Kenny Polcari
KennyPolcari.com
Stocks go from RED to BLACK and back to RED again.... Traders and investors were all about taking some ‘money off the table’ yesterday after the recent run up in stock prices….Look – the move off the lows was a bit fast – the mkt has rallied 12% in 5 weeks - and now the newest macro data points continue to send a mixed message - so to think that a pullback was not in order – is a bit naïve.
The mkt sold off on Monday, after the weekend gave traders the opportunity to reconsider the implications of Friday’s strong NFP report. Add in weak Asian data and the global downgrade by the OECD (Organization of Economic Cooperation & Development) on Monday and traders had every reason to hit the sell button while the buyers had every reason to sit back and enjoy the anxiety.
Both the Dow and S&P – were down just about 1% reflecting the fact that traders are now pricing in a 70% chance of a 25 bps rate rise in December – vs. the 30% chance only 4 weeks ago. The action and tone of the mkt clearly reflecting the idea that the ‘beginning of normalization’ may be upon us. What will be interesting to see is how the mkt reacts to the idea that the FED may now be behind the 8 ball - that many are now suggesting.... which will cause Janet and the FED to act more aggressively in the new year – And if the mkt senses that to be the case then a test of the August lows is absolutely not out of the question. But let’s not get ahead of ourselves just yet.
Janet Yellen is due to give what is being billed as a 'major economic speech' on Wednesday, December 2nd to the Economic Club of Washington and then on Thursday, December 3rd she is due to address a congressional committee about the current state of the economy - so she is about to have what baseball refers to as a 'double header'.
Now - yesterday - the Boston FED's own Eric Rosengren put a rate hike squarely on the table - saying that there has been 'real improvement' in the economy and that the October jobs report was 'very good news'. (I wonder where in Boston he is living?)
The next couple of weeks will feature other FED mouthpieces and they are surely set to support the 'improving economy view'...... So early December will give Yellen the chance to hammer home her message and set the stage for the next FED meeting on December 15/16th. Now it gets interesting....because we must ask - Will she use this opportunity to 'set the record straight' or will she 'back down' as she has all year? At this point - she has no choice but to move on rates......FAILURE to do so has the potential to send the mkts into a tailspin as it would suggest complete and utter confusion, defeat and lack of control.
So far – all of this talk is just that – talk. Rates have not gone anywhere officially and although the bond mkt may be sending the signal that rates are getting ready to rise – officially they have not….and we all know how quickly mkts can change. Be aware – the FED has to bang the drum and try to manage expectations – they can talk about how strong our economy is all they want, she can jawbone about raising rates all she wants, but if the macro data continues to be mixed to weaker – then the reality is that rates won’t be going anywhere because the data does not support the basic premise of 'data dependency'. (unless of course she changes the rules.....wink, wink!)
Now onto more interesting news….Citron Research has done it again…..Andrew Left has now turned his sights onto Mallickrodt – another biotech drug maker. In a post to Twitter – which now seems to be the newest bullhorn and fastest way to create turmoil - Left said:
“At these prices $MNK has signif more downside than $VRX – far worse offender of the reimb sys – more to follow. VRX can’t live in a vacuum”
His comments sent the shares spiraling out of control in minutes – down more than 20% at one point only to end the day down 17% at $58. (The stock is down 56% from the summer highs) This stock is now in a free fall....clearly getting hammered beginning weeks ago on the VRX commentary - breaking all kinds of key supports and is approaching 2013 prices - when the stock was spun off from Covidien.
He then followed up his ‘tweet’ with an email sent to CNBC saying that:
“The market has been so focused on Valeant that they forgot about other platform companies who are levered and face the same headwinds in reimbursement. We already see these challenges at Mallinckrodt and while Valeant has been taking all the heat, the business model of Mallinckrodt is just as, if not more, in danger of unraveling."
A call to the company did not allay any fears really.....they did say that “we are fully confident in our business model and remain focused on executing our long term strategy” –
Of course they are! Let’s see what today brings….Tune into the Halftime Report on CNBC at high noon – Scott Wapner has an exclusive with Citron’s Andrew Left…
Overnight in Asia – more mixed macro data out of China…..their CPI did rise by 1.3% but that missed exp of +1.5% and is down from the September read of +1.6%. Producer prices also fell 5.9% in October marking the 44th straight month of declines. This data did little to inspire confidence and only screams for additional stimulus. Natixis’s Chief Economist in that region had this to say:
"This is not good news for a government that targets a floor to growth of 6.5 percent and doubling income by 2020. The People's Bank of China (PBOC), thus, will be under pressure to ease monetary conditions further. We expect the central bank to slash the reserve requirement ratio by another 50 basis points to 17 percent,"
Japan +0.01%, Hong Kong -1.4%, China -0.19% and ASX -0.4%.
Emerging mkts also fell for a 4th day....mkts in India, South Korea, Egypt, Dubai, Qatar, Taiwan, South Africa all falling better than 1.2%.....The EEM - MSCI emerging mkts ETF is now down 5% in 5 trading sessions.
