Things you need to know.

  • Bitcoin pierced $50k and is now up another $3k this morning.

  • Investors mull what a 10 yr at 1.3% means (or not).

  • Two storms slam the country – sending oil surging.

  • Uncle Warren reveals two new positions….VZ and CVX.

  • Try the Grilled Veal Chop.

And so, it begins….

Bitcoin pierces $50,000 - doubling in value in less than 8 weeks in what has become a race to $100k or higher – this morning it is up $3,000 trading at $51,500….…….and 10-year treasury yields jumped past Friday’s highs and are now at the highest level since February 2020…. climbing 9 bps to end the day yielding 1.3%.   And as the bond market came under increasing pressure - stocks - which had been up in the pre-mkt struggled soon after the opening…. falling then surging only to tumble again and go negative by 12 pm…. talk of rising bond yields dominating the conversation…. once again causing so many to wonder what the tipping point is.  Now clearly 1.3% is not it, but it happened so fast yesterday morning that at one point you thought – “Maybe this is the just what the Dr ordered” – We have been looking for an excuse to back off - is this it?  Well, not yet – at least for now, not yet….by the end of the day – stocks ended mixed.  The Dow gained 65 pts, the S&P. Nasdaq and Russel all lost, falling 2 pts, 48 pts and 16 pts, respectively.  The Transports which we discussed yesterday did manage to rally 5 pts – leaving it well below piercing the old high and not (for now) confirming more of an uptrend. 

And this is exactly what I mean….the market feels a bit tired, I have been saying that for a while now….but remember – the market can remain irrational longer than you can remain solvent…so at some point you have to run with it….but like I have also been saying – by no means should you be chasing it up here….what is invested, is invested and that is fine, but new money can afford to be patient and as a long term investor you are the one in control. 

Goldman goes mainstream

Yes, my friends - Goldman is going mainstream – trying to catch the ‘common man/woman’ – and this is sure to have Marcus Goldman, his son Henry and his son-in-law Sammy Sachs rolling over in their graves…. Can you imagine?  Goldman Sachs reaching out to service the ‘average’ American? (defined here as ‘the masses’).   Horror…I mean the WSJ headline says it all:

“Goldman Sachs to Offer Its Investing Know-How to the Masses – Elite Wall Street firm unveils Marcus Invest, a robo advisory wealth management platform.”

And for all of this – they are only going to charge 0.35% of assets under management.  To be clear – that is for ‘digital advisory services’ (think a computer, no humans) – but this computer will allocate and automatically rebalance your account based on models designed by the firm’s investment strategy committee……Now do not go and get all excited at all……this ISN’T the same investment committee that the wealthy get, this is a ‘Robin Hood style algorithm…...  I mean look – you used to have to have a minimum of $10 million in assets for them to even look at you, now they took the founders name no less and launched Marcus Invest – and all you need is $1,000 to become a Goldman client….  Oh boy, how the world has changed…..and the latest drama surrounding Robinhood is only being used to emphasize the need for size and depth in the financial services industry – and that is good, considering Robinhood completely blew up….tarnishing the investment industry as a whole – when what blew up was the ill financed trading app itself that proved it didn’t have the depth to support what they have helped to build – a casino like atmosphere.    

And then the massive storm engulfing 75% of the country caused energy stocks to surge…. Texas, the country’s largest producer state shuttered operations as the storm took hold and this caused energy traders/investors to panic – what we found out is that the electric system in Texas was not prepared for a storm like this….and that is certainly going to cause a whole new conversation about emergency preparedness….  In any event – this pushed up energy prices as investors/traders attempted to get ahead of the storm.  WTI pierced $60/barrel as the media emphasized the coming damage that the two storms are about to inflict……Snow, ice, and failed electric grids in parts of the country leaving 100 million people without power only added to the angst…. The XLE ended the day up 2.5% after being up as much as 3.8% earlier in the day. 

And in another long-awaited announcement – we all found out that Uncle Warren (Buffet) has added both Verizon and Chevron to the Berkshire Hathaway portfolio…investing $8.6 bill in VZ and $4.1 bill in CVX.  Ok – that’s great, but now Becky Quick of CNBC fame must find out – Who made the decisions?  Was its Warren or was its Todd and Teddy?  I mean – who cares who made the decision -is it going to change the narrative?  Not at all…so move on… Hello????   Warren is pushing 90 – Capisce?

Now we all know what’s going on….so no need to rehash the headlines….but what yesterday revealed is that investors and the markets appear to be tiring…better eco data, continued good earnings, talk of more stimulus, zero % interest rates and better vaccination rates did little to push stocks up again – but what that is doing is allowing those newly vaccinated to rediscover the world and like I said in a tweet yesterday – the older baby boom generation is now feeling empowered and they are going out to dinner, out shopping and even travelling to go see grandchildren….….…..and with earnings season winding down and the political landscape heating up – as Joey now travels the country to ‘sell’ his $1.9 trillion stimulus plan – investors are starting to consider valuations….and what that suggests is maybe a slow down to the push higher….maybe – investors are going to start looking at where we are vis a vis where the economy is and begin to pay a bit more attention…. Look – currently the S&P is trading at 22.5 times projected 12-month earnings and this is well above the longer-term average of 17% and yes, while the terms (of the economy) are a bit different this time, the fact is – stretched valuations are stretched valuations….

