Not Again?

Stocks came roaring back to life the past couple of days….rocketing higher again yesterday as investors/traders continued to enjoy the ride – a far cry from the concern and fear of only 9 days ago. Volatility has subsided somewhat suggesting that the ‘correction’ that we witnessed and lived thru last week is all but a distant memory. The anxiety created over a weakened Germany and what that might mean for the broader continent as well as the global growth story has once again been put to rest by the central banks – the ECB and FED specifically. And the daily barrage of earnings announcements is set to confirm to the world that ‘things ain’t so bad here in these United States’……

As I have said in prior notes – no matter what the short term – I am still of the opinion that the mkt will end the year higher than where we are. So what does that mean? A return to S&P 2025 ish….(4% higher from here) would give us a solid 9.5% raw return – add in dividends and you are solidly in 12% camp….but you have to make you own decisions....

Last week during the ‘meltdown’ – we discussed how the S&P had broken down and thru its long term uptrend channel (drawn all the way back to the fall of 2012). Once broken - the pressure mounted and a range of risk management software caused some traders to hit the SELL button and raise more cash while at the same time other risk management software signaled to buyers to ‘go slow – no need to rush’ lending itself to weakness and creating the surge lower.......

But once the mkts calmed down - and human beings were able to put it in perspective - many came to the conclusion that once again - technology had forced the pendulum to swing way too far to the left and thus began the process of righting the ship....... During the past week – the S&P has moved decisively back into this uptrend channel as the mkt looks to establish a more solid footing in and around the 1950 range –smack in the middle of the channel. So what’s next?

Well…………….It does feel like the mkt is stabilizing.....and given the amount of time that has elapsed since this crisis began (7 yrs ago) coupled with the massive stimulus plans provided - courtesy of the world’s central banks, it is fascinating that we are still arguing over the direction of global growth.

Remember - the stock mkt is about investing in companies and that financial performance of companies is supposed to be a fairly decent barometer of the economy. Now while prior qtrs saw earnings beat due to cost cuts - this qtr we are actually seeing earnings beat because companies are growing their top lines....and that in the end is a good thing.

Long term investors always tend to look to the bellwether - solid Americana - stocks to gauge the most sensible read of how the economy is faring. Case in point – CAT – an American corporation that designs, manufactures, markets and sells not only machinery & engines - but financial products and insurance to global customers via a huge worldwide dealer network. Yesterday this multi-national ‘core bellwether’ did not disappoint one bit – reporting earnings of $1.63 vs. the $1.36 estimate…. But even more important was that their future guidance was equally as strong – the stock soared - up 5% - providing investors with a reason to celebrate and as we see more of this as the earnings season continues - this is what will provide the foundation for the Christmas Rally 2014.

Today we look for earnings from F, CL, PG, BMY, UPS......Ford already guided lower - 3 weeks ago - they re-priced it - taking some 9% out of the stock - then the mini crash took another 12% - in the past week it has rallied back 6% and I would expect - if there are no more surprises - that it will rally back towards resistance at $15.90.

Look - in the end - let’s not discount the actions of the central banks – including the FED - as they will remain supportive. Despite all of the worries of last week- worries that caused the sudden and violent surge lower – I am of the mindset that the Fed is much more likely to go slow and even extend the timeline for when rates may start to rise - vs. moving them higher sooner.

OK – now with all that being said – guess what? If you have been sleeping under a rock - you may not know the news....but -

NYC now has its first OFFICIAL case of Ebola! News hit the tape yesterday late afternoon.... Get this – Dr. Craig Spencer – who was in Guinea, treating Ebola patients – flies back to this country last week – comes thru customs and goes home – as if he had been sunning himself on the French Riviera! Now I get it - he did not appear to have any signs of infection - BUT don't you think that maybe - healthcare workers coming from Africa - who have been working and in contact with this disease should mandatorily be quarantined for 21 days just as a pre-caution? I just askin'...... So work with me here for just a min......

