Things you need to know.
- Stocks fall for a 2nd day and some are asking why?
- Bubble’s bubble’s everywhere…..
- Guggenheim predicts a bond bull market!
- Doggy Coin fall 15%
- NFLX gets punished – Subs missed by 35%
- Try the Veal Saltimbocca
Stock’s stumble and the media suggests that Wall St cannot seem to explain it……Are you kidding? Can you say ‘VALUATIONS’?
In fact, a Bloomberg article puts it this way –
“Up four weeks and six of the last seven, US stocks are doing something they haven’t done since March; fall on consecutive days. For the first time in a long time, Wall St pundits found themselves trying to explain a weak market.”
I guess what makes me surprised is that the two writers of that article seem to be completely out of touch with reality…. No one is at odds trying to explain away TWO down days in the market – in fact – if you are a Wall St pundit and you are having trouble explaining the recent weakness – then you should reconsider your understanding of the markets. A peek at the chart ALONE will tell you all you need to know….
And I said it yesterday and I said it last week – all we need is something that comes out of left field, something that no one expected and that would be the match to light the fire….
In my opinion – the recent collapse of so many SPAC’s (highlighted in Monday’s note), the unexplainable collapse of Bitcoin over the weekend was enough to cause some investors to reconsider the ‘UP ONLY’ mantra……and reconsider valuations.
Look – the market was priced to perfection…. they had priced everything into all the indexes…. causing all to outperform as the mood and psyche went from lockdown to open. So, two down days is causing angst? Oh boy……By the end of the day the Dow was down 256 pts, the S&Ps off 28, the Nasdaq down 128 and the Russell gave up 44 pts…again the biggest loser falling 2%.
The unending FED, pumping money into the system and promising to keep rates artificially low has fueled the recent rally, ongoing federal stimulus and trillion dollar relief packages that have passed with promises of more to come, add in y/y earnings that are growing at better than low double digits (for obvious reasons), a nation that is expected to achieve ‘herd immunity’ by the summer against a virus that ravaged the world, a change in the political atmosphere, economic data that gets stronger and stronger with each report, cities that are re-awakening and global demand surging as countries around the world wake up as well. All of this is good news and investors have celebrated and this is reflected in stock prices…. …. but like so many things – the pendulum swings two ways and it usually swings too far to the left and then it compensates by swinging too far to the right – until it finds equilibrium….
The market has swung way too far to the right….and that is evident in a range of asset bubbles…..…..besides stocks….SPAC’s, crypto currencies, housing, commodities, unicorn stocks that triple and quadruple in value from one week to the next are only the tip of the iceberg…..Non Fungible Tokens or NFT’s – are only the latest illogical craze that has taken on a life its own…..and then there is Doggy Coin…..by its own definition was a ‘coin’ created as a farse…
It is “a peer-to-peer, open-source cryptocurrency”. It has the image of a dog as its logo alongside nonsensical phrases in multicolored, Comic Sans- font text. Its underlying technology is derived from Litecoin. Notable features include its low price and unlimited supply. But what makes this incredible (and stupid) is that it is now a top 10 digital currency worth some $50 billion – $50 billion! It’s bigger than the Nasdaq stock market…It’s bigger than Interactive Brokers, it’s bigger than so many midcap US companies – yet the FED doesn’t think there are bubbles anywhere and the writers of the article say that Wall St pundits are having trouble identifying why stocks went down for TWO days…Not two weeks, two months or two years….just two DAYS……..I just pointed out at least 6 reasons why….…and if you look hard, surely you can come up with even more….
But this coin has caught the eyes of the Reddit crowd and then you get Lonnie Musk and Chamath Palihapitiya seemingly embracing it – BOTH – who have NOTHING TO LOSE in this fight and have cult like followings….…. out they are pushing the merits of a joke coin…. drawing the unassuming into the fray……The fact that it has even gotten any airtime speaks directly to the role and power of social media and how it can create a story out of nothing…. making everyone think it is easy…. I mean Doggy Coin and NFT’s – it borders on lunacy….and then you ask why the market has had 2 weak days? REALLY? I would love to see the market have two weak months! Shake the branches…!
And this morning we hear from Scotty Minerd – Guggenheim fame telling us that bond yields are set to go DOWN which then means that stocks have no place to go but UP….……that the Japanese and other foreign gov’ts as well as insurance funds and pension funds are finding value in long dated debt – 10 US gov’t debt yielding 1.55%. and 30 yr. US gov’t debt yielding 2.44%. Finding value means that they are buyers of US debt and if that holds true then yields by his analysis will remain low for the foreseeable future (remember the inverse relationship – bonds up, yields down, bonds down, yields up) …which then means that stocks will find support and move higher….and that is what makes a market….differing opinions causing some to be a buyer while it causes others to be a seller. And so, it goes….
