Stocks attempted to move higher yesterday morning on the better macro data points (new homes, inflation and US manufacturing) but the resistance was too much to bear……stocks ended lower as this ‘improving picture’ suddenly changes the picture.....investors and traders have been taking a breather as they assess the landscape and continue to look for clarity on a range of fronts: The dollar, oil, inflation (or lack of), mixed macro data reports, earnings, the Eurozone, and Greece to name just a few….trust me – there are plenty more issues – but let’s just start with these.
I think the single biggest takeaway right now – is the dollar story and the impact it has across the mkts……..(Now - earnings is also a story for sure - but those will become more of the story in a couple of weeks) and the message is fairly clear.
The FED has a problem on its hands – so what to do? Does the FED really want a weaker dollar? – Not so much, but do they want a much stronger dollar – absolutely not! (At least not right now) So what have they done by holding the line and leaving the conversation ambiguous? They hopefully have created a ceiling – a cap so to speak – on where the dollar might go. How have they done this? By not raising rates…..now that alone will not prevent the dollar from moving higher if other currencies continue to weaken – but it will not give the dollar the additional fuel to surge higher. ****This morning we are seeing the Euro rise on the back of new signs of growth on the European continent- and this rise in the Euro is causing the dollar to weaken.....good for us!**
Yesterday we got some ‘good’ macro data…..consumer prices (CPI) showed signs of inflation! Can you believe that? The cost of living in the U.S. rose by 0.2% - ahead of the 0.1% expectation in February…..How so? Well now they are saying that stabilizing gas prices helped the CPI do better. If you were to annualize just this monthly CPI report then inflation would be running at 2.4% - BINGO! And we have a game changer.......That rate then causes all of the histrionics - (exaggerated dramatic behavior designed to attract attention) about rising rates!
And then it's off to the races - again....... But wait – CPI in January was NEGATIVE 0.7% - so can you really say that the math works? Not so much – but they need something to keep the conversation alive. Look - we know that the Fed is looking for a reason to show that inflation is accelerating and a report like this does just that. And so the pressure sets in……and the traders jump ship…… I say traders because volumes do not yet suggest that long term investors are getting sucked into the histrionics.
Up next - a ‘reversal of fortune’ (if you really believe it) of sorts - purchases of NEW homes in the U.S. unexpectedly rose – surging higher by 7.8% (vs. the -4% expectation) in February to a 7 year high – now again I call BS – but new homes are funny – the builders – Toll, Pulte, KB Homes etc do it all… they draw you in, they finance the project from securing the land, to building the home – they make it easy for the buyer (because then need and want to sell houses) and with the mkt soft like this – they then throw in a huge array of ‘extras’ all for ‘FREE’……(Free? Think again.... nothing is ever FREE) enticing the home buyer with a beautiful new home complete with all of the latest bells and whistles….. I know because in 1999 I bought a Toll Brothers house and guess what they did?
Yup....they draw you in, they put on the hard sell to the wife….. they show you a ‘decked out home’ they tease you with the granite, marble, trim work, and landscaping and then they ‘close the deal’ – because they know that ‘A happy wife is a happy life’…….It is brilliant marketing for sure.....and it works very well.
So this might help explain why the EXISTING home sales showed weakness….who wants to buy an ‘old house’ – that a bank has to finance (good luck with that) , that needs updating, landscaping, a new roof, driveway, heating & AC and windows - when you can have it all in a new house? So something has to give…..and what is giving is prices of existing homes – they are under assault….so is the housing mkt really rebounding?
Now we are getting to the end of the qtr…..so institutions are ‘eliminating the negatives and accentuating the positives’ in their portfolios…….This qtr – we have seen utilities come under pressure – as fear of higher rates has taken its toll and yesterday was no different….while all 10 industry groups fell utilities led the way.
Next up – Biotech's – the strongest sector this quarter as traders/investors have been chasing some of these names like a drunken sailor...In fact the WSJ headlines today's paper with:
"Surging Biotech's Rally Fuels Bubble Fears - As valuations skyrocket and Nasdaq nears record - the Anxiety builds"
The article goes on to point out that low rates are causing investors to take excessive risk and if the economy does in fact slow and rates start to move higher then investors will look for the more traditional blue chip Americana type companies that offer stability of earnings, growth and dividends - vs. the gamble of the high risk (and yes - high reward) if every I is dotted and T crossed. So when investors review portfolios they will naturally use the outperformance as a source of cash ahead of coming earnings. Now that is not a statement on the investment value - it is more a statement on future economic outlook.....
Now this morning - US futures are flat...holding the line at 2084 - smack in the middle of the support/resistance range of 2060/2115. In line with yesterday's surge in New Homes - we also see a surge in today's Mortgage Applications.....+9.3% vs. last week decline of 4%.....Expect to hear more about the recovering housing mkt.....blah, blah, blah......
