Was it the Ghost of Christmas Future? Try the Shrimp Cardinale

Kenny Polcari Uncategorized Leave a Comment

Things you need to know:

  • Stocks got smashed – Concerns are everywhere
  • Was it the Ghost of Christmas Future?
  • Nancy and Stevey try ONE more time – “Listen to me, don’t be a bad boy” she says…
  • CNBC Robert Frank reveals a top tax rate of 62+% under Biden (Can Joey please explain?)
  • Oil drops yesterday but is rallying today… holding the line.
  • Try the Shrimp Cardinale

Stocks got clobbered yesterday… Every S&P sector in the RED… in what some might consider ‘uncontrollable spread’… Energy -2.12%, Communications -1.8%, Basic Materials -1.67%, and Technology -1.8% all leading lower… Utilities – a defensive sector fell by 0.84% while the WFH (Work From Home) stocks only fell by 0.5%. S&P Growth ETF (SPYG) fell 1.6% while S&P Value ETF (SPYV) fell 1.4%… the Dow lost 410 pts or 1.4%, the S&P gave up 57 pts or 1.6%, the Nasdaq lost 193 pts or 1.6% and the Russell gave up 20 pts or 1.2%. It was the usual suspects plus a little more…

Hello? Yesterday morning when I woke up to write my daily note – I looked out the window and found that the rain storm that happened overnight was still brewing outside – the sky was dark, the clouds were darker, the wind was whipping around and the rain was pounding on the sliders while the water from the intercoastal was washing over the sea walls… and so I asked – Was this a foreshadow of what is to come? Was this the ghost of Christmas future – as represented in the 1843 Charles Dickens novel – a Christmas Carol… Recall that in that novel – Ebenezer Scrooge (think the American electorate) was visited by 3 ghosts – Think Barack – Christmas past, Donny – Christmas present and ??? – The Ghost of Christmas’s yet to come… Now that could be Donny, Joey or even Kamala – who knows?

All we know is that the Ghost of Christmas future was shrouded in a deep black garment, which concealed him/her (I’m being gender neutral so as to not make any assumptions) and left nothing of him/her visible except one outstretched hand – leaving the mystery of the Ghost just that a mystery. And this story is much like the mystery that is surrounding the American electorate now… What will the ‘Ghost’ (read President) of the future look like? What will be the policies? Will we have more of what we know (a Republican Ghost) or will the Ghost of Christmas future pull back his hood and reveal himself/herself as a Democrat? (Work with me here…)

Either way – it is what it is… The countdown has begun – T-14 days (or 336 hours) until the elections – which is good, but what concerned the markets yesterday was more than – What will that look like? Will it be decisive enough? Will it be contested? Leaving Americans and the world asking – Who is in charge over there???? What concerned markets more yesterday was the building story of a slowing US recovery as the idea of any gov’t support going into the election is almost all but assured of not happening – thus the selloff… But now we must ask – Will there be an 11th hour surprise? Word had it after the bell that Nancy and Stevey are due for another phone call this morning and futures are higher at 5 am (It’s exhausting…) in anticipation of what the call might reveal. If this deadline passes without a deal – then it will become increasingly unlikely to produce any significant relief and while Trump would love to get a deal done – Nancy is in no rush – there is no political upside for her – besides – she smells blood in the water. In addition – Senate Republicans are pushing back on any deal that is more than the $1.8 trillion on the table.

The slowing economy is reflected in the fact that jobless claims are rising, small businesses are going belly up at an alarming rate, airlines slashing routes and slashing jobs, the unemployed running out of benefits, the long term unemployed increasing in numbers, restaurant bookings are beginning to slow in the Northern part of the country as fall turns to winter and it becomes more difficult to dine outdoors in 10 degree weather.

As noted yesterday – covid 19 cases are surging with 46 of our 50 states in the RED zone… suggesting ‘uncontrolled spread’ – and in Europe – we are seeing the same thing happen across the region… countries lighting up the RED zone. The silver lining in this is that covid 19 deaths have fallen to a 3-month low. But with cases going up – the idea of more lockdowns becomes a repeated reality. (side note – we are already seeing that in France, Italy and Spain). And that created a level of angst that many had assumed was gone and with rates increasing here in the US – many are now questioning what’s next? Talk of a Blue Wave has now turned into a Blue Tsunami resulting in another negative headline. (recall a Tsunami is more than a wave – capisce?) Then toss in the ‘no stimulus talks’ and you have just another negative headline adding to the Risk Off tone… and then it was 4 pm and the closing rang… ding, ding, ding.

Overnight markets in Asia were mixed… Japan -0.44%, Hong Kong + 0.11%, China +0.8% and Australia -0.72%. The PBoC (Peoples Bank of China) left the one & five year loan rates unchanged – and that was NOT a surprise. Current rates are 3.85% and 4.65% respectively.

