The Clock Ticks & Investors Await – Try the Spaghetti Ubriachi

Kenny Polcari Uncategorized

Things you need to know.

  • Countdown to 2 pm…. tick, tock, tick, tock
  • Global markets in a holding pattern
  • Oil up another 40 cts – now trading at $72.48/barrel.
  • Bitcoin and Ethereum are quiet.
  • Try the Spaghetti.

Stocks ended the day lower on Tuesday, but off their worst levels. The S&P’s and Nasdaq pulled back from all-time highs set Monday – falling 8 pts or 0.2% and 101 pts or 0.7% respectively.  The Dow gave back 99 pts or 0.3% and the Russell fell by 6 pts or 0.25%.  Value outperforming growth as the wheels turn.   In the end, it was not a notable day at all as investors prepared for what is to come today at 2 pm.

REITs (XLRE) were the worst performer down 0.9% followed by Tech XLK – 0.6%, consumer discretionary XLY – 0.5% and communication services XLC -0.5%.  Energy XLE +2% was the big gainer as oil bucked the recent broad trend of commodity weakness…. Lumber down 40% in one week…. Industrials XLI were up 0.4%, utilities XLU +0.3% and financials XLF +0.2%.  Treasuries were unchanged to slightly weaker with the 10 Yr. yield at 1.50%. Gold settled at $1865/oz while Bitcoin ended the day at $40,100 and Ethereum at $2550.  WTI crude shot higher – ending the day at $72.44/barrel…. Leaving oil now up 100% from the October 30th low of $36.17/barrel.  Oil is up 100%…. just sayin’.

The economic calendar was full of information…. May PPI’s latest inflation reading came in ‘hotter than expected’ while retail sales missed.  June empire manufacturing index also came in below expectations – but no one should be surprised because that is a NY regional index, and the state has been essentially closed. However, investors and the markets are still largely in waiting mode for the Fed.  Again – the big question is whether Powell will say the central bank has begun informal or formal discussions on tapering.  And do not forget the debate surrounding whether Jay will say the economy is still a way away from “substantial further progress” and whether the dot plot will continue to show no rate hikes through 2023. Rumor has it that the dot plot will now show a potential rate hike in mid-2023.   Oh, so much to worry about…. but there are only hours left until we find the answers.

Now while it was mostly quiet – there were some who focused on the recent pullback in lumber and copper prices attempting to quiet the noise of skyrocketing commodity prices – suggesting instead that peak inflation fears may have passed- ahhhhhh……not so fast.  And in DC –   Joey is expected to review the bipartisan infrastructure proposal within next 2 weeks though some are already saying that it might already be DOA.

Citibank warns that investment banking revenues will be significantly lower in 2Q. (Will that be a warning for the big banks across the board?) AXP-CEO Stevey Squeri tells us that travel bookings and dining spending are back to pre-pandemic levels – suggesting a FULL recovery has taken place (good for the leisure and travel stocks, Airlines, Hotels).  My JetBlue flight on Sunday evening from Palm Beach, FL to Westchester Airport in NY was $350 (one way) and it was jam packed – every seat taken with a few stragglers hoping to go standby (they were out of luck) ….and UBER & LYFT are mugging New Yorkers charging rates that are astronomical…. Yellow cabs almost non-existent in the city that ‘never sleeps’.

Called an UBER last night at 10 pm – $61 to go 4.3 miles – Tribeca to E 52nd St – at 10 pm, no traffic – 16 mins – that equates to $221/hr. – what am I missing?  That ride in 2019 might have cost $21….so last night’s $61 represents a 200% increase – but do not worry, it is transitory.

This morning we wake up to see that US futures are mixed…Dow, S&P and Russell all in slightly negative territory while the Nasdaq is attempting to push higher.  In addition to the FED meeting – we will get Building permits – expectations of 1.7 mil and Housing Starts of 1.6 mil.  Neither of which will drive the conversation at all, unless of course the actual reports diverge significantly from consensus – which no one expects….so feel free to push them aside.

European markets are all standing at attention as they too await the FED.  Markets are mixed, churning in place – UK CPI rose to 2.1% y/y and 0.6% m/m.

Oil! Continues to trade higher…this morning WTI (West Texas Intermediate) is up 0.9% again…. trading at $72.78 as the bulls come charging – strong demand eating away at supply sending prices higher.  Leaving some to wonder – Is it possible to see $80 oil by July 4th? And if we do – expect to see $4 at the gas pump….and when the new gas tax hits expect to pay more again!

Bitcoin is trading at $40,000, Ethereum is trading at $2,500 while Doggey Coin is at 0.31 cts.

The S&P closed at 4,246 backing off the new high achieved on Monday.   Yesterday I said that watch for the action…. will it have any conviction ahead of the FED announcement.  A weak performance might suggest caution going into the announcement while a robust performance would suggest investors are not concerned……so, what is your call? My guess is that the FED will indicate that it might be time to start talking… – do you think? But Jay will make it abundantly clear that nothing will happen fast.  On a side note – We are still buying $40 billion of mortgage bonds every month to SUPPORT the housing market…. does anyone see an issue with that?  The housing markets.  Does that really need our continued support?  Now while I do not believe it does, any suggestion that the FED is pulling back on that will send housing into cardiac arrest…. just watch….

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Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Spaghetti Ubriachi

So, you ask – spaghetti ubriachi? (Ooo – bree – a – key)?  You cook it in water and red wine – a nice Chianti or “vino di tavola” (table wine).  No need to use an expensive red – go out and buy a chianti.   The trick is that you add equal parts of water and wine – bring to a boil and add the pasta – cook for 7 mins and then strain – reserving a mugful of water/wine.   You then finish it off by sautéing in a pan with butter, garlic, pancetta and ½ cup more of the wine…. read on…

You need – a nice chianti, garlic, butter, spaghetti, olive oil, chopped parsley, pancetta, and red pepper flakes (optional).

Add equal parts water and red wine to pot and bring to a boil.  Add salt.  Add pasta. Cook until al dente – like 7 mins or so.

In the meantime, peel the garlic and slice it. – chop some pancetta.   Place the butter and olive oil in a sauté pan large enough to fit the pasta and place it over low heat to slowly melt the butter.  Now add the pancetta and cook just until almost crispy…. now add in the chopped garlic.  Saute.  (Here is where you will add the red pepper flakes if you choose)

When the garlic gets toasty add the additional ½ cup of red wine and about ¼ cup of pasta water…. turn up the heat until the liquid simmers. Strain the pasta – reserving a mugful of water…. toss the pasta into the sauté pan with the garlic & wine.  Mix well, tossing and stirring over med hi heat until the liquid is absorbed.  Do not let it “dry out” …. you can always add a bit more of the water if it does.  Taste.  Good?

Serve immediately in warmed bowls….be sure to have plenty of Pecorino Romano cheese on the table…

Buon Appetito.