The Tango vs. the Salsa; Countdown to PPI – Try the Scampi

Kenny Polcari Uncategorized Leave a Comment

Things you need to know.

  • The dance continues….Each index a bit different
  • Jay Powell – once again says – Relax…it’s all good
  • The rotation reversing….from growth to value to value to growth…
  • Chinese PPI suggests building inflation – US PPI due out at 8:30
  • Oil remains just shy of $60
  • Try the Shrimp Scampi

And the dance continued…. all the indexes doing something different….as the day wore on and Fed Chair Jay Powell once again told the world that.

‘the central bank has the tools to curb ANY inflationary pressures, which are expected to be temporary as the economy reopens….’  And Boom….

The dance turned into the waltz for the Dow as it gained 57 pts or 0.17%,,,,,,the S&P?  Oh, that was the Tango…. ….and you know the Tango….it is a dance of precision, sex, passion, almost erotic in its style and presentation…causing investors to go all in…. leaving the S&P’s just 3 pts shy of the next century mark – 4100 – a prize I identified in yesterday’s note and only 7 days past the surge up and through 4000…. ….. The Nasdaq was doing the Salsa….and for anyone that knows about the Salsa – it is all in the hips….and those hips sent the tech stocks surging…. up 140 pts or 1.03% and the Russell’s dance could be defined as doing the Cha-Cha…continuing that back and forth and sidestep move…gaining 19 pts or 0.88%.  It was all very exciting……leaving investors yearning for more….

Tech appears to be back in the leadership position… – as the move into value appears to be taking a breather for the moment…..10 yr. treasuries which had caused the surge into value names and out of growth names 2 months ago – now nothing but a distant memory…..as tech and the Nasdaq play catch up……..the S&P Growth ETF – SPYG – surged by 1% yesterday – mimicking the same 1% move in the broader Nasdaq index……the value ETF – SPYV fell 0.10%….the difference between the two has now narrowed to just a 5% difference vs. the 10% difference just last week – leaving the Nasdaq just 2.5% below it’s all time high…..and so the excitement builds……
And this morning – at 8:30 we are going to get the latest PPI report – the Producer Price Index report and here is where we will see the brewing pressures of inflation…. IF there are brewing pressures…. I mean – Does anyone see brewing pressures?  No, do not be ridiculous….

Expectations for the PPI today call for +0.5% m/m, ex food and energy of +0.2% m/m, – Final demand of 3.8% y/y and final demand ex food and energy of +2.7% y/y……now remember – two months ago – February 17th to be exact – PPI was expected to be +0.4% and it came in at +1.3%….3X greater than the expectation and then do you remember what happened?  10 Yr. yields surged, the VIX surged – rising some 60% in 3 weeks….and tech stocks took it upside the head…. seemingly falling into the abyss…. losing a quick 12% over 2 ½ weeks…before it found itself – recall that the Dow and S&P only backed off by 4%– 5% …. Analysts, strategists all calling for the ‘big’ re-pricing…. was this it?  Was this the beginning of a new mind set?  Well, it kind of felt like it was, until it wasn’t…..rates surged to 1.5%, backed off, then surged to 1.6%, backed off and then surged to 1.77% and backed off again…..each time causing investors to reconsider the theme……but each time coming to the same conclusion…..With the FED completely behind us, assuring us that they weren’t going away….and FED rates to remain near zero…investors became less concerned – after much massaging –  about those rising 10 yr. rates…

The media making sure to get out all the talking heads to reconcile the latest moves and to assure investors that while the market may appear expensive – in fact – with the expected robust recovery here and around the world – and the pent up demand that you can feel – just be walking down the street – there is nothing to worry about…..and so….traders and investors went on a shopping spree scooping up those high growth names that had become value names…and bang…it is off to the races….Cathie Wood’s ARKK ETF – that is the poster child for anything tech disruptive – also took it on the chin – falling 30%  – into official bear market territory by the end of the 1st qtr.  has now regained 18% in the past week………as the start of the 2nd qtr. appears to have provided a new opportunity…. Oh boy….it is exciting…. but do not get complacent….

And speaking of complacency – the VIX continues to move lower – each tick lower – essentially a vote of confidence in the future…..and while I get it, I continue to urge caution…..because if the macro data should start to change and rates begin to move towards 2% – I do think we will see the latest spike up – disappear….Recall how the FED keeps telling us to relax…don’t worry….yeah, well….to each his own….and that’s what makes a market – a difference of opinion which creates both buyers and sellers….and while I remain optimistic about the recovery, I also remain cautious about the potholes ahead….which is why I remind you to assess who you are, assess your risk profile, figure out where you are in the ‘life cycle’ because that will help you define and create the proper plan.  Look, if I were 30 – I would be all in…. Tech all the way…. but I am 60 – so I must be honest as I assess my time left on Mother Earth…. Do not worry – you will get there – and sooner than you realize….

