"Loose Lips Sink Ships"

And welcome to the real world....stocks failed to continue the rally built upon hope and free money - using cocaine and heroin (think central bank stimulus) to get the mkts where they are..........The catalyst yesterday? Well take your pick.......Was it the lack of a move by the BoJ? How about that weak GDP print? Or maybe the realization that earnings are really going to be down 8% this qtr? Glut in oil inventories? BoE announcement to leave rates unchanged? How about the reality of the FED comments the day before......the FED is unable to raise rates because although jobs are strong, economic activity is slowing? (Now that IS a conundrum - and flies in the face of logic). What about nervous investors that just decided it was time to take some money off the table after the most recent rally? What about the news that Uncle Carl (Icahn) has sold his position in Apple (after chalking up a $2 billion gain) - could that have been the reason that the selling accelrated into the bell? (We'll get back to the announcement by Uncle Carl in a bit).

Stocks started the day deeply in the red - as Asian and European mkts were setting the tone.... but my mid-day - traders and investors seemed to put all of that behind - taking the mkt into positive territory - celebrating almost.......but that was not to be....was it sellers that got anxious or was it the buyers who were exhausted? Either way - the pressure started at about 1 pm.......buyers backed off and then the selling accelerated.....the indexes began to roll over......look - the Nasdaq has been leading this rollover for several days now and closed at its lowest level since late March and yesterday just allowed the Dow and S&P to join in the fun. The sell off was broad....The Dow Jones Trucking Index dropped 2.8% (weak earnings), Housing stocks also saw significant weakness, Energy names under pressure, Financials not happy and of course TECH taking the blame for an inflated mkt.

Timing is key - because the mkt appeared to be ok after that weak GDP report, weaker earnings, and news from abroad.....but when billionaire investor Carl Icahn, told CNBC that he sold his stake in Apple, the algo's went into 'frenzy mode'.....and the herd mentality caused these same guys to rush the door..... Apple subsequently got hit even harder falling some 3.1%, extending its move lower from Wednesday in reaction to their disappointing earnings....

But here is the funniest part of this whole story.....Carl Icahn did NOT sell his position in Apple yesterday......he had already sold it...I mean you don't move 70+ mil shares in a day or two......or even 3 or 4 (unless of course one of the big investment banks 'takes him out of the position in one print - which did not happen)...so you see - Uncle Carl has been quietly liquidating his position over time......not saying anything, keeping his mouth shut, and swearing anyone else in the chain to do the same.....Why? Because "Loose Lips Sink Ships' - if he announces before he sells it -w hat do you think happens? Come on, really? (Let's be clear - he did nothing wrong at all - there is nothing untoward here, no one has an obligation to tell the mkt what they are up to....just like when he bought it, he only announced his increased position AFTER he bought it - sending the mkt into a BUY frenzy then - as all the algo's wanted in....stupid really). So he sells it over whatever period of time it took him and then he announces his sale....when there is no more risk of such a negative reaction to his holdings.....What I find so incredibly amazing is how the algo's react to this news.....it's ridiculous...I mean look - he is but one investor - what about Vanguard's 326 mil share holdings, or Blackrock's 315 mil shares? Go down the list - State Street owns some 217 mil shares while Fidelity is lugging 156 mil or so.....Are these asset managers any less savvy? (Who by the way - represent you and me via mutual funds etc.) What about what their position says about the quality of this holding...in fact -Carl's announcement is seen as a gift to any asset manager that wants to add to his position in Apple.....(If you believe the long term story, then buying on weakness is not a negative at all) In the end - it was all about the 'Carl Show' and the drama of it all....look the headline said -

"We're Out of Apple and It's China's Fault" - Really? China's fault? It's a bit dramatic - no?

