Things You Need to Know
- Investors re-think the whole election thing and what it means for AI
- Tech gets crushed, broader mkt under pressure.
- Money moved into bonds and gold.
- Try the Linguine Arrabiata
I am on Fox Business with Stuart Varney this morning from 9 – 10 am.– please join us.
Well…that didn’t last long.
On Wednesday, (post the election) the Bulls came charging in, running over the bears – taking (most) stocks significantly higher – in what appeared to be a ‘relief rally’ – now that the election was over…..Oil fell by nearly 8% on hopes that the Democratic sweep would put pressure on Trump to end the conflict in the middle east….Remember – all the indexes all ended in the green, but the mood was mixed, there was something odd about it…..…..Yes, the Dow had advanced by 3%, the S&P by 1.6%, the Nasdaq up 1.4%, the Mag 7 up 2.2%
But something wasn’t right…. the Semi’s ended the day DOWN 3.1%…..
And then yesterday happened…..someone pulled the rug out and stocks collapsed…..in the hours after the bell on Wednesday, investors, traders and algos (and DO NOT discount the role the algo’s played in this story – because it is very significant) had a chance to rethink the rally. Investors woke up to a different set of questions.
What would Democrats do with control of Congress? How hard would they go after the administration (think Trump and Hegseth)? And what happens when the CEOs spending hundreds of billions on AI find themselves being dragged up to Capitol Hill to answer questions by elected officials with zero understanding of the AI industry. Musk- a man who has changed the course of history both on earth and in space – is somehow at the top of that list….
On Monday evening – during a live taping of Pivot podcast – with far left co-hosts Scott Galloway and Kara Swisher – Galloway actually accused Musk of being a ‘traitor to the West’ – referencing the Rosenbergs – the husband and wife that were convicted of conspiracy to commit espionage for passing atomic bomb secrets to the Soviet Union in 1953….and were executed on June 9th of that year – Galloway then suggested that Musk ‘should be held to the same standards as every other traitor in the West’ – the implication is clear.
And then the histrionics started…… The rhetoric running hot…. getting even more amplified…..And this should be unacceptable to everyone.
Add that onto all of the other headlines about what the Dems were planning on doing – away from tech – once the new congress is seated….and then it happened….the gates opened and the rout began…..The selling initiated by the smart logic algo’s – algo’s that read and scrape the headlines and then react to the tone of the headline and story….with no ability to assess and consider all of the options….Selling begets more selling, Leveraged investors (traders) get hit with margin calls and that creates more selling, leveraged (long) ETF’s only adding to the angst – while leveraged (short) ETF’s won big….the SPXS rose 13%
Technical levels get broken and that causes the algos to sell more, individual investors get spooked and hit the sell button as well, buyers (of which there were plenty) step aside, (because why stand in front of a moving train?) leaving a void in the prices allowing stocks to collapse – as sellers panic……this is exactly why you do not make emotional decisions.
Stocks, tech and semi’s especially – were trading as if the world is coming to an end and that the Democrats will slam the brakes on EVERYTHING, as if they can really stop this AI train and the data center argument from advancing…… to be clear – the cannot….
It was a disaster – amplified by the algos….at the end of the day – here is what it looked like – the Dow lost 3.5%, the S&P up 1.6%, the Nasdaq +1.4%, the Russell up 1.6%, the Transports up 1.1%, the Equal Weight S&P up 1.9% while the Mag 7 gained 2.2%. The VIX (fear index) shot higher by 62%! The Nasdaq lost $2.3 Trillion in mkt value. Some of the biggest names in the AI trade lost nearly a fifth of their value in a day.
And it wasn’t just tech. Every sector finished lower. Some took a much bigger beating than others, but as the day wore on, the selling got more indiscriminate.
Tech especially got whacked…. Semis -12.5%, Memory names down 18%, Software down 4.4%, Disruptive Tech down 9%, Quantum names down 10+%…
Now let’s be clear. If the Dems and local officials want to make it harder to build data centers, they can. A moratorium can delay a project. A zoning vote can kill a site and destroy opportunities. And those decisions have consequences for the construction jobs, equipment orders and power contracts tied to that project.
Which brings up another question. What happens to earnings estimates if the buildout takes longer? The election raised the prospect of more scrutiny and tougher approvals for data centers. A delay in construction can push out equipment orders, power demand and revenue. Investors had been paying up for those earnings today, and Thursday they started questioning – what happens now?
But the companies building these facilities have choices, too. They can take the next project to a state or county that has the power, the land and appetite for the investment. But that takes time, and investors have every reason to care about the delay. The next question is where those dollars land. Money and opportunity move to where they’re treated best. Space anyone?