This morning….US futures are telling us that different story….the Dow, S&P and Russell are up while the Nasdaq is a bit lower……as the market struggles for direction….and investors consider the prospects for economic growth vs. lingering inflation – Factory price data in China rose – PPI jumping to +4.4% – exp was for +3.3% and CPI data rose to +0.4% vs. the +0.3% expectation….and that is spurring new concerns about global inflation.  The Chinese market got slammed falling 1.5% on that news…. The 10 yr. yield being quoted up at 1.67% up from 1.63% as investors await today’s PPI data.

In Europe – the markets there are all over the place….10 yr. German bond yields rose to -0.31% (that is correct – rates in German are negative) while 10 yr. UK bonds rose to 0.8%…. German industrial output fell 1.6% vs. the expected increase of 1.5% – a big difference…. right?  A negative number vs. the expected positive number…. At 6 am – the FTSE – 0.24%, CAC 40 + 0.17%, DAX -0.05%, EUROSTOXX +0.02%, SPAIN -0.66% and ITALY -0.42%.

Oil remains just below $60 – leaving it to post a 2% drop this week after OPEC + agreed to gradually increase supplies over the next 3 months….and new concerns over a potential 4th wave of the virus that could cause renewed lockdowns…concerns that I do not believe to be realistic…. I continue to ascribe to the demand acceleration story in the second half of the year……

Bitcoin – is trading at $57,800.  Ethereum is trading at $2100.

The S&P closed at 4097….as it tried desperately to pierce 4100…….S&P futures are up 4 pts at 6 am…..….which would take us up and through 4100 if it holds….we won’t know that until 8:30 am…when we get the PPI report…if the PPI report is benign – suggesting no inflation then it will be off to the races…but if the PPI is stronger then I would expect the market to reverse course and come under some pressure as the week closes….It’s all about to get very exciting – so hold on to your horses….

Remember – as a long-term investor – you need to eliminate the daily noise and focus on the plan.  Do not become emotional…. Take advantage of the move in prices to rebalance your portfolio so that you are not overexposed or out of balance – this will protect you.

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


Shrimp Scampi

So delish….

For this you need:  1 ½ lbs. of cleaned and deveined jumbo shrimp, plus a handful of shrimp shells, ½ lb. of linguine, sugar, s&p, olive oil, butter, dry white wine, fresh thyme, fresh squeezed lemon juice, cornstarch, 8 garlic cloves, fresh chopped parsley.

Start by making a salt and sugar brine…. dissolve 2 tbls of sugar and 3 tbls of salt in 1 qt or cold water…. add the shrimp, cover, and refrigerate for 20 mins.  Remove and pat dry with paper towel.

Bring a pot of salted water to a rolling boil.

In a large skillet – add some olive oil and turn the heat up to high.  Add the shells and sauté for 2 – 4 mins…. Remove from heat – now add in 1 c of the dry wine, and some thyme sprigs.  Return to medium heat and sauté for another 5 mins.  Now – carefully strain the contents of the pan thru a colander – set over a large bowl.  You should end up with about ¾ c of liquid. Discard the shells.  And Set liquid aside.

In a separate bowl – combine 3 tbls of fresh lemon juice, 1 tsp of cornstarch – set aside.

Add the linguine to the water and cook until aldente…maybe 7 – 8 mins.  When done, strain – always reserving a mugful of the pasta water.  (If you prefer to eat this without pasta – then skip this step).

In the large skillet – add more olive oil, add sliced garlic and s&p – heat over med heat and sauté the garlic for 3 – 5 mins…until fragrant.   – now add in the reserved wine mixture – turn heat to high – bring to a boil and then turn to medium.  Add the shrimp and cover – stir occasionally – making sure to flip the shrimp so they get pink on both sides…. Remove from heat – using a slotted spoon remove the shrimp and put into a bowl.

Now return to heat and add in the lemon juice and cornstarch m- cook until slightly thickened.  1 min….   Remove from heat, add in 4 tblsp of the softened butter and chopped parsley.  Add back in the shrimp and mix.

Toss the linguine in with the shrimp and toss to mix…. if you need to – add back some of the pasta water to keep moist.  Not too much…. just enough to keep it moist.  If you choose not to use the pasta – then serve with some nicely toasted garlic bread.  Mmmm delish…

Buon Appetito.