Markets Kiss All Time Highs? What Angst? Recession? Don't be Foolish! Icahn Moves to Miami

What You Need to Know Today

Mkts kissing all-time highs

Algo’s gearing up to strike

ECB does not disappoint and that puts more pressure on Powell

Icahn moves to Miami! 

 OK – the ECB did not disappoint  -  they announced a 10 bps cut in rates – taking its rate to NEGATEVE 0.5% - which may have been a bit less than what the most aggressive call was, but he then topped it off with a HUGE new bond buying program that is to start on November 1.  This new QE (Quantitative Easing) program will buy $22 billion of Eurozone debt every month and ‘run for as long as necessary’ – I guess that’s about as close as you can get to do ‘whatever it takes’  - the famous line he uttered during the height of the GFC (Great Financial Crisis).   By doing so he has committed the new ECB President – Ms. Christine Lagarde – to even more negative rates and a QE program that has no timeline……a place that will prove to be a bit uncomfortable for her – at least initially.  We can be sure that when reporters have a chance to corner her – alone – they are going to try and pin her down to a time frame, and what she thinks and will now do as President of the ECB – because that is what they do.  So – Let’s see. 

Then before the opening yesterday – there was a WSJ story suggesting that the Trump Administration was considering ‘partial settlements’ on the ongoing trade war – and this caused US futures to spike higher…but then after the opening bell as the mkt was surging – word from the WH was – “No Way!”  No partial anything and that saw the mkt back off – just a bit – but where there is smoke there is fire – and while they tried hard to kill that rumor – they never really did and so the mkt turned higher yet again……And then Trump took to Twitter to say that “The ECB was trying and succeeding in depreciating the Euro against the VERY strong dollar, hurting US exports.” Putting more pressure on the FED and Jay Powell to cut rates next week.   

Don’t forget – the FED is expected to cut – so no surprise – but if there was ANY question about what the next move is – that is absolutely OFF the table now.  The only question now is will he announce a new ‘rate cutting cycle’ – which would suggest months of cuts in the year ahead…..or is he going to stand up and say ‘enough is enough’ now.  Our rates will now be within the 1.75%/2% band – once again – at historic lows – there is zero reason to push our rates lower from here – in fact – I don’t’ think he should cut rates at all – BUT if he doesn’t do it now – then the algo’s will slaughter the mkt, the WH will lob bombs at FED and the media will parade analysts and strategists around to suggest that the FED is ‘out of touch’….It is a self-fulfilling prophecy……whether we need it or not. 

Now there are plenty of people who are on my side of the fence and do not believe that we need a rate cut at all, but because of the way the FED does it today – they float balloons, they test the mkts, the toss out ideas to see what the mkts think and then they ask everyone to come in and lie down – have a Xanax and let’s talk about it – this way NO ONE is surprised and I say that is ‘Bull…t’.  The new generation of traders has no idea that in the prior century (the 20th) the FED NEVER conducted themselves like this at all.  They would come out on Thursday mornings at 8:30 – they would step up to the podium and make an announcement and then they would turn around and go back thru the door – shutting the door behind them -  NEVER asking anyone if they were ok, or if their feelings were hurt, or is there something you want to discuss – etc…..they drove policy and then it was up to the mkts to interpret what that meant – PERIOD – The  End!

Ok – Next – so as the day wore on – the mkt traded higher and higher – bringing us to < 1% of the all time highs on the Dow and the S&P as the algo’s apparently forgot all about the chaos they created only weeks ago when the yield curve inverted (for a brief second) causing all the headlines to scream RECESSION and DISASTER and RUN & HIDE etc….it was ridiculous – but it is what it is…..we have allowed the technology to take control…… And then back to the trade rumor that wouldn’t die – the one about a partial settlement – remember that one?  Well, apparently Donny has reconsidered his “Absolutely Not’ commentary and instead said ‘we will consider it’ and that was enough to suggest that this ‘cold war’ may be thawing……..By the end of the day the Dow added 45 pts or 0.17%, the S&P was up 8 pts or 0.29%, the Nasdaq was ahead by 25 pts or 0.30% and the Russell which is up 5% this week – gave up less than 1 pt. 