Bonds and gold were the beneficiaries of all of the hysteria…the TLT gained 0.2%, the TLH gained 0.25% – the 10-yr bond yield dropped 5 bps to end the day at 4.83%, the 30 yr fell 2 bps to end the day at 5.25%….
Gold rallied by 0.7% to end the day at $4,090 after trading as high as $4,145. This morning it is down $22 at $4,065.
Oil rose by 3.5% to end the day at $91.20…This morning it is up 20 cts. Talk of an end to the conflict drowned out by the noise on Wall St.
This morning…. futures are mixed…the Dow down another 500 pts, S&P’s up 20 pts, the Nasdaq is up 340 pts while the Russell is flat.
The new governor of Texas coming out to say – she is ‘NOT against’ data centers at all, she just wants to put up some guardrails……funny how that story changes when a day like yesterday happened…I suspect we will see more of that.
In any event – as a long term investor – you should be looking at this as an opportunity – because AI, data centers, memory, CPU’s, GPU’s and TPU’s are not going away and just think of the advancements in tech that we don’t even know about yet….….…if you were not in the AI game – then now might be a good time to get in, if you are in, then make sure you rebalance to bring you in line with your portfolio construction.
Days like yesterday should be seen as an opportunity for investors…. You should be stay focused, buy the biggest names in the sectors you are invested in…. A well-diversified portfolio that is built around YOU is the key to building long term wealth over time.
Eco data today includes the Oct NFP report….and while we are expected to create 70k news jobs…I am not really sure anyone is paying that much attention…..to a report that is NOT expected to surprise….. Trust me – after yesterday – the NFP report is not at the top of your list this morning….
European markets are all lower…. down a bit more than 1%.
The S&P closed at 7,353 – down 334 pts….7500 which was support – snapped like a toothpick when tested…. once we broke that the sell algo’s got more aggressive, the buy algos stepped aside…..…the selling taking us right down to the 200 dma trendline…. Remember – days like yesterday can be unnerving…. selling that forces the indexes to end on the lows that day – usually means more selling to come today…….…yesterday – they ended on or close to those lows….
Look at the Dow – it closed on its lows and is down 500 pts in the pre-mkt…Yes the Nasdaq is rallying, but don’t get fooled – that could change on a dime if the hysteria continues…. The Nasdaq is now down 12.2% and is in correction territory, it broke its long term trendline yesterday at 25,100…..to end the day at 24,315. If we see it bounce – look at the trendline as resistance until the market has a chance to regroup.
If you’d like to discuss your goals, evaluate the risk in your portfolio or simply get a second opinion, give me a call at 561-931-0190 or better yet – click on this link to connect. https://slatestone.com/contact-us/
I’m always happy to provide a complimentary portfolio review and risk assessment.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Linguine Arrabiata (Angry Pasta) – perfect for the mood of the day……
Arrabiata -means in a “rage”, “angry”……so here we go sports fans…..
You begin with the basic marinara sauce – plum tomatoes, garlic, onions, grated carrots & celery, fresh basil, pinch of sugar and s&p….
Add some Olive oil to the pan – with the side of the knife – smash the garlic and then chop – add to the pan and sauté…..next add the diced onion – continue to sauté for about 10 mins…. heat is med – do not burn the garlic!
Next add the shredded carrots and celery (maybe 2 of each) and continue to sauté for another 15 mins or so – so that the veggies get soft and almost begin to melt away. Now add the plum tomatoes…. If you want a chunky sauce then “hand crush” the tomatoes and add to the pot…if you prefer a smoother sauce – then run thru the food processor and blend well.
Once you add to the pot – season with fresh basil, s&p and a pinch of sugar (think this is more psychological – but my grandmother still does it – so just do it). Bring to a boil – then reduce to simmer, stir and cover…returning to stir occasionally. Should simmer on the stove for 30 mins or so….
Now the Arrabiata – you need: Pancetta, crushed red pepper flakes, garlic and olive oil….
In a large sauté pan – add olive oil (just a bit) – add some smashed/chopped garlic and sauté…now add the pancetta and continue to sauté for about 5 mins…. introduce the red pepper flakes – the more you add the “angrier” it gets…capisce? Now add 4 ladles of the marinara sauce and mix.
Bring a pot of salted water to a boil and add the Linguine and cook for 8 mins or so until aldente…..strain – reserving a mugful of pasta water…. Add to the large sauté pan and mix well – allowing the sauce to permeate the pasta……Serve immediately in warm bowls and have plenty of fresh grated cheese on the table for your guests. A robust red wine will complement this dish well.
Buon Appetito
