The Push Resumes; Who’s Next on Bitcoin? – Try the Swordfish

Kenny Polcari Uncategorized Leave a Comment

Things you need to know.

  • Markets pause yesterday and continue to climb today…US Futures are up!
  • Focus on stimulus and relief – Earnings season almost over – but reports continue to impress.
  • Commodities higher; dollar weaker…inverse relationship – multinationals will benefit too.
  • Macro eco data due out at 8:30 am…. What will CPI reveal (I say benign).
  • Bitcoin is not going away…. who else will jump in the pool with Lonnie?
  • Try the Swordfish – Sicilian Style (Yum…)

OK – Breathe…….and that is what the market did yesterday…. It took an opportunity to sit back and relax….it did not continue to march higher, but nor did it back off substantially…it just churned in place, seemingly waiting for the next directional driver. As the closing bell rang- we saw the Dow losing 9 pts, the S&P gave back 4 pts, while the Nasdaq advanced 20 pts, the Russell added 9 pts and the Transports (once again reminding everyone that they matter too) advanced 90 pts or 0.66% – by far the best performer of the group. But there were no bells and whistles at all…it was just a ho hum day….more talk of Lonnie Musk, more talk of Bitcoin (which isn’t going away any time soon – so get used to hearing about it and get used to hearing about other ‘coins’ in the space – Ethereum, Tether, Litecoin, XRP and of course the latest newsmaker – Dogecoin – (some people pronounce it like Dodge – Coin – think Dodge Ball,  but I prefer to call it Doggy – Coin -Why?  Why not?).

It seems like the action of late in this space is dependent on who makes the headlines.  Two days ago it was Musk and Tesla, yesterday was speculation that Apple will join in the fray by announcing some huge purchase of the coin  – a la TSLA – (in a show of support for this futuristic block chain technology) along with the ability to buy and sell things with your iPhone wallet using Bitcoin…..and if you let your mind run wild – you can’t expect that Jeffrey and Jazz (AMZN) are going to let this opportunity pass them by either…….and you can’t expect that any of the other ‘visionaries’ are going to let this opportunity slip by….I mean once Lonnie made the announcement you can imagine how enraged Chamath must be (hysterical really), so don’t expect that as it soars in value that it will become any less relevant – in fact quite the opposite…and if you watch any of the cable business news programs it is quite obvious that this conversation is now mainstream….so get on board.  Now that does not mean go all in – sell your stocks and buy Bitcoin – no, no, no…it just means – read up on it, be part of the conversation, get to know what is happening in the space so that you are not caught off guard.

See my appearance on FoxBusiness with Stuart Varney yesterday discussing this very point –

https://video.foxbusiness.com/v/6230429072001

Back to the markets – So what will be the next directional driver for stocks?  Not more virus news – that is all priced in, not more vaccine news – that is priced as well, earnings?  Nope – the season is ending, and the results are in…. more than 80% of the reports beat the estimates – well ahead of the historical trend and that too, my friends, is priced into the markets….  The Trump impeachment – (as I clear my throat) THAT is not even an issue (for the markets) – investors have waved him off long ago.  So then, you ask – what are we waiting for?  What will drive the markets next (in either direction?)

You know the answer – The $1.9 trillion stimulus package and all its details coupled with the coming macro data detailing the state of the economy.  It will be a return to what matters (think fundamentals) and not what causes hysteria.  It will also determine how much sway the Biden Administration has, and this too will be important for the markets.  My good friend – Quincy Krosby – Chief Market Strategist at Prudential Financial had this to say:

“I think the market is enjoying the potential of a package from the Biden Administration regardless of how its actually delivered”. 

And that seems to be the consensus estimate by most of Wall St and by individual investors.  Now though, I will say – it does not want to see a watered-down version – it wants to see it all…it wants to see the Dems force it through the senate – anything less will be a disappointment.

Markets are also waiting on the latest fundamental macro data…. today we get the CPI – which is the Consumer Price Index – a measure of the ‘weighted average prices of a basket of consumer good and services, such as transportation, food and medical care.  It is calculated by taking the price changes for each item in this basket and averaging them’ (Investopedia).  This is an important metric for everyone…. because it details the purchasing power of the dollar – as it moves higher (think inflation) the purchasing power of a dollar moves lower (capisce?)

And today’s eco data includes the latest read on the CPI – expectations M/M are calling for an increase of +0.3% Ex food and energy of +0.2%, Y/Y of +1.5%…..And this would be an ok report – a tepid report really that doesn’t signal real underlying inflationary pressures….but if it deviates (to the upside) then that will suggest building pressures….and while the FED has told us that they are prepared for inflation to run hot – no one is really sure of what ‘hot’ means….although we are in agreement that it is somewhere north of 2%.

Now the bond market is telling us something a bit different – 10 yr. yields are rising and currently stand at 1.157% and the 30 yr. yield pierced 2% before settling in at 1.95%… and this tells us something different…naturally rising bond yields suggest a growing economy -which would not be a negative for the markets – in fact quite the opposite as long as bond yields rise while inflation remains in check – allowing the FED to stay on the sidelines….but if inflation is rising causing the FED to raise rates to try and control it – then that is a whole other game….and that is a road we don’t want to go down right now….because that road will be full of very big potholes causing all kinds of damage to the undercarriage.  In either event – rising rates will – at some point – cause stocks to re-price – just how much they re-price will depend on why rates are rising.  Capisce?  And once again there is debate on what the 10 yr. rate will be to cause that re-pricing to happen.  I am in the 1.5% / 2% range…. (inside the bell curve – while there are others way out the bell curve not expecting any re-pricing until rates hit 3%!)  Ouch.

