Things you need to know.
– CPI appeared to be a ‘no brainer’ – but is trending UP.
– PPI due out at 8:30…In any event the MKT is demanding a cut.
– Former Fed Pres – Richie Fischer – says ‘Why are we Cutting?’ could he be sending ‘smoke signals’ that JJ is considering No Cut?
– Traders and algo’s would NOT be happy and they would hit the SELL button! I say, Good…. Lower prices for Long Term Investors.
– Try the Stuffed Calamari’s – Feast of the 7 Fishes #7
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So, apparently there is no confusion… (or that is what the market told us yesterday) – Marky Zuckerberg is giving $1 mil to the Trump inauguration (can you believe that!!!) META rises by 2.2%!!! Nothing like trying to get into bed and do nicey nice with someone he ‘censored’ 4 yrs ago…I wonder what Jeffy Bezos is going to contribute…. But let’s not go there right now…. Back to the markets…
The Nasdaq surging by 347 pts or 1.77% as investors, traders and the algo’s go ‘hog wild’ for anything TECH! By the time the closing bell rang – the Dow showed a loss of 99 pts or 0.2%, the S&P up 50 pts or 0.8%, the Russell added 12 pts or 0.5%, the Transports lost 95 pts or 0.6% while the Equal Weight S&P added 7 pts or 0.1%….(Again not the divergence between the S&P and the Equal Weight S&P).
As expected the CPI came in higher than last month (but it was expected)….suggesting that inflation is no longer trending lower and could potentially begin to turn up – but to be fair, this is only one data point….this morning we will get the sister report – the PPI – this is inflation at the producer level – which in my opinion is more telling….recall last month we were surprised – when the PPI report came out. It was hotter than expected – and that suggested that we would see CPI rise (which we did)….Why – because if PPI rises that means producers are paying more for products they use to produce the products we then buy – so think about it, if they are paying more, who do you think makes that right? You…The C in CPI (Consumer). The Producer PASSES those higher prices onto you. It doesn’t get any more complicated than that.
The PPI is expected to come in mixed…Top line PPI m/m at +0.2% (unchanged), while top line PPI y/y is expected to come in at +2.6% (vs. last month’s +2.4%) and if you take food and energy out – PPI Ex food and energy m/m is expected to be +0.2% (unchanged) while the y/y read is expected to be +3.2% (vs. last month’s +3.1%). So, let’s see how the market reacts to this data point this morning – Will it confirm what the market did yesterday or not?
Right now, US Futures are just a bit lower…. Dow futures – 75, S&P’s down 10, Nasdaq down 51 while the Russell is lower by 4. European markets today are all higher – not dramatically – just north of the where they closed yesterday…Italy the outperformer +0.4%.
Again, this is about ‘placing your bet’ for the short term…. Will they or won’t they cut? Remember none of the FED members can speak – they are in lockdown mode – but you can get ‘former’ FED members that can offer up their opinions on what should happen, remembering that they have no sway – but they could have ‘insight’ – Capisce? It’s usually Nicky T of the WSJ or our friends at Goldman Sachs that act as ‘Deep Throat’, but yesterday – FORMER Dallas FED President – Richie Fischer says he is ‘baffled’ that the market thinks we should cut. He reminded us that since the FED cut rates by 75 bps – rates have done nothing but go UP, markets are doing well, he went onto say that.
“Financial conditions are VERY ACCOMODATIVE’ right now, lots of private capital out there, private lending is strong, but if I were at the table I’d say let’s pause…”
He would not cut next week and then he would wait to see what the data continues to tell him…. saying that they are having trouble getting to 2% so why cut? Nothing is screaming for a cut other than the traders, the algo’s and Larry Fink – CEO at Blackrock (they have $11.5 trillion of AUM) – who said at a conference in Saudi Arabia ‘he was expecting the US will cut rates by 25 bps next week’.
