Things You Need to Know
- **Please refer to back to yesterday’s note concerning ‘momo’ traders!
- Stocks lower around the world.
- Tech Bond sales are now the concern. On top of everything else..
- Bitcoin goes negative on the year, gold down, Oil down, Bonds Up.
- Is this the FLUSH before the rally?
- Try the Tuscan Beef Peposo
Good morning.
Buckle Up – It’s RISK OFF Around the World – stocks, bitcoin, gold all getting slammed – Bonds though are UP!
Global markets are lit up red. In Asia, they hit the sell button hard:
Japan – 3.2%,
South Korea – 3.2%,
Taiwan – 2.5%,
Australia – 2.0%
Hong Kong – 1.7%
China – 0.6%
Across the Eurozone, it’s the same story – pressure everywhere:
Italy – 1.5%
Spain – 1.4%
Euro Stoxx – 1.5%
France – 1.1%
Germany – 1.1%
UK – 0.85%
And here at home, the tone is no different – U.S. futures are lower across the board, setting us up for another down day in the States.
This Slide Is NOT a Surprise – And here we go.
This is long overdue, and nobody should be shocked or panicked by it. Call it a slide, a reset, a shakeout – pick your word – but in my opinion, it was coming. I thought we’d see it in September/October. It just took the market a little longer to catch up with reality.
Now it appears to be here. All the things we’ve been talking about are finally hitting home:
Stretched valuations – tech especially.
The upcoming NFP report
The next FOMC meeting
The start of BIG retail earnings
And the countdown to NVDA earnings on Wednesday night
What’s funny is none of this is new.
We’ve been saying for weeks that stocks are stretched, that NFP could disappoint, that the Fed is confused, that the consumer is wobbling, and that the AI bet is being priced like it can never miss.
The New Obsession: Big Tech, Bigger Debt. And now there’s a fresh concern the media is latching onto – in essence creating more concern.
Yesterday, AMZN sold $15 billion worth of 40-year investment-grade bonds. The original expectation was $12 billion – but there was $80 billion in demand for this paper. That’s 7x oversubscribed. Translation: there is still a massive amount of money looking for a home. Too much money chasing too little supply.
On its own, that’s not an issue. But layer it on top of recent deals from:
META – $30 billion, GOOG – $25 billion, ORCL – $18 billion, …and suddenly the narrative is:
“Big Tech is loading up on debt to finance AI infrastructure, capex, and maybe buybacks. Is this sustainable?”
Let’s be clear: these companies are CASH MACHINES.
We’re talking about combined free cash flow north of $200 billion a year and trillions in market cap.
The supposed “issue” is that analysts now fear we’re shifting from self-funded AI to debt-funded AI, and they’re waving the red flag – trying to draw a straight line back to the dot-com bubble, where hype completely outran reality.
To which I say: This Is NOT the Dot-Com Bubble 2.0. Anyone trying to compare today’s AI build-out to late-’90s dot-com mania needs to have their heads examined.
Back then, we had “businesses” that were nothing more than websites with Super Bowl commercials and NO revenue model and NO products. Today we’re talking about companies like NVDA, PLTR, GOOG, AMZN, MSFT, IBM, AMD and others that are generating real cash, building real infrastructure, and serving real demand.
You cannot compare Pets.com to NVIDIA. You can’t compare a sock puppet IPO to trillion-dollar platforms running global compute.
If you want to make that comparison, you need to go back to that Ivy League school you went to and get your money back! This is not 1999.
But – and this is important – even real stories get overbought, and real companies can trade at ridiculous prices when the momo crowd takes control. And we have been discussing this for months…..And now the market is adjusting.
Let’s make sure to discuss LEVERAGE another day and the impact that has on days like today. And I mean margin leverage and ETF leverage. And to think they want to create ETF’s that are 5 x’s levered! Brillliant!
What’s funny now, is that all the guys that kept saying ‘never another down day on Wall St’ are the ones now saying – ‘oh, this is completely appropriate’!
You are killing me!
Yesterday – stocks ended the day lower……Dow gets clocked down 557 pts or 1.2% , The S&P gets whacked – down 62 pts or 0.9%, the Nasdaq got slapped- down 192 pts or 0.85%, the Russell got punched in the face – down 46 pts or 2%, the Transports got kicked in the gut – down 285 pts or 1.8%, the Equal Weight S&P suffered a blow to the chest – down 100 pts or 1.3%, while the Mag 7 got a slap on the wrist – only falling 35 pts or 0.1%.