For one week - this guy moves around the city of 8.5 mil people - via Uber, the Subway (1, A & C lines), walking, running, going out to restaurants to eat, goes bowling in Williamsburg, sightseeing on the Hi-Line, never mind being intimate with his girlfriend (who is apparently clueless too) 'unaware' of his potential to become ill. Really???

Then yesterday wakes up with a 103 degree fever having some gastrointestinal issues and THEN decides to call for help. Then our CLUELESS Mayor – Bill DeBlasio comes to the rescue and says that

“very few people had contact with Spencer since he returned from Africa last week”.

Very few people? This guy has been running around NYC since last week? Cabs, Subway, Bodega’s This is NYC – there are some 8.5 mil people that live on the island! Ahhhh Bill? WAKE UP! Use your head for something other than a hat rack..... Is it ME???

This morning US futures are down 6 pts....now you can be sure that the whole Ebola thing will be given the credit for any weakness in the mkts - please do not go down this road....Yes - is it an issue? Sure - but do not give it that much credit to take down the US financial mkts..... Are you changing your investment thesis based on this news? The focus is and remains on the macro and micro data points.....Last night Microsoft blew it out of the water - that stock trading up 3.5% in early trading while AMZN once again disappoints - trading down 10% in pre-mkt trading.... There is only one eco report due today - New Home Sales - exp of 470k or a decrease of 6.8% m/m.....

I continue to believe that the mkt will churn as it builds its base. I suspect that the trading range will remain solidly 1920/1950 until - with any real pressure ready to test the 200 dma at 1907.

Overnight in Asia - mkts moved higher after Wall St's rally even as property data from China painted a weakening picture of the region’s largest economy. New home prices falling across the country in September. The overall price decline was 1.3% y/y. Word of NYC's first case of Ebola is making the rounds - Here we go sports fans.....Are people in Beijing really worried about Dr. Spencer? Really? Japan +1%, Hong Kong -0.13%, China - flat, and ASX +0.5%.

In Europe - mkts are all a bit lower - as they also try to blame the Ebola case here in NY. Come on.....those mkts have also rallied in the past few days after having taken a beating so the churn and back and forth is expected as they too look for a floor. In the Uk - David Cameron was told that his country must pay and extra 2 bil Euros to the EU within the next couple of weeks - because their economy is that much stronger....France gets a rebate - because they can't get their s**t together..... How great is that? FTSE -0.34%, CAC 40 - 0.56% DAX - 0.37% EUROSTOXX -0.40%, SPAIN -0.02% and Italy flat.

Tuscan Bean Soup

You will need to start with Celery, Carrots, Onions and Red Potatoes.....

dice the veggies and sauté in a bit of Olive Oil.....keep heat on medium and stir frequently. After about 5 / 8 mins - add one can of chicken broth, one can of water, season with pepper - no salt needed.....bring to a boil then reduce heat to simmer. Cook for another 10 mins or so... that veggies are nice and tender.

At this point - take 2 or 3 ladles of the veggies and puree in the food processor and return to pot. This gives the soup substance and a hearty texture and flavor.

Next add the Cannelloni beans with the juice from the can along with a baby pasta - you can use: Orzo, Tubettini, Ditalini, or elbows - leave heat on low and cook for about 10 mins....add fresh washed chopped Escarole and stir...continue cooking for another couple of mins and test the pasta for doneness. Should be firm to the bite.

This is a hearty and filling meal - serve in warmed bowls with fresh Italian sliced garlic bread that has been toasted ever so gently in the oven. Enjoy with a bottle of white wine....

** Garlic Bread - for those of you who have never attempted: Melt a stick of butter with crushed/minced garlic and a touch of Olive oil in the microwave. In the mean time - toast slices of Italian "Pane di Casa" in the oven under the broiler. When you flip the bread - Use a pastry brush to brush the butter/garlic mixture onto the slices of bread. Continue to toast and remove when golden brown.

Buon Appetito.