European markets are mixed – Spain considering lockdowns/curfews to control the spread while Germany reports negligible infection rates. In addition – all eyes remain on Earnings, US politics and US stimulus as investors sort through the noise. UBS reports a 99% increase in net income for the 3Q reporting net income of $2.1 billion – analysts had expected $1.5 billion. Logitech reports a 75% jump in 2Q sales (you can thank covid 19 for that) as people adapt to WFH (Working from Home). As of 5:30 am – the FTSE +0.24%, CAC 40 + 0.69%, DAX -0.17%, EUROSTOXX +0.12%, SPAIN +0.84% and ITALY + 0.49%.

And this morning… the rain has stopped but the wind is still strong… and while it is dark outside right now – the weatherman tells me that the sun is coming out (today)… is that code for a ‘stimulus deal’. Does the weatherman know something we don’t know? Well – US futures ARE UP… Dow futures +150, S&P’s +20, the Nasdaq +75 and the Russell is +12 and it is ALL about the 11th hour. Nancy (on the front page of cnbc.com) shown pointing her finger at Stevey and the administration in a ‘listen to me – don’t’ be a bad boy’ pose. The headline promising that ‘Pelosi and Mnuchin Make Progress in Stimulus Talks…’ Blah, blah, blah… We hear that every other day… but the clock is ticking, the election is coming and the economy (for some) is in distress. So – let’s see if the sun does come out today… and if it does – in all of its glory – then I suspect that stocks will rally – if only for a brief moment… because then the focus will turn to the election, the ballots and Thursday nights debate… the debate commission has now allowed the moderator to turn OFF the mikes in the initial 2 min response – sending Donny over the edge. In addition – the Supreme Court ruled yesterday that Pennsylvania will be allowed to count mail-in ballots up to 3 days PAST election day (again sending Donny over the edge) – as long as they are postmarked by November 3rd! Now you know this is going to be an issue – as Pennsylvania is a swing state…

Yesterday – Rob Frank of CNBC fame profiled a piece that suggests if we get a Blue Wave this election cycle – then anyone making more than $400k/yr can expect tax rates to soar. Residents of high tax states like CA, NJ and NY can expect ‘all in tax rates’ to be 62.6%, 58% and 60% respectively and if you live in NYC – you can expect top rates of 62% and this is all just a best guess… chances are that those rates are low… actual rates could be higher. Hello! – BUT Joey and Kamala are not discussing that, they are pushing the Covid story… because if they are forced to discuss their tax plan – it will expose what that party is thinking. So the question is – Will Kristen Welker – the moderator – ask that question? Will she put Joey on the hot seat and force him to define his plan? Most likely not… just sayin… and for those of you who missed the piece – here it is.

Economic data: Housing Starts – exp of +3.5% m/m and Building Permits of +3% m/m.

We are now in the thick of earnings… expect the number of reports to heat up… today’s include: IQV, LMT, PM, ACI, PCAR, PLD

Oil dropped yesterday but is up this morning… as virus infections intensify and new lockdowns are considered… while Libya’s supply is growing only adding to a world awash in ‘black gold’. There are now 40 million worldwide cases… 2.3 million or 5% of those in the US – which means that 95% of global cases are somewhere else. OPEC and OPEC + have all pledged to support oil prices as concerns grow so I guess we can expect more production cuts – as of now – they have cut production by 7.7 million bpd – which was expected to fall to 5.8 million barrels in January – but if the virus continues to surge – then they will most likely remain at 7.7 million barrels. We will hear from the API (American Petroleum Institute) later today and that will give us additional insight. Oil prices continue to hover at the intersection of all 3 trendlines… $40.90/barrel.

The S&P closed at 3426 yesterday – down 57 pts… after trading as high as 3503 and as low as 3419. Yesterday morning I said that it looked like it wanted to test the Friday high of 3515 and push higher to test the September highs of 3580. And while that could have happened – the fact is that DC is a mess… I did say – “Watch what happens in DC today…will Nancy concede or not… Now she is screaming about the language, not about the money any more… so let’s be patient and watch what happens next”. Just fyi – support is down at 3400 and we tested 3419! This morning’s rally could see us open at 3450 and if there is a deal, we could be right back at 3500 in a wink of an eye. But for now it’s 3400/3580….and with volatility elevated – we could see swift moves in either direction. Sit tight and stick to the plan.

Take good care –

Kenneth Polcari
Chief Market Strategist, Consultant
kpolcari@slatestone.com

 

Shrimp Cardinale

This is a simple dish to make and is so rich and delicious.

For this you need: 2 lbs of large cleaned shrimp – (cut in half lengthwise), butter, 1 lb of linguine, ¼ c of Brandy, 1 c of heavy cream, marinara sauce and s&p to taste.

Turn on the oven – Bake 350 degrees. Bring a pot of salted water to a rolling boil.

Melt a stick of butter in a large bowl – now toss the shrimp – season with s&p. Lay the shrimp out on a baking dish and bake in the oven for 5 – 7 mins… remove and place in a large sauté pan.

Put the linguine in the boiling water and cook for 8 mins or so.

Over med heat – add in the brandy and allow it to burn off a bit – next add the heavy cream and about 3 or 4 cups of the tomato sauce. Reduce the heat to simmer and allow the sauce to thicken.

When the pasta is done – strain (always keeping a mugful of the water) and add directly to the sauté pan and mix well. You can always add back some of the pasta water if it needs it. Serve in warmed bowls.