Now — the momo guys are bailing, that triggers the algos to follow suit. When an index fails to hold a trendline because the fast-money crowd is running for the exits, the next step is almost always the same – lower prices. Technical chart failures (breakdown) automatically cause algo’s to go into sell mode (conversely technical chart break outs cause the algo’s to go into buy mode).
So, when trendlines supports are broken (that’s a failure to hold) the algos push deeper into sell mode, and the buyers step aside to watch how panicked the sellers get.
And remember — let me be clear…. stocks don’t go down because there are no buyers…. There are always buyers. For someone to sell a stock, someone else must be willing to buy it. So don’t let them tell you “There are more sellers than buyers.” That’s a misnomer. What we actually have is more aggressive sellers, which allows buyers to be patient, selective, and very price sensitive.
…and that is exactly what happened. …..The Dow, S&P, Nasdaq & Mag 7 all pierced their short term trendlines and Boom – down we go, The Russell, & the Equal Weight Pierced their intermediate term trendlines and Boom – down we go, and the Transports are sitting right on top of both the short and intermediate trendlines that are converging…..so when it pierces one, it actually pierces both and Boom – down we go…..Remember – they don’t care about P/E ratios, discounted cash flows, or even fundamentals, they don’t care what some strategist thinks or what the Fed is gonna do. They just care about velocity.
That’s why prices fall fast — sellers hit bids, buyers move lower, and down we go… and yes, it gets uncomfortable. And this is where you’ve got to stay disciplined — don’t let them see the whites of your eyes.
Hold your ground, don’t panic (recall the April drawdown?), You are a long-term investor, not a day trader. Remember, it’s about time IN the market, not TIMING the market. You have a quality portfolio; you planned for this. Time is on your side.
Don’t tip your hand. Let the momo guys exhaust themselves, let the algos finish their tantrum, and then you act — calmly, deliberately, and according to your plan. It’s called stocks on sale!
I mean if you were willing to pay $258 for AMZN 2 weeks ago (it’s all time high), then why would you run out the door when it trades down 12% when NOTHING about the fundamental story has changed? In the pre-mkt – AMZN is down another $3 – trading at $229 – just $1 above the trendline – so sit back and watch what happens – if it breaks then $215 is NOT out of the question and if that happens that would represent a 17% decline off the high….That is called a ‘sale’.
Now the VIX – which was higher yesterday morning in the pre-mkt – shot higher after the opening…..trading up as much at 18.2% before settling up 15% at the end of the day. This morning it was up another 5.5% but has since settled back and is currently up 3% – suggesting that maybe cooler heads will prevail…which doesn’t mean we won’t go lower – we most probably will….but if you are looking for a crash – I think you will be disappointed.
So far – to be clear – the Dow is down 3.7%, the S&P down 4%, Nasdaq down 6%, Russell is down 8%, Transports down 4%, Equal Weight 4.25% while the Mag 7 are down 6.2%. None of the indexes are in ‘correction zone’ – which doesn’t mean individual names are not…In fact AMZN is – It is down 12%, NVDA down 12%, PLTR -18%, I mean I can keep going, but all that means is that there is OPPORTUNITY for long term investors.
Bitcoin is trading at $92k – that is down $38k (or 30%) from its all-time high and now in negative territory for the year. This morning it traded below $90k – but has rallied back. Many now asking are we in a ‘crypto winter’ – the talking heads say we are not, do your own due diligence!
Gold is down $400 (9%) from it’s all time high – leaving that still up 53% ytd.
Oil is below $60 barrel – trading at $59.90 this morning and down from $71 in July.
Bonds are up – yesterday the TLT and TLH rose by 0.25% – Yields remain in a tight range.. The 2 yr is yielding 3.57%, the 10 yr is yielding 4.11% and the 30 yr is yielding 4.72%. 30 Yr mortgages are costing you 6.2%. 15 yr mortgages cost you 5.6%. Your gov’t mm fund is paying you 3.77%.