This morning we are seeing the bulls want to charge again….in what is a ‘just buy everything mentality’ (which is itself a signal….) it defies reality – but how many times have we seen that over the years…and in fact – most recently with the GME drama?  Recall the guys that were paying $450/sh only 8 days ago?  Last night it closed another 15% at $50.31 and this morning is quoted even lower at $48/$48.50.  Talk about OUCH!!!

Dow futures are up 85 pts, S&P’s are up 12, the Nasdaq is ahead by 56 and the Russell is higher by 7 pts.  After the bell we heard from TWTR, CSCO, LYFT, FISV, TWO, AKAM, ENPH & CCK – all ‘beat the estimates’ – (see the pattern?) and that is giving new life to the current rally.  And the nearly 3% rally in 2 days in the Russell – bringing YTD performance to better than 16% is suggesting that investors are betting on the small caps/mid-caps as a proxy for a complete US recovery from the pandemic…. Which is why the virus / vaccine news is no longer a market moving event – the market is already looking through it and the Russell’s performance is announcing that with great fanfare!  And the massive fiscal stimulus package ($1.9 trillion) will certainly help keep equities moving higher for now.

The VIX – fear index – has also come well off its recent highs and has settled back into the low 20’s – suggesting that investors are much more relaxed and not so anxious….and that is also helping the mood…..and until we get an event that causes the VIX to spike – there does not appear to be a reason to see any significant pullback right now….but that does not mean you join the lemmings and arbitrarily just hit the ‘buy button’……because valuations are stretched and while they can continue to be stretched – at some point it snaps…For most of you reading this – you are already in the market, so you are already enjoying the gains….if you need to allocate new monies – pick carefully….

Earnings today includes two US icons – KO & GM and one underwear company – UA. All before the bell, while UBER and MGM will report after the bell….

European markets are mixed…. At 6:30 am the FTSE+0.28%, CAC 40 +0.04%, DAX +0.1%, EUROSTOXX +0.15%, SPAIN -0.49% and ITALY +0.15%.  In Europe it is a busy day for earnings….and while they are also keeping tabs on the virus/vaccine it too is no longer at the top of the list of market concerns and corporate concerns…. what this earnings season has shown us is that most companies remain resilient and successfully pivoted where they needed to. There is not European eco data today to consider.

In the end – the trend continues to be up and the only thing that will change this narrative is a substantial change in the story…. It will have to be something that no one expects….and it will be defined by the FED…It will be a change in policy that suddenly changes the fundamental story, and it could be a small change in language, or it could be a comment by one of the Fed Presidents as they ‘test a theory’ but until then – enjoy the ride….

Oil – continues to rally…. YAHOO!!!  Currently trading up 27 cts at $58.62…inching ever closer to $60/barrel…. yes, demand is up, but do not forget what is happening to the dollar…its s going lower…and that is also helping to support the whole commodity complex…. remember – commodities are price in dollars – as the dollar weakens the prices of commodities rise (inverse relationship) and oil is a commodity….

Gold is also a commodity and that too is a bit higher…. up $4 at $1,841/oz…. And while it has broken all 3 trendline supports it is now attempting to take them back……but they will offer big resistance…. $1860, $1871, and then $1883….do not expect that to happen quickly – it will take some time.

Bitcoin?  That is taking a break today….off $750 at $46,600…but after the Lonnie news – calls for $100,000 + are all the rage and if we start to hear of more visionaries jumping on board – that may happen sooner vs. later….Start small….pick away at – there is no need to buy 1 full bitcoin – you can buy fractional shares so that you are in the game, watch how it reacts, join in the fun…

The S&P closed at 3911…. after testing 3902 and then 3918 – leaving it above the trendline that I identified as 3900…….and if you try to draw a different trendline – then resistance becomes something much different…. (think 4200) which leaves you to ask – What do I do?  Stay the course – rebalance as necessary and do not get caught up in the ‘meme’ trade…. You are not a ‘meme’ investor.  Look for the S&P to make a new intraday high as the opening bell rings…S&P futures are now up 14 pts….and that will take it to 3925.  What is next will depend on the rhetoric….and now that we have broken up and thru that trendline – only means we are in uncharted territory….so it could go either way…. I am sitting back with new money and letting my invested money do the work….

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what Slatestone can do for you.
Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Swordfish  – Sicilian Style

A great dish from the Island that sits just off the toe of Italy. (I am going to make this tonight)

Raisins, green olives, capers, pignoli nuts (pine nuts), tomatoes, garlic, onion, s&p, olive oil and the swordfish.  This dish is easy to make – it will tease your senses – and tickle your pallet – only takes about 15 or 20 mins to prepare and 20 mins to cook…. enough time to set the table, pour the wine, light the candles, put on the music, and dim the lights….

**Preheat oven to 400 degrees (f).

Season the swordfish with s&p.

Next soak the raisins in warm water for about 1/2 hr… drain and set aside.

Heat the olive oil in a sauté pan on med high heat…. sauté the diced onion and crushed garlic until soft. Do Not Burn.  Maybe like 5 / 8 min’s…. add raisins, diced tomatoes, chopped olives (no pits!), and capers – like 1 tblspn.  (If you like capers feel free to add a bit more – but not too much as the taste will overpower the dish).  Reduce heat to simmer and cover…stirring occasionally…. for about 15 min’s or so…

Grill the swordfish quickly – just enough to sear it so that it takes on the grill marks…Flip and repeat and then place in the baking dish.  Cover the fish with the raisin/olive/caper/tomato mixture – bake for 10 or until the steaks are firm…. careful not to overcook.

Present the fish on a warmed plate – serve with a large mixed green salad with red onions, cucumbers, grape tomatoes, maybe some fresh mozzarella…. dress with s&p, oregano, a splash of fresh lemon juice, balsamic vinegar, and olive oil.

Buon Appetito.