MSFT Blows the Wheels Off the Bus – Try the Shepherd’s Pie

Kenny Polcari Uncategorized Leave a Comment

Things you need to know:

  • Market continues to churn and MSFT blows the wheels off the bus – stock up 3%
  • FB, AAPL and TSLA today… Hold onto your boots
  • GME! Plunging – after Melvin Cap closes out position
  • Reddit censoring that news to try and stop the bleed!
  • FOMC reports at 2 pm – no change expected
  • Try the Shepherd’s Pie

And the churn continues – I have been saying that the market feels a bit tired and needs to regroup – so it either does it quickly by falling a swift 5 – 7% or it does it slowly – grinding lower as it digests all of the most recent developments… overall the broader market didn’t do much, but individual names did more… At the 4 pm bell – the Dow was off 23 pts, the S&P’s off by 6 pts the Nasdaq down 10 pts and the Russell lost 13 pts… Nothing big, nothing to write home about… but some of the individual names that reported was where all the action was… JNJ +2.7%, VZ -3%, AXP – 4%, MSFT +8% (AND +2% AFTERHOURS), SBUX +1.2% (AND -2% AFTER HOURS), MMM+5% and then there was more commotion in GME – Up another 71% during the day and then up another 137% after hours… now trading at $344/sh this morning… recall this stock was trading at $19 on January 8th… and nothing has changed in the fundamental story thereby confusing anyone that spends their time assessing valuations and outlook. The only thing that appears to have caused this incredible surge – was a report by a hedge fund that they were ‘quite short’ the stock and that sent the day traders into a frenzy…

By now, you’ve heard about Reddit and if you haven’t you’ve been living under a rock – but that’s another story… in this ‘social platform’ there has been an angry mob that has decided to ‘storm the markets’ and take no prisoners… they have rallied together to ‘take back what’s theirs’ (in an attempt to repeat the attempted takeover of the gov’t 2 weeks ago) or so that’s what they are all telling us in various tweets and posts. And then you have the Winklevoss twins chiming in, and then Chamath (I’ll just call him by his first name like we do for Cher, Madonna, Elvis, Beyonce or Elon…) who, as a very successful VC (venture capitalist), joined the mob and himself bought Feb 115 calls  and then made sure everyone knew it by tweeting it out… which only sent the army of day traders into another hysterical craze, and then after the market closed – Elon tweets out #GAMESTONK! – which caused the traders to blow a fuse… and only sent the stock up another 137% in the afterhours session to a high of $334/sh… All in a game of blood, sweat and tears…

***BREAKING NEWS***

And then at 6 am this morning Andy (Ross Sorkin) reports that the hedge fund – Melvin Capital – that created all of this hysteria by announcing his short has now covered that position and is no longer in the name… so here it comes… let’s see what happens now…CRASH, BANG BOOMMMMM – it will be like an old Batman and Robin fight scene! (Now I’m really dating myself – but any baby boomer out there will understand the reference!) I can’t wait to see how this ends…

In any event – the focus for investors should be on the fundamentals and the overall economic environment… period the end.

Last night after the bell – MSFT reported and if you’re are surprised at the results you should probably have been asleep at the wheel for the last 12 months… they BLEW THE WHEELS OFF THE BUS… topline revenue grew by 17%, earning per share came in at $2.03 vs. the expected $1.64… and revenues were $43 bil vs. the expected $40 bil… the intelligent cloud business revenue grew by 23% coming in at $14.06 bil vs. the expected $13.7 bil  – personal computing division say revenues rise 14% and the Office, Dynamics and LinkedIn division saw a 13% jump in revenues… the stock which is up 7% since the new year (it is up 45% over 12 months) and was up another 2.8% overnight and is quoted up $7 this morning.

Today we will hear from FB, AAPL & TSLA due out after the bell today also enjoyed a rally during the day and then after the bell on the back of the MSFT report… Just wait until we hear from GOOG (2/2) and AMZN (2/2) etc.