Now it’s a big week for retail earnings and HD reported and they disappointed…missing estimates blaming homeowners for not ‘fixing’ up their homes! It is trading down $6 or 1.6% in the pre-mkt. Watch for WMT, TGT, LOW and more. If the others mimic the HD narrative then it might be more of an issue, but WMT & TGT are two very different businesses, so I expect a different story. LOW might have the same narrative – and that should not surprise you.
NVDA is tomorrow…..and the bets are on…. The options markets are pricing in a 90% chance of a ‘substantial beat’ on the numbers, and they are pricing in a +/- 7% move after the announcement. Now while NVDA is up 41% ytd – they did take 12% out of it last week…They pierced short term trendline support and they tested intermediate term trendline support ($178)– which held. This morning it is quoted down $2 at $184.80.
The media is making a big deal about the fact that Petey Thiell’s hedge fund – Thiell Macro sold all of their NVDA (537,742 shares) over the past month raising $100 million – as if everyone should panic because Petey sold his stock….Ok – run with that…..don’t you really want to know where he bought it and did it meet his target? My guess is he did just fine and now he is looking for other opportunities…. Remember – he is a hedge fund not a mutual fund – they operate on different metrics.
Recall when Uncle Warren sold his BAC stock at $40 – everyone thought I should sell MY BAC as well…. Right! He bought his position at $5 during the GFC and his sale at $40 represented a 700% return…. I’ll take that any day of the week. And btw – BAC is now trading at $52 after trading at an all-time high of $54.
US futures are down – Dow is -260, S&P’s -20, Nasdaq -100 and the Russell is -8.
The S&P closed at 6,672 – down 61pts. We busted right through trendline support at 6710 and are in a 6530 (intermediate support) and 6710 (now resistance) trading range. Again, once we broke support, the algo’s got more aggressive to see if the bulls would defend the position or if they would step aside to test the anxiety level? They stepped aside and it looks like they are stepping aside again today.
Now this could be all end of month selling (clean it out) – as we prepare for a Santa Claus rally in December – or maybe not…Sit tight – do not make an emotional decision.
Now is the time to stick to your plan – remain disciplined, talk to your advisor if you are concerned, patience is a virtue – especially when the markets get nervous.
Call me at 561-931-0190 – to give you a no obligation review of your portfolio. It’s all about risk management – let me help you assess the risk of the portfolio vs. the risk you are willing to take.
Countdown
Black Friday deals are happening.
22 days until the FOMC announcement.
37 days until Christmas
43 days until the ball drops in Times Square
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Try the Tuscan Beef Stew Peposo
Peposo is a slow-braised Tuscan beef stew made with beef shank or chuck, lots of black pepper (whole peppercorns + cracked pepper), Red wine (Chianti is the classic), Garlic, Salt
That’s it….no carrots, no celery, no onions. It’s peasant food at its best.
The dish was created in the 15th century in the town of Impruneta, just outside Florence — famous for its terracotta kilns. The tile workers would toss chunks of beef, garlic, pepper, and wine into clay pots. Then seal them and then push the pots into the corner of the kiln overnight.
The heat of the kiln would slowly melt the beef into velvet, and the pepper/wine combo created a deep, bold sauce — almost smoky, spicy, and magically simple.
It’s said to have been a favorite of Filippo Brunelleschi, the guy who built the dome of Florence’s Duomo.
So here we go:
Ingredients: 3 lbs. beef shank or chuck, cut into large chunks, 6–8 cloves garlic, smashed, 2 tbsp cracked black pepper, 1 tbsp whole black peppercorns (don’t skip — they mellow beautifully), Kosher salt, 1 bottle Chianti (or any dry Italian red)
Brown the beef – Season with salt. In a heavy Dutch oven, heat a splash of olive oil and brown the beef on all sides. Don’t rush this — this is where flavor begins.
Add the garlic and pepper – Toss in the smashed garlic, the cracked black pepper, and the whole peppercorns. Let them toast for 30 seconds.
Add the wine – Pour in enough Chianti to cover the meat. Scrape up the browned bits.
Bring to a simmer, cover, and cook on the stovetop for 3–4 hours on low or in the oven: 275°F for 3 hours.
When done – The meat should melt when you touch it.
Remove the lid and simmer for another 15–20 minutes. To let it thicken and become glossy, rich, and luxurious.
Serve this over polenta or pappardelle. Or do it Tuscan style with crusty bread to soak up every last drop.
Buon Appetito!