Other eco data today includes: Durable goods of + 0.2%, Ex transportation of +0.2%. Look for the action to continue to be driven by the dollar - and with the Euro a bit stronger - then look for the dollar to weaken - this in turn should cause futures to turn up.....but again - remain within the defined trading range until earnings begin in two weeks.
At 6:30 am - we learned that 3G Capital (PE firm) in partnership with Warren Buffet's Berkshire Hathaway - will acquire Kraft foods and merge it with Heinz making it the 5th largest food company in the world. KRFT surging 17% and is now trading at $77.50 in pre-mkt trading.....This is sure to be a positive driver today and will spur more speculation about other possible mergers....
European mkts all a bit lower on the - better overall macro data out of Germany and France causing the Euro to rally - putting pressure on those mkts....but that's just for today...tomorrow the story could change again. FTSE -0.18%, CAC 40 - 0.81%, DAX - 0.59%, EUROSTOXX -0.71%, SPAIN -0.58% and ITALY -0.64%.
On a side note - for those of you investing in frontier mkts - Saudi stocks are getting pummeled this morning heading for their biggest decline in 3 months as Shite Muslin rebels create more havoc.
A Flank Steak, butter, garlic, s&p, Red Wine, Shallots, Balsamic Vinegar (a good thick one) and olive oil.
Begin by melting a stick of butter – now season the steak with s&p, add chopped garlic and massage. Now pour the melted butter and massage that into the meat as well. Cover and set aside. (now you can use olive oil - but trust me - the butter is so much better!)
In a small pan – melt more butter (1/2 stick) with some olive oil – so that the butter does not burn. Now toss in sliced shallots – maybe like 4 shallots in total – sauté for 5 mins or so. Now add in ¾ cup of red wine (your choice) and 2 tblsp of the nice thick balsamic vinegar. Bring to a boil and then turn to simmer. Reduce by half – will only take a couple of min. Turn off the heat and whisk in one more tblsp of butter. (Can never have enough butter)
Preheat the oven to 400 degrees.
In a large skillet – add a touch of olive oil and heat up. When ready – add the flank steak to the pan and sear on both sides – 3 – 4 mins per side. Now remove and place in a pyrex dish and put it in the oven for 5 – 8 mins (depending on thickness). Remove and cover – let rest for another 5 mins. (*now you can use this sauce on any type of steak you like.....grilled rib-eyes, filet etc.)
Prepare you serving platter with fresh kale - When ready – slice the flank steak across the grain and arrange on the platter with the kale. Looks good, no? Now you can spoon the Red wine shallot sauce over it all or you can keep it on the side and let your guests serve themselves. Serve this dish with smashed roasted potatoes and a lg mixed salad.
Buon Appetito.
I think the single biggest takeaway right now – is the dollar story and the impact it has across the mkts……..(Now - earnings is also a story for sure - but those will become more of the story in a couple of weeks) and the message is fairly clear.
The FED has a problem on its hands – so what to do? Does the FED really want a weaker dollar? – Not so much, but do they want a much stronger dollar – absolutely not! (At least not right now) So what have they done by holding the line and leaving the conversation ambiguous? They hopefully have created a ceiling – a cap so to speak – on where the dollar might go. How have they done this? By not raising rates…..now that alone will not prevent the dollar from moving higher if other currencies continue to weaken – but it will not give the dollar the additional fuel to surge higher. ****This morning we are seeing the Euro rise on the back of new signs of growth on the European continent- and this rise in the Euro is causing the dollar to weaken.....good for us!**
Yesterday we got some ‘good’ macro data…..consumer prices (CPI) showed signs of inflation! Can you believe that? The cost of living in the U.S. rose by 0.2% - ahead of the 0.1% expectation in February…..How so? Well now they are saying that stabilizing gas prices helped the CPI do better. If you were to annualize just this monthly CPI report then inflation would be running at 2.4% - BINGO! And we have a game changer.......That rate then causes all of the histrionics - (exaggerated dramatic behavior designed to attract attention) about rising rates!
And then it's off to the races - again....... But wait – CPI in January was NEGATIVE 0.7% - so can you really say that the math works? Not so much – but they need something to keep the conversation alive. Look - we know that the Fed is looking for a reason to show that inflation is accelerating and a report like this does just that. And so the pressure sets in……and the traders jump ship…… I say traders because volumes do not yet suggest that long term investors are getting sucked into the histrionics.
Up next - a ‘reversal of fortune’ (if you really believe it) of sorts - purchases of NEW homes in the U.S. unexpectedly rose – surging higher by 7.8% (vs. the -4% expectation) in February to a 7 year high – now again I call BS – but new homes are funny – the builders – Toll, Pulte, KB Homes etc do it all… they draw you in, they finance the project from securing the land, to building the home – they make it easy for the buyer (because then need and want to sell houses) and with the mkt soft like this – they then throw in a huge array of ‘extras’ all for ‘FREE’……(Free? Think again.... nothing is ever FREE) enticing the home buyer with a beautiful new home complete with all of the latest bells and whistles….. I know because in 1999 I bought a Toll Brothers house and guess what they did?
