The Rotation Continues, Tech Under Assault – Try the Risotto w/Cauliflower and Truffle Butter

Kenny Polcari Uncategorized Leave a Comment

Things you need to know.

  • Stocks get slammed as investors consider what’s next
  • All while Bond Yields continued to retreat – hmmmmm?
  • The rotation continues….as investors go from Sexy to Boring
  • Biden puts Kamala in charge of the border and he is about to make his 1st press appearance today at 1:15 pm
  • Try the Risotto w/Cauliflower and Truffle Butter

Stocks continue to get slammed…..Tech under pressure – the Nasdaq once again falling below the trendline support that I told you would be key for the next move ….13,325 was that level….and we breached it last week – attempted to rally on Friday, closed above it, but then fell victim to the angst once again – leaving the Nasdaq down 8.5% from its most recent high – and yesterday, while there was nothing that specific per se, there was and has been building anxiety about a number of things…..The economy, interest rates set by the FED and interest rates set by the markets, inflation, the recovery, a variety of Covid 19 variants that are now raising new concerns across the globe, taxes, immigration, and the latest policy responses to a number of cultural and national issues that have taken over the conversation…..and while those responses to the cultural and national issues  will do nothing to price stocks in the long term, they will affect the psyche when the overall mood is already anxious….

Investors have been seesawing between ‘it’s all good and ‘Oh s**t – what’s going on now?’ and this has created a spike in volatility one day, only to see it dissipate the next…….Asset managers trying to make sense of stretched valuations in stocks, SPACS,  housing, bitcoin and other crypto currencies and now the latest entrant onto the global stage – Non-Fungible Tokens – otherwise known as NFT’s…. Which btw make zero sense to me – so I’m not even going there, because I don’t think it will ever be a ‘mainstream’ long term retirement vehicle at all, in fact, I suspect it will go the way of the dot com bubble of 1999/2000.

Now there will be some that call me out on this thought, but my response will be- Great….That’s what makes a market – both buyers and sellers….and in this case – I am a SELLER of NFT’s….But that’s another story for probably another time….. I mean I’m still trying to wrap my head around why anyone would pay $2 million + for a Jack Dorsey tweet….I mean – what is the value in that?  What am I missing?  Never mind the $70 million that a still unknown buyer paid for that ‘digital artwork’….I mean it’s laughable…. Think of it for just one minute…$70 million – for what exactly?  .

For ’13 years of everyday work that is authenticated by blockchain, which certifies its originality and ownership’…..?  Right….

What is interesting is that we still don’t know who the buyer was…. All we know is his/her name is Metakovan – a pseudonym for someone that wants to remain anonymous….who then told us that ‘this is a crown jewel, the most valuable piece of art for this generation…..It is worth $1 billion’….oh boy…..I’m way too old for this crap….
In any event – all of this latest volatility was ignited by the recent jump in bond yields that then sent the high flyers down the drain…..as concerns rose about valuations….and while we understand that – then the contra should be true as well…when bond yields fall the high flyers should have rallied, but they did not rally when bond yields fell yesterday….leaving the 10 yr at 1.61% down from 1.65%,  which then suggests that something else is going on…..and it’s called the big rotation….money moving out of ‘sexy’ and into ‘boring’ – but boring does not mean no opportunity….in fact – during this reflation/recovery trade boring actually looks opportunistic….as money managers reallocate based on those range of issues identified above….which does not mean you throw ‘sexy’ out….you just rebalance it within your portfolio.

And while boring (the Dow) held onto gains for much of the day- it fell victim to the selling pressure in the final hour of trade…by the end of the day- The Dow fell 3 pts, the S&P’s down 21 pts or 0.55%, the Nasdaq lost 265 pts or 2.0% and the Russell – which has so far outperformed this year lost 51 pts or 2.3%.

To me, the markets appear to be pausing, trying to price in what we are all seeing……an attack on big business, an attack on success, nervousness around what all of this means for the US economy as rates, inflation and a broad range of potential tax increases now become primary concerns for investors….because they haven’t been an issue for a long time….and as we emerge from this pandemic – analysts and strategists all sing the same song….the US economy is about to explode, and while that is great news, it also means we need to consider what it means for rates and inflation…..and we are beginning to see pricing pressure at the producer level – which will make its way to the consumer….And the most recent PMI’s all showing great strength and yesterday’s data was just another example of that…..Markit US Manufacturing and Services PMI’s were strong again…..at 59.8 and 59.5 respectively….well into expansionary territory….which is both good and bad, right – the sword cuts both ways….and while Jay and Janet tell us not to worry – that message is getting lost in the most recent market action.