In Europe this morning – mkts there are falling in line with the rest of the developed and emerging world. The Chinese weak macro data along with FED policy are the key drivers in this latest pullback. Surprised? Why? Don't worry - Eric Rosengren told us that we are fine! FTSE -0.36%, CAC 40 -0.37%, DAX -0.21%, Eurostoxx -0.27%, Spain -0.29% and the surprise - Italy +0.39%.
US futures are off 2 pts. Eco data today includes Import Prices, and Wholesale Inventories.....but don't hold your breath for those - turn up the volume and listen to Chicago Fed President - Charlie Evans - a perennial DOVE - will he confront Rosengren and call it all BS?
On the oil front - the IEA (Int'l Energy Agency) told us that oil will hit $80/barrel......(5 yrs from now!) Don't you love those predictions...how can they ever be wrong....so many things will happen along the way and they will claim 'new data' for any change in forecast. Why bother forecasting out 5 yrs like that? It's like someone saying the S&P will trade at 3k in 7 yrs.....or that interest rates will revisit the highs of 1982 - for those of you who don't remember - they were 21% and the DOW was trading at 792. I'm just sayin.......
Italian Wedding Soup (in case you do not want the ravioli's.)
This is a great soup to make for any occasion but works very well with Thanksgiving. This soup is full of veggies and tiny veal meatballs and is a family favorite.
For the meatballs - you need:
1 lb ground veal, minced garlic (2 cloves), chopped fresh parsley leaves, freshly grated Pecorino Romano, freshly grated Parmesan, milk, 1 extra-large egg, lightly beaten, s&p.
For the soup:
Start with your basic Chicken soup....add 1/2 cup dry white wine, fresh baby spinach, 1 cup of tubetini or ditalini (small pasta)
Preheat the oven to 350 degrees.
For the meatballs, place the ground veal, bread crumbs, garlic, parsley, Pecorino, Parmesan, milk, egg, s&p in a bowl and combine. With a teaspoon, drop 1 to 1 1/4-inch meatballs onto a sheet pan lined with parchment paper. (You should have about 40 meatballs. They don't have to be perfectly round.) Bake for 30 minutes, until cooked and lightly browned. Set aside.
In the meantime, heat up your soup, add the wine and bring to a boil. Add the pasta to the simmering broth and cook for 6 to 8 minutes, until the pasta is aldente.
Next - add the meatballs to the soup and simmer for 1 minute. Taste for s&p. Stir in the fresh spinach and cook for 1 minute, until the spinach is just wilted. Ladle into soup bowls and sprinkle each serving with extra grated Parmesan. A nice piece of garlic bread on the bottom of the bowl is always a favorite.
Buon Appetito.
The mkt sold off on Monday, after the weekend gave traders the opportunity to reconsider the implications of Friday’s strong NFP report. Add in weak Asian data and the global downgrade by the OECD (Organization of Economic Cooperation & Development) on Monday and traders had every reason to hit the sell button while the buyers had every reason to sit back and enjoy the anxiety.
Both the Dow and S&P – were down just about 1% reflecting the fact that traders are now pricing in a 70% chance of a 25 bps rate rise in December – vs. the 30% chance only 4 weeks ago. The action and tone of the mkt clearly reflecting the idea that the ‘beginning of normalization’ may be upon us. What will be interesting to see is how the mkt reacts to the idea that the FED may now be behind the 8 ball - that many are now suggesting.... which will cause Janet and the FED to act more aggressively in the new year – And if the mkt senses that to be the case then a test of the August lows is absolutely not out of the question. But let’s not get ahead of ourselves just yet.
Janet Yellen is due to give what is being billed as a 'major economic speech' on Wednesday, December 2nd to the Economic Club of Washington and then on Thursday, December 3rd she is due to address a congressional committee about the current state of the economy - so she is about to have what baseball refers to as a 'double header'.
Now - yesterday - the Boston FED's own Eric Rosengren put a rate hike squarely on the table - saying that there has been 'real improvement' in the economy and that the October jobs report was 'very good news'. (I wonder where in Boston he is living?)
The next couple of weeks will feature other FED mouthpieces and they are surely set to support the 'improving economy view'...... So early December will give Yellen the chance to hammer home her message and set the stage for the next FED meeting on December 15/16th. Now it gets interesting....because we must ask - Will she use this opportunity to 'set the record straight' or will she 'back down' as she has all year? At this point - she has no choice but to move on rates......FAILURE to do so has the potential to send the mkts into a tailspin as it would suggest complete and utter confusion, defeat and lack of control.
So far – all of this talk is just that – talk. Rates have not gone anywhere officially and although the bond mkt may be sending the signal that rates are getting ready to rise – officially they have not….and we all know how quickly mkts can change. Be aware – the FED has to bang the drum and try to manage expectations – they can talk about how strong our economy is all they want, she can jawbone about raising rates all she wants, but if the macro data continues to be mixed to weaker – then the reality is that rates won’t be going anywhere because the data does not support the basic premise of 'data dependency'. (unless of course she changes the rules.....wink, wink!)