He went onto say that American mortgages are more often than not priced for 30 yrs, which means interest rates do not impact the largest asset of many households, their homes’ (oh boy!)– which is true if you already have the home, but that is not true if you don’t’ have a home or if you are trying to sell your home….…..Mortgage rates have done NOTHING but go UP since JJ and the Inflation Orchestra cut rates by 75 bps. What were 6.3% rates have now become 7% rates. The cost of a $500k mortgage then was $3094.86/mo., today that same mortgage costs you $3,326.51 – a 7.5% increase in the cost of that mortgage…I’m just sayin…. Price increases over the past 4 yrs are dramatic…. Home Prices +43%, in addition – prices for everything else are up as well….Apparel +17%, New Cars +19%, Food at home + 22.9%, Restaurants +25%, Electricity + 29%, Auto Insurances +61%, Fuel Oil + 50%…and the list goes on….but just to remind you – yesterday’s CPI revealed that prices are still rising at a 3.3% rate y/y they are NOT FALLING 3.3% Y/Y. So while they tell us that inflation is better – yeah better than the 9.4% rate we saw in 2022 – we are not in a ‘deflationary’ environment when prices actually fall – to do that, the FED needs to put us into a ‘recession’ like Volker did in 1981…but JJ is apparently not interested in doing that….They should have done that in 2022, but they failed….and then we heard Janet Yellen apologize yesterday for not ‘doing more’ – offering regret saying she is ‘sorry’….Oh boy….really? We discussed this on the Big Money show yesterday…. see the link below.
https://video.foxbusiness.com/v/6365882830112
In any event – it is what it is, and we are where we are…. Now let’s see who wants to fix it and who doesn’t….
At the end of the day – the S&P sectors were mixed…We saw strength in Tech +1.5%, Financials +0.2%, Consumer Discretionary + 1.8%, Energy +0.2% and Communications + 1.6%…the other sectors lower led by Healthcare – 1.4%, Basic Materials lost 0.35%, Real Estate & Industrials down 0.2%, Utilities lost 0.6% (think lower rates), Consumer Staples – 0.8% (think boring, not sexy).
Now lately we have been hearing a lot about Quantum Computing and the role it is going to play AI and the future…On Monday we discussed IONQ – which is up 140% ytd, but there is an ETF that gives you exposure to this group….Sylvia Jablonski’s Defiance ETFs – has one – QTUM and it is up 42% ytd….and it includes names like QTBS +363%, Rigetti +649%, IONQ +140% – all very exciting….
Down the chain – Semis had a great day – SOXX +2.5%, Robotics & AI- BOTZ + 1%, IGV +1.55%, Cybersecurity + 1.5%, Disruptive Tech – ARKK + 2% – Capisce?
The VIX fell further into complacency territory…. now trading at 13.76…. moving deeper into the ‘no worry zone’ – which is exactly why we should be worried…. but you can’t fight the tape, but that also doesn’t mean you chase the tape… This is the time to be really smart, do your diligence, do not get drawn into the FOMO (Fear of missing out) mentality.
Bonds sold off again…the TLT down 1% while the TLH lost 0.7% and the AGG gave up 0.25%. And so, what did yields do? Ahhh? They went up…the 2 yr now yielding 4.17%, the 10 yr is kissing 4.3%, with shorter duration 3 month and 6 months offering you 4.25% and 4.16%. Current 12-month CD rates are between 4.2% -4.5% depending on what you deposit.
Oil rose by 2.65% or $1.82 yesterday to end the day at $70.40 – now piercing both the short and intermediate term trendlines that are converging right here at $70.33. This happening even after the IEA tell us that even the Saudi supply delay will not prevent an oil glut next year…They think we will be oversupplied by 1.4 mil b/d – well I guess all the buyers missed that memo…(more supply should drive prices down not up), but the reason we did see strength was because of more comments around tighter curbs on Russian and Iranian oil flow. And the new National Security Advisor nominated by Trump is Mike Walz – you know him. He is a Retired Army Green Beret and brings extensive military and policy experience…and he is known as vocal advocate for a strong national defense and has expressed hawkish views on China and is expected to put ‘maximum pressure’ on Iran and that includes Iran’s oil. Less Iranian oil may mean that we may not have that oversupply next year – something the Saudi’s would love to see – less supply could be higher prices…and remember – UBS put out that piece on Monday calling for Brent to trade in the $80’s next year, which means WTI should be trading in the mid 70”s.