So back to reality....GDP (Gross Domestic Product) - at this point in the game the news is terrible..... - the sharp pullback - causing a reality check in aisle 5. It marks the worst performance in 2 yrs for the US economy......but as expected - we did hear from both sides of the aisle.....and while the economy seems to be struggling, is it as bad as the report implies? Have we seen this movie play out before? Flash back to 2014 and 2015.........we had the same issue - only to see the economy improve as those years went on....but is this year different? Did Janet all but say that? Hasn't the IMF also said it? What do the actions of global central leaders suggest? but then this has been expected for a long time now. Yesterday's GDP report said gross domestic product rose by 0.5% in the 1Q compared to the 1.4%increase in the 4Q. (Economists had expected the pace of growth to be 0.7%).
The slower growth due to a larger decrease in non-residential fixed investment, a deceleration in consumer spending and a downturn in federal government spending. But - inflation signals were larger than expected, as the government reported that core consumer prices, which exclude food and energy prices, surged up by 2.1 percent in the first quarter after rising by 1.3 percent in the fourth quarter. So it remains confusing.....Does this mean that June is on the table or not - because in the end - mkt drivers will be about what the FED is going to do....... James Knightley, Senior Economist at ING, had this to say:

“Looking at these two outcomes together, the report doesn’t really give us a clear guide as to whether the Fed is more likely to hike at June. We think we will need to see a decent bounce in the activity data for a June hike to occur. We still favor a September move with the Fed then waiting until 2017 before hiking again.”

So - no matter what - unless there is a real shift in economic fundamentals - the mkt will most likely go into a tailspin whenever the FED chooses to raise rates....so get used to it.....we have been so pumped up on artificial stimulus - it can't do anything but go lower as it needs to re-price based on changing rates. And guess who does not want that to happen? The Democrats! So expect some hand holding as we move into the summer conventions ahead of the November elections. Let me be clear: Don’t expect a rate hike until after the election in November.....

It was indeed a broad sell-off today. The Dow Jones Trucking Index dropped 2.8 percent on weak earnings in this sector. Housing stocks also saw significant weakness as the Philadelphia Housing Sector Index dropped by 2.7 percent. Home related earnings in this sector also showed net losses.

A slew of U.S. economic data is scheduled to be released on Friday, including reports on personal income exp of +0.3%, and pers spending of +0.2% and REAL Pers Spending of +0.1% and Chicago-Purchasing managers report.

US futures are now down 3 pts -...having broken the 2080 support level...so what is next? I would guess if it does not rally and hold above 2080 - then look for 2050 ish the next stop. Expect more chatter about the Icahn comments and trade as everyone lives vicariously thru the drama.....All very exciting....
 

Rigatoni w/Sautéed Broccolini and Sweet Sausage

This is simple to make - yet makes a great dish when serving family style...Presents well, and goes with any other entrees you make at a summer dinner party.....Broccolini - is a green veggie - similar to broccoli but has smaller flowers, and longer, thinner stalks. It is a hybrid of broccoli and the Chinese veggie - Kai-Lan. It is a versatile veggie and one that you can use in numerous dishes.

You will need: 1 ring of Italian sweet sausage (no fennel), s&p, onion, garlic, olive oil, 3 heads of broccolini and 1 box of Rigatoni.

First - heat outdoor grill to high.....when hot - place the ring of sausage on the grill and lower heat to med low......allow to cook for 4 or 5 mins and then turn and cook other side for 4 / 5 mins....you can flip one more time and cook for another 2 or 3 mins....remove from heat- let stand.

Next - rinse the broccolini and then slice the stalk and the flowered head into bite size pieces - set aside.

In a sauté pan - heat up some olive oil, add chopped garlic - 3 or 4 cloves - and sauté....now add 1 large sliced onion and sauté until soft...maybe 3 mins or so.. Now add the broccolini. Season with s&p, and stir...reduce heat to low and cover - stirring occasionally. While this is cooking - slice the cooled sausage into bite size pieces and then add to the broccolini mix.....season with s&p and cover again. Stir occasionally.

Bring a pot of salted water to a rolling boil. Add Rigatoni and boil for 8 mins or so - until aldente. Strain - saving one mugful of water to remoisten. Put pasta back in pot - add back 1/4 mug of water and stir....now add the Sausage /Broccolini mix and stir. Add two handfuls of grated Parmegiana cheese and toss. Present on a platter family style and enjoy.



Buon Appetito.