US futures are up this morning….not big, but they are up…..in what feels like another ‘dead cat bounce’ as investors continue to consider valuations.  Now look , yesterday was a tough day for some stocks….I mean Cathie Woods’s ARKK ETF is now the barometer of tech disruptors and future tech and that ETF took it on the chin…falling another 5.7% as the individual names continue to get crushed…..TSLA -5%, SQ -4.3%, ROKU – 7%, ZM – 7.5%,m NVTA – 12% and the list goes on….and that was just yesterday…..In fact – many now use her ETF as a barometer of investor sentiment in the tech space….and rightly so, her ETF owns all of the biggest newest tech disruptors….So, it is a good guide to investor sentiment.

Boring is good…right – the Value trade (which is considered boring) is outperforming sexy – defined as the Growth trade – and that seems to be the thinking for 2021…..While the Nasdaq is off 8.5% ,the ARKK ETF is off 28% – putting it well into BEAR mkt territory…..(defined as a decline of > 20%), the Dow is only off 2%, the S&P is off 2.5%, and the Russell is off  9% – this after an explosive move higher that took the Russell up 54% in 4 months….so a 9% pullback is nothing to panic about.

Eco data today includes Initial Jobless Claims of 730k, Cont Claims of 4 million, 4th QTR GDP of 4.1%, and the Kansas City Fed Survey of 26.

European markets are under pressure…. the spread of new covid variants causing new lockdowns across the region as leaders attempt to control the spread and investors consider the ramifications of the latest lockdown.  Energy names under pressure as the lockdown suggests a short term decline in demand – something that I think is just that short-term….. Possible curbs on a vaccine bloc from the EU to the UK only raising the temperature….. …. There is no eco data to drive the conversation – so it is about lockdowns, global bond yields, inflation, and the recovery…. At 7 am the FTSE -0.34%, CAC 40 -0.34%, DAX -0.21%, EUROSTOXX -0.34%, SPAIN -0.77% and ITALY -0.10%.

Bitcoin – is down $1200 at $53,000.  Ethereum is up $5 at $1606.

The S&P closed at 3889 – again falling below the century mark…..and ending the day on its low……Officially the 50 dma is at 3868 and should offer some support if we test it…..but again the force of the test will depend upon today’s 7 yr bond auction….If it is underwhelming the tone will go from slightly positive to negative in a heartbeat……and if that happens, then look for the  – that respond to ‘technical breaks’ in the markets  to kick in and force the markets lower – just to test the will of both buyers and sellers….Will the bulls defend the position or not?  Will they let it fall just to see where it goes?  All very interesting………

We remain in the broader 3770/4040 channel – which continues to define a broader trading range that is well within what would be considered normal.  So, no reason to panic right now.

Stick to the plan, do not chase, trim where necessary and put money to work when its right….and that may not be today……and that is ok.

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

Risotto w/Cauliflower and Truffle Butter

This is another great risotto dish that is easy to make and easy to present.  For this you need:

Diced Spanish onion, olive oil, butter,  2 Cups Arborio rice,  1/2 Cup dry white wine, Cauliflower Florets Cut Into bite size pieces, warm chicken broth, s & p, truffle oil or truffle butter and shaved Parmegiana cheese.

Heat the olive oil and butter in a heavy saucepan over medium heat.

Add the onions and cook until tender – maybe 10 mins…then add the risotto and stir until well coated with the oil mixture.  Add the wine and continue to cook until it is almost completely absorbed.

Next – begin by adding one ladle of the hot chicken broth, stirring frequently until it has been almost completely absorbed before adding more.  Continue to cook the risotto in this manner adding the broth one ladle at a time until the rice cooks.

While the risotto is cooking, heat some more olive oil in a frying pan and add the cauliflower.  Cook over medium low heat adding a tablespoon or two of  broth until the cauliflower is tender and just beginning to turn a golden brown.   Remove from the heat.

After cooking the risotto for about 25 mins, should be tender to the bite, stir in the cauliflower and butter. Season with s &p to taste.

Once it is well mixed – serve the risotto into individual bowls, drizzling the top with the truffle oil or a spoonful of truffle butter.  Garnish with shaved cheese and serve immediately.

Buon Appetito.