Yup....they draw you in, they put on the hard sell to the wife….. they show you a ‘decked out home’ they tease you with the granite, marble, trim work, and landscaping and then they ‘close the deal’ – because they know that ‘A happy wife is a happy life’…….It is brilliant marketing for sure.....and it works very well.
So this might help explain why the EXISTING home sales showed weakness….who wants to buy an ‘old house’ – that a bank has to finance (good luck with that) , that needs updating, landscaping, a new roof, driveway, heating & AC and windows - when you can have it all in a new house? So something has to give…..and what is giving is prices of existing homes – they are under assault….so is the housing mkt really rebounding?
Now we are getting to the end of the qtr…..so institutions are ‘eliminating the negatives and accentuating the positives’ in their portfolios…….This qtr – we have seen utilities come under pressure – as fear of higher rates has taken its toll and yesterday was no different….while all 10 industry groups fell utilities led the way.
Next up – Biotech's – the strongest sector this quarter as traders/investors have been chasing some of these names like a drunken sailor...In fact the WSJ headlines today's paper with:
"Surging Biotech's Rally Fuels Bubble Fears - As valuations skyrocket and Nasdaq nears record - the Anxiety builds"
The article goes on to point out that low rates are causing investors to take excessive risk and if the economy does in fact slow and rates start to move higher then investors will look for the more traditional blue chip Americana type companies that offer stability of earnings, growth and dividends - vs. the gamble of the high risk (and yes - high reward) if every I is dotted and T crossed. So when investors review portfolios they will naturally use the outperformance as a source of cash ahead of coming earnings. Now that is not a statement on the investment value - it is more a statement on future economic outlook.....
Now this morning - US futures are flat...holding the line at 2084 - smack in the middle of the support/resistance range of 2060/2115. In line with yesterday's surge in New Homes - we also see a surge in today's Mortgage Applications.....+9.3% vs. last week decline of 4%.....Expect to hear more about the recovering housing mkt.....blah, blah, blah......
Other eco data today includes: Durable goods of + 0.2%, Ex transportation of +0.2%. Look for the action to continue to be driven by the dollar - and with the Euro a bit stronger - then look for the dollar to weaken - this in turn should cause futures to turn up.....but again - remain within the defined trading range until earnings begin in two weeks.
At 6:30 am - we learned that 3G Capital (PE firm) in partnership with Warren Buffet's Berkshire Hathaway - will acquire Kraft foods and merge it with Heinz making it the 5th largest food company in the world. KRFT surging 17% and is now trading at $77.50 in pre-mkt trading.....This is sure to be a positive driver today and will spur more speculation about other possible mergers....
European mkts all a bit lower on the - better overall macro data out of Germany and France causing the Euro to rally - putting pressure on those mkts....but that's just for today...tomorrow the story could change again. FTSE -0.18%, CAC 40 - 0.81%, DAX - 0.59%, EUROSTOXX -0.71%, SPAIN -0.58% and ITALY -0.64%.
On a side note - for those of you investing in frontier mkts - Saudi stocks are getting pummeled this morning heading for their biggest decline in 3 months as Shite Muslin rebels create more havoc.
Pan Seared Flank Steak w/Red Wine Shallot Sauce
This is easy to make and will present like you spent hours in preparation. For this you need:A Flank Steak, butter, garlic, s&p, Red Wine, Shallots, Balsamic Vinegar (a good thick one) and olive oil.
Begin by melting a stick of butter – now season the steak with s&p, add chopped garlic and massage. Now pour the melted butter and massage that into the meat as well. Cover and set aside. (now you can use olive oil - but trust me - the butter is so much better!)
In a small pan – melt more butter (1/2 stick) with some olive oil – so that the butter does not burn. Now toss in sliced shallots – maybe like 4 shallots in total – sauté for 5 mins or so. Now add in ¾ cup of red wine (your choice) and 2 tblsp of the nice thick balsamic vinegar. Bring to a boil and then turn to simmer. Reduce by half – will only take a couple of min. Turn off the heat and whisk in one more tblsp of butter. (Can never have enough butter)
Preheat the oven to 400 degrees.
In a large skillet – add a touch of olive oil and heat up. When ready – add the flank steak to the pan and sear on both sides – 3 – 4 mins per side. Now remove and place in a pyrex dish and put it in the oven for 5 – 8 mins (depending on thickness). Remove and cover – let rest for another 5 mins. (*now you can use this sauce on any type of steak you like.....grilled rib-eyes, filet etc.)
Prepare you serving platter with fresh kale - When ready – slice the flank steak across the grain and arrange on the platter with the kale. Looks good, no? Now you can spoon the Red wine shallot sauce over it all or you can keep it on the side and let your guests serve themselves. Serve this dish with smashed roasted potatoes and a lg mixed salad.
Buon Appetito.
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