Now onto more interesting news….Citron Research has done it again…..Andrew Left has now turned his sights onto Mallickrodt – another biotech drug maker. In a post to Twitter – which now seems to be the newest bullhorn and fastest way to create turmoil - Left said:
“At these prices $MNK has signif more downside than $VRX – far worse offender of the reimb sys – more to follow. VRX can’t live in a vacuum”
His comments sent the shares spiraling out of control in minutes – down more than 20% at one point only to end the day down 17% at $58. (The stock is down 56% from the summer highs) This stock is now in a free fall....clearly getting hammered beginning weeks ago on the VRX commentary - breaking all kinds of key supports and is approaching 2013 prices - when the stock was spun off from Covidien.
He then followed up his ‘tweet’ with an email sent to CNBC saying that:
“The market has been so focused on Valeant that they forgot about other platform companies who are levered and face the same headwinds in reimbursement. We already see these challenges at Mallinckrodt and while Valeant has been taking all the heat, the business model of Mallinckrodt is just as, if not more, in danger of unraveling."
A call to the company did not allay any fears really.....they did say that “we are fully confident in our business model and remain focused on executing our long term strategy” –
Of course they are! Let’s see what today brings….Tune into the Halftime Report on CNBC at high noon – Scott Wapner has an exclusive with Citron’s Andrew Left…
Overnight in Asia – more mixed macro data out of China…..their CPI did rise by 1.3% but that missed exp of +1.5% and is down from the September read of +1.6%. Producer prices also fell 5.9% in October marking the 44th straight month of declines. This data did little to inspire confidence and only screams for additional stimulus. Natixis’s Chief Economist in that region had this to say:
"This is not good news for a government that targets a floor to growth of 6.5 percent and doubling income by 2020. The People's Bank of China (PBOC), thus, will be under pressure to ease monetary conditions further. We expect the central bank to slash the reserve requirement ratio by another 50 basis points to 17 percent,"
Japan +0.01%, Hong Kong -1.4%, China -0.19% and ASX -0.4%.
Emerging mkts also fell for a 4th day....mkts in India, South Korea, Egypt, Dubai, Qatar, Taiwan, South Africa all falling better than 1.2%.....The EEM - MSCI emerging mkts ETF is now down 5% in 5 trading sessions.
In Europe this morning – mkts there are falling in line with the rest of the developed and emerging world. The Chinese weak macro data along with FED policy are the key drivers in this latest pullback. Surprised? Why? Don't worry - Eric Rosengren told us that we are fine! FTSE -0.36%, CAC 40 -0.37%, DAX -0.21%, Eurostoxx -0.27%, Spain -0.29% and the surprise - Italy +0.39%.
US futures are off 2 pts. Eco data today includes Import Prices, and Wholesale Inventories.....but don't hold your breath for those - turn up the volume and listen to Chicago Fed President - Charlie Evans - a perennial DOVE - will he confront Rosengren and call it all BS?
On the oil front - the IEA (Int'l Energy Agency) told us that oil will hit $80/barrel......(5 yrs from now!) Don't you love those predictions...how can they ever be wrong....so many things will happen along the way and they will claim 'new data' for any change in forecast. Why bother forecasting out 5 yrs like that? It's like someone saying the S&P will trade at 3k in 7 yrs.....or that interest rates will revisit the highs of 1982 - for those of you who don't remember - they were 21% and the DOW was trading at 792. I'm just sayin.......
Italian Wedding Soup
In keeping with the Thanksgiving theme - Today's recipe is for the first course -Italian Wedding Soup (in case you do not want the ravioli's.)
This is a great soup to make for any occasion but works very well with Thanksgiving. This soup is full of veggies and tiny veal meatballs and is a family favorite.
For the meatballs - you need:
1 lb ground veal, minced garlic (2 cloves), chopped fresh parsley leaves, freshly grated Pecorino Romano, freshly grated Parmesan, milk, 1 extra-large egg, lightly beaten, s&p.
For the soup:
Start with your basic Chicken soup....add 1/2 cup dry white wine, fresh baby spinach, 1 cup of tubetini or ditalini (small pasta)
Preheat the oven to 350 degrees.
For the meatballs, place the ground veal, bread crumbs, garlic, parsley, Pecorino, Parmesan, milk, egg, s&p in a bowl and combine. With a teaspoon, drop 1 to 1 1/4-inch meatballs onto a sheet pan lined with parchment paper. (You should have about 40 meatballs. They don't have to be perfectly round.) Bake for 30 minutes, until cooked and lightly browned. Set aside.
In the meantime, heat up your soup, add the wine and bring to a boil. Add the pasta to the simmering broth and cook for 6 to 8 minutes, until the pasta is aldente.
Next - add the meatballs to the soup and simmer for 1 minute. Taste for s&p. Stir in the fresh spinach and cook for 1 minute, until the spinach is just wilted. Ladle into soup bowls and sprinkle each serving with extra grated Parmesan. A nice piece of garlic bread on the bottom of the bowl is always a favorite.
Buon Appetito.
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