Gold which pierced $2700 on Monday and traded up to $2756 is churning here. Recall that I told you – If gold pierces the trendline ($2701) – then we could see it trade up to $2750 in short order – how is 2 days for ‘short order’! This morning it’s just digesting that $100 point move higher and is trading down $13 at $2743. It is now in the $2700/$2800 trading range again…
US futures remain lower…..as we wait for the PPI – but I’m not sure it’s going to make a difference…the market is now pricing in a 100% chance of a 25 bps rate cut….so I do not see how JJ can turn this around without causing all kinds of chaos in the final 2 weeks of the year……Although I am still on the NO cut page – because I like Richie Fischer see no reason for the cut other than to pacify the markets because JJ painted himself into a corner. So cut now, but do not expect any cuts in the first qtr. of 2025 and if inflation in the next couple of months continues to tick higher -watch out…Rates may have to rise.
The S&P ended the day up 50 pts at 6084 on all the excitement that JJ can’t disappoint…. That retest of 6000 that I was hoping for is not happening today…. but the week is not over…. But nor do I think we are ready to pierce 6100 – so we are in the 6,000/6,100 trading range till year end.
Again, at this point, I would let the portfolio ride only by making last-minute changes due to tax planning issues. New money should be sitting in a gov’t mm fund earning 4.25% while we wait for the new year – where I fully expect (or hope for) some early weakness to take the froth out. In the end – patience is a virtue.
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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#7 Stuffed Calamari
This is outstanding…you have to like Calamari’s because this one is a bit of work…. but the result – to die for.
For this you need: Calamari bodies for stuffing – so you want the big ones… (You don’t need or use the tentacles so just specify “bodies for stuffing”), homemade Italian style breadcrumbs, wine, olive oil, toothpicks, homemade marina sauce (same as the lobster sauce w/out the lobster.) s&p.
So here is the deal – you order the calamari from the fish store – “cleaned”. This means that they trim the tentacles and take out the membrane from the inside…. but here is reality…. You still have to make sure that they are clean – so when you get home – you need to wash them and confirm that the membrane was in fact taken out. If not – you have to turn the calamari inside out – and then rinse well and then turn it back again – this is the trick…you have to be very careful as you do not want to rip the body otherwise you cannot stuff him. Capisce?
Now take a bowl of seasoned breadcrumbs – add enough olive oil to make them moist but not “wet”, now add a splash of your favorite white wine – not chardonnay. Mix well. Can you make a ball with the breadcrumbs? Do they hold in place? Perfect.
Now – carefully stuff the calamari using a teaspoon and your index finger…. careful not to overstuff as they will explode in the sauce when you cook them. You need stuff them just enough so that you can pin them closed with a toothpick… Repeat until you have stuffed all of the calamari’s …
Once you have stuffed them – drop them into the marinara sauce that you have prepared and turn the heat to simmer – DO NOT BOIL the calamari! The same sauce I gave you yesterday.
They will begin to plump up and turn white then take on the color of the sauce. They will cook in all of about 30 mins (max). Turn heat off and let rest.
Again – you should make this the day before and let it sit overnight. The next day – take it out of fridge and let warm up to room temp and then heat it up to simmer. When you are ready to eat them – serve them in a large bowl with plenty of tomato sauce. You can also make this and serve it over linguine if you prefer. The other option – if you make both the lobster and calamari sauce – then mix a couple of ladles of each and serve that over the linguine.
Buon Appetito