This morning US futures are a bit lower …. Dow futures off 26 pts, the S&P’s down 8 pts, the Nasdaq giving up 24 pts and the Russell lower by 6 pts.  10 yr. treasuries trading just below 1.3% continue to cause investors to consider what to do – should they start to rotate out of some of the highflyers or not?  Look – low rates and more stimulus will certainly help to keep a floor under stocks -and there are sectors that will benefit…. Energy and financials are two that are offering higher yields than some of the most attractive bonds and in a recovering economy they also offer significant potential capital appreciation.  But higher rates will hurt some of the growth names (think the ones that have ‘zoomed’ higher) ….so do not go and throw the baby out with the bathwater…. In fact – only financials and energy were up yesterday…all the other sectors came under pressure with Basic Materials -XLB, Real Estate - XLRE and Healthcare – XLV suffering the most – losing 2.38%, 1.07% and 1% respectively.  Even Utilities suffered – XLU – falling 1.12% to end the day at $61.92 - down and thru two trendline supports looking to test long term support at $60.75.

Now the VIX did not do much yesterday – suggesting that while some investors are a bit concerned – there is not enough fear yet to cause a re-pricing. Stay tuned.

Eco data today includes: Mortgage Apps, PPI (Producer Price Index) m/m of +0.4%, ex food and energy of +0.2%.  PPI y/y of +0.9% and +1.1%.  Retail Sales of +1.1%, ex autos and gas of +0.9%.  Industrial Production of +0.5%, Capacity Utilization of 74.9% (well below what would be considered inflationary – just FYI).  And at 2 pm – we will hear from the FED when they release their latest minutes from the January 27th meeting.  Are we expecting anything new?  Hardly – but you can expect some in the media to try and pull the sentences apart – looking for new words or old words with new meanings…. In the end – it is what it is. 

European markets are also taking a breather….as the sun moves across the sky…. the headlines define it all….

“European Markets Edge Lower as Investors Monitor Rising US Treasury Yields” –

And its all about the 1.3% yield yesterday on the 10 yr. and the 2.058% rate on the 30 yr.….….as any additional move higher will certainly cause many to consider rotating out of those names that have been the beneficiaries of this low-rate environment. UK inflation figure revealed a surprise to the upside – rising by 0.7% and that is causing analysts to worry about the pace of rising inflation. At 6:00 am the FTSE -0.19%, CAC 40 -0.05%, DAX -0.62%, EUROSTOXX -0.18%, SPAIN -0.34% and ITALY -0.45

Oil is up again – WTI (West Tx Intermediate) trading at $60.54.

Bitcoin + $3,000 at $51,500… Yesterday I said that you can just feel how it wants to pierce $50,000 and by most estimates – today just may be the day….and when it happens – expect the asset to continue to surge….as the algo’s go nuts – celebrating this latest milestone in the Bitcoin saga…. Look for the other crypto’s to advance in unison….

The S&P closed at 3932 – down 2 pts after swinging 27 pts from hi to lo……. Futures are churning in place as investors await the next data point…. The action defined by trendlines that reveal a channel of 3771/4040.  You know how I feel - the market feels tired – and the attempts to advance feel less robust…. which only means that any re-pricing will offer new opportunities.   

Stay the course – Stick to the plan, trim where necessary and put money to work in some of the underperformers…. call you advisor if you have one and feel like you need to talk. Yesterday I said that I was waiting on PLTR to see how they do and how investors react before committing new money to the name – after the earnings and towards the end of the day – I bought a bit more….and this morning – the stock is quoted up $2.  Stay awake…. this is not the time to doze off. 

Grilled veal chop w/cherry tomatoes

You can grill or pan fry the chops – either way keep them golden brown on the outside and pink on the inside.

For you this you need: 4 Veal chops on the bone – 1 ½ in thick, Canned cherry tomatoes, sliced garlic cloves, fresh basil chopped, red pepper flakes (optional), s&p and olive oil.

Now this is so simple to make and should take no longer than 30 mins max.
If you are grilling the chops – then preheat the grill.

With a meat mallet – pound the veal chop, now rub with a bit of olive oil and season with s&p.  Set aside.

In a sauté pan – heat up some olive oil and sauté the garlic.  Do not burn – Add the cherry tomatoes, s&p, and red pepper flakes (if using).  Mix…. turn heat to med low.  Now add the chopped basil – mix well, turn off heat and set aside.

Now place the chops on the grill and cook until golden brown on each side – most likely not more than 3 or 4 mins on each side.  Much longer and the chop will be well done throughout.  If you are pan frying – then use a grill pan with the heat on high and do the same.

When done – you can present it two ways. Either make a bed of cherry tomatoes and place the chop on top or place the chop on the plate and top with the cherry tomatoes.  Serve with an arugula salad dressed in traditional oil/vinegar seasoned with s&p & fresh lemon juice.  Keep it simple.

General Disclosures

Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

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The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.

UNLESS OTHERWISE NOTED, INDEX RETURNS REFLECT THE REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS, IF ANY, BUT DO NOT REFLECT FEES, BROKERAGE COMMISSIONS OR OTHER EXPENSES OF INVESTING. INVESTORS CAN NOT MAKE DIRECT INVESTMENTS INTO ANY INDEX.

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