US futures are mixed this morning…the Dow down 5, the S&P’s flat, the Nasdaq off 28 and the Russell up 12. (Recall the Russell has gotten beaten up badly, it is down 7% since the March highs…) still in normal trading range but down more than the broader mkt……so a bounce in the Russell makes perfect sense….
NETFLIX reported last night, and they beat on the top line $3.75/sh vs. the $2.62 estimate, Revenues grew at 24% y/y but then they revealed that they missed substantially on the new subscriber line…. growing new ‘subs’ by 3.9 mil vs the expected 6.2 as saturation and competition challenge their story…then add in a world awakening and booooommmm! Trader types immediately hit the sell button…. sending that stock down 11% in the post market……and this morning – NFLX is quoted down $40 at $502/$505…. So, I must ask…. Do you realize the world is waking up? Does the word valuation mean anything in a competitive environment? Do you really want to still stay in the house and watch TV? Look – no one is throwing a charity event for NFLX – so get over it and decide if it still fits your portfolio or not.
And then Apple launched their big spring event….and while it was all very exciting – investors and traders sent that stock down 1.3%. We got all the bells and whistles, new colors, new machines, new upgrades etc.…New iMac, upgraded iPads, Air tags, more TV stuff etc.…. yet the stock came under pressure as some investors raised cash ahead of what feels like a bit of nervousness in the broader market…. Are you selling Apple? Not me…. happy to buy more – back up the truck.
Eco data – Mortgage Apps – will they continue to show weakness or not – we are about to find out.
Earnings today…LAD (BEAT), SBNY (BEAT), ANTM, BKR, NDAQ, HAL, KNX, VZ all before the bell, while we will get KMI, CMG, BXS, LVS, DFS, CCI after the bell.
DXY – while boring is important……..it found support at $91 and is now trading at $91.37….this is putting just a bit of pressure on the extended valuations of the commodity complex (inverse relationship) …and remember – the weak dollar helps the big multi-nationals…because when the sell products abroad in foreign currencies and then bring that money back to the US an convert it into dollars – they get more dollars and that is good…..so a weaker dollar benefits the multi-nationals which is just another reason why we are seeing the US centric names (Russell) under pressure….
Oil fell about 2% yesterday – ending the day right on the trendline at $61.31…part of that was dollar stability and part of it is the ongoing discussion that surging rates virus rates in India will slam demand….and you know how I feel about that…. enough said – it is a ridiculous argument.
European markets are higher as of 6 am FTSE +0.26%, CAC 40 +0.34%, DAX +0.06%, EUROSTOXX +0.48%, SPAIN +0.29% and ITALY -0.16%. UK inflation ticked up to 0.7% and Paul Craig of Quilter Investors – tells us that the
“UK has reached a turning point in its economic reaction to the pandemic and price growth is now on an upward trajectory…”
In addition – earnings continue to impress.
Bitcoin is trading at $55k and Ethereum is trading at $2300…. Doggy Coin fell by 15% and is quoted at 0.32 cts/ – down from 40+ cts….
The S&P closed at 4134…. Now that is down a whole 1.4% from Friday’s high of 4191, the Nasdaq is off 1.8% since Friday…these are hardly anything to get worked up about…in fact – there are some that are rooting for further declines…. remember – the S&P would have to fall to 3770 to enter ‘correction’ territory……and that is 421 pts from here. Stop panicking….
And just FYI diapers and adult incontinence products going up in price, PG announced yesterday that a range of staples will see price increases of 9+% – this after Kimberly Clark raised prices on toilet paper and Huggies…. Coca-Cola is also joining in the fun – raising prices on soda while General Mills, Hormel Foods, JM Smukers all raised prices too. But – do not worry – there is not any inflation.
Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you. You can now get a video version of this note on my IG (Instagram) feed – my handle is Kennyp1961 (https://www.instagram.com/kennyp1961/)
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Veal Saltimbocca
Love this dish…. easy to make and always a winner.
For this you need: Thinly sliced Prosciutto, Pounded veal scallopini, Sage leaves, butter, olive oil, chicken stock and white wine.
Begin by placing a slice of prosciutto on each veal slice, and then place a sage leaf on top of that. Thread a toothpick through the three layers, holding the sage and prosciutto onto the veal.
Heat butter, and the oil in a heavy frying pan until hot. Add the veal in a single layer, prosciutto side down. Sauté until the prosciutto is slightly crisp and brown, around two minutes. Turn, and cook on the other side for an additional minute. Remove from the pan and keep warm and covered.
Now add 1 cup of white wine. Deglaze the pan by scraping up the browned bits from the bottom, cook until it has reduced by half. Now add 1/2 cup of chicken stock and cook over high heat until it has reduced by half.
Whisk in 2 tblspn of butter, and then return the saltimbocca to the pan to re-warm.
Remove the toothpicks and the sage and transfer to a serving plate, prosciutto side up.
Pour the pan juices over the meat and serve immediately.
Buon Appetito.