Other earnings out today include PB, ANTM, EAT, TDY, BX, BA, NSC, GLW, PRG, ADP, ABT,

Eco data today includes: Mortgage apps – not a mkt mover at all, Durable goods – exp of +1%, Ex transports of +0.5%, Cap Goods orders of +0.5% and Cap Goods shipped of +0.6% – but the bigger story will be the Jay Powell press conference after the we get the 2 pm FOMC rate decision – where nothing is expected to change and in fact – many expect Jay to put to bed any chatter about the FED ‘tightening’ anytime soon – which apparently has been some of the chatter among the paparazzi… so let’s see. My sense is that it is all clear ahead… no change in rates (for now) and more talk of what they are willing to put up with in terms of inflation… remember – he has indicated that the FED is prepared to let inflation run ‘hot’ for a while before reacting…

US futures are down today… in fact down more significantly… Dow futures are off 235 pts, the S&P’s are down 31 pts, the Nasdaq is off 13 pts and the Russell is down 36 pts. Mortgage apps are down but loan size is up… (of course it is, housing prices have also gone out of control).

Today the chatter will be all about tech and today’s earnings…..and then the FED…..Virus and vaccine talk is starting to calm down as hospitalizations are in decline….and people getting vaccinated….and while the process is still clunky – we are making headway and the hysteria is going away.  Politics – while always an issue – has also moved to the back burner for now and is not the main driver any longer.

European markets are also down… in what is also more of a consolidation pattern. Yesterday the IMF (Int’l Monetary Fund) raised its global growth forecast to +5.5% up from +5.2%… but that is not doing much to excite investor interest. And while the virus and vaccine continue to concern them as well, they are ‘hopeful’ that the race is to a cure is in sight but remain concerned about what the recovery trade will look like. They too, are awaiting news from the FED before they react.  Again – no change is expected so you could say that the news is priced n.  At 7:15 am the FTSE -0.74%, CAC 40 -0.95%, DAX -1.51%, EUROSTOXX -1.27%, SPAIN -0.91% and ITALY -1.24%.

OIL continues to churn—trading at $52.61 as traders bounce back and forth over what the latest strains and lockdowns mean for demand. We remain in the $52/$55 range for now… as signs of weaker demand weigh on the market one day and then signs of stronger demand cause it to trade higher the next.

Gold holding steady at $1,841/oz and Bitcoin is down $1200 pts at $30.400.

The S&P closed at 3849 – this morning futures are currently lower… As I have been saying I think it is a bit tired and most of this good news has been priced in – so sit tight… don’t chase and keep your eye on the ball… We remain in a broad channel – 3780/4100… my sense is that we test 3780 first… but let’s see… And while we may not do that today – it certainly feels like it sometime soon.

Take good care,

Kenneth Polcari
Consultant, Market Strategist
kpolcari@slatestone.com

 

shepard's pie

Shepherd’s Pie

This is a great, easy ‘comfort food’ dish. One that is good on a cold night as it contains everything you need in one dish. Meat, veggies and mashed potatoes. So light the fire and curl up on the couch…

For this you need: Carrots, onions, olive oil, ground beef (chuck), butter, frozen peas, canned corn, tomato paste and a shot of red wine (optional).

Sauté chopped carrots and onions in some olive oil until soft – 8 / 10 mins… add ground beef – but use ground chuck – as it has a higher fat content and gives the pie a robust juicy flavor.  Season with S&P.  Once all browned and cooked nicely – drain any of the fat that has accumulated.  Add about 2 tablespoons of butter, frozen peas and the canned corn. Mix well.    Next add tomato paste (Contadina always works nicely) and a shot of red wine – let simmer for a bit.  (maybe 12 / 15 mins). Turn off the burner and get a baking dish.  Grease with butter and add the mixture.  Top this off with homemade mashed potatoes and sprinkle some grated parmegianna cheese on top. Put in the oven and bake for about 20 mins or until the mashed have a golden brown tint.

When done – remove from oven – and let stand for 5 mins. Serve on warmed plates. Gather the family – put on a nice family movie and enjoy your time together.

Buon Appetito