This morning – US futures are on FIRE……Dow +108 pts, the S&P + 11, the Nasdaq +30 and the Russell +9 – and if we open at these levels then the S&P and Dow will kiss those highs and force the algo’s into overdrive – because you see the “Momo” guys (Momentum players)  are all on board – and in their world – new highs beget new highs and if they can force it then they win……and while it all feels buoyant and exciting – I would caution investors to not go out and just buy anything.  In fact – there is plenty of opportunity to make sales on stocks that have made substantial moves and redirect those monies into stocks that have been dislocated and underperformed – It’s the growth vs. value strategy – and we have seen that play out over the past couple of weeks…..the Russell – which is small and mid-cap US centric names – which was way under performing has suddenly lifted her head – rising 5% this week alone,  Energy – which has gotten clocked since last October – losing 28% as a group (XLE) has rallied 10% in the last 3 weeks…..as value investors go on the hunt and the fear of recession and disaster fade.   Financials (XLF ETF) which got crushed at the end of the year last year has struggled to get back and is now up 8% in the last 3 weeks….taking it back to where we were 1 yr ago.   In fact – after all is said and done  - do you realize that the S&P is only 2% from where we were on October 3, 2018?  And the Dow?  That is up just under 1% from one year ago….so while there has been a lot of noise and volatility over the past year – none of it apparently has really impacted the broader mkt but there has been plenty of opportunity to put more money to work (think December, March, June and August)  to build your portfolio.   

So while nothing official has been released or confirmed, the multiple press reports have now caused the mkt and investors to expect: 1) No more tariff increases and 2) Large agricultural purchases by China  - which is where we were back in June, although now we actually have more tariffs. Eco data today includes:  Retail Sales  exp of +0.3% so for stocks to continue this rally, we need to see a better than expected but not too much better and If that happens, then look for the mkt to be led by cyclicals.   A breakout from the highs is BULLISH – I’m just not sure that we will do it on the first attempt…but can the mkt move higher – Of course, just like can we expect a recession – of course. 

But Donny will do his best to keep that at bay….as he announces a new middle class tax cut (to come at some point within the year) and a partial trade solution that will remove some of the angst surrounding the global economy allowing investors to focus on the broader fundamentals. 

And in a move to shove it up NY’s backside – Billionaire investor Carl Icahn is picking up and moving his whole shebang to Miami – all his employees and all his income…..he, along with so many others have had it and it’s about time that Cuomo, DiBlasio and the other far left lawmakers consider how their actions have consequences.  Welcome to Miami – its BOOMING…construction happening everywhere as the South Florida biz development boards are killing it as they persuade more and more financial powerhouses to say goodbye to the Big Apple.

 

Ropa Vieja

So to welcome the Icahn corporation to South Florida – what better way than a good Spanish Dish?

Ropa Vieja -  literally means "old clothes".....it describes the shreds of beef, peppers, onions, carrots that reminded someone at some point long ago of shredded clothing.....this is a staple in the Island Nation of Cuba...and although my wife hails from Puerto Rico - she makes an incredible Ropa Vieja - 

You start with Flank Steak - that you braise in a pot for about 1 - 1 1/2 hrs  with water, carrots, onions, celery, s&p.  Remove and let cool - strain the liquid - making sure to press on the veggies to release the last bits of flavor....return to pot and reduce to about 4 cups of liquid.  With 2 forks - shred the flank steak - pulling it apart and leaving it stringy.

In a heavy skillet - sauté julienned red & yellow peppers, onions,  & garlic, until soft - add the shredded beef, a can of tomato sauce (not paste) and one cup of the braising liquid.  Add frozen peas and pimento stuffed Spanish olives (cut in half).    Season with s&p, and a bit of oregano.  Cover and let simmer.....You can feel the sand between your toes....the Ocean splashing you in the face......

This dish should be served over rice - either plain white rice or yellow rice....

Buen Provecho!  Which literally means that "you deserve to eat well"