Futures Surge, Dollar Gets Whacked & Turn Off the Damn FB!

Welcome back after the MLK holiday yesterday...Hope you enjoyed the long weekend.... Strap yourself in....Mkts around the world are on FIRE....
 
Dow futures are up 240 pts while the S&P futures are UP 14 pts at 6 am……they didn’t even stop to kiss 26,000 or 2800 – they blew right thru it and if this holds thru the 9:30opening bell…. we can expect to penetrate another millennial and century mark in as little as 8 trading days!  Recall it was on January 3, 2018 that we pierced 25,000 and 2700 on both indexes respectively.  ………
 
Last week. the Dow added another 2%, the S&P tacked on 1.6% the Nasdaq rose by 1.7% and the Russell added 2% - all closing at record highs.... I mean look these indexes have already added 4.3%, 4.2%, 5.1% and 4% respectively - and we are only 2 full trading weeks into the new year....
 
This is a great time to be alive!
 
Dollar continues to get whacked – now down 2.75% since the start of this year (and down 12% since January 2017) – and don’t kid yourself….this is a big part of the surge higher in global mkts as the global economic boom takes root……With the ECB (European Central Bank)  and the BoJ (Bank of Japan) on the verge of joining the FED in terms of raising rates (because of their strengthening economies)  – the Euro and the Yen are stealing some of the thunder and the dollar is suffering…..add in the recent tax reform plan that is expected to increase the deficit –  the dollar typically comes under pressure as the deficit expands and the potential of a gov’t shutdown this weekend if those Bozo’s don’t do something longer term about the spending bill……
 
Now a weaker dollar is good for the big US multi-national companies that benefit when they convert Euros/Yens/Yuans/Peso’s/Roubles/Looneys back into dollars…..and  a falling dollar helps US exporters by making US goods more competitive abroad….never mind that it gives the FED cover to raise rates….But at some point a weak dollar will spur runaway inflation which then causes a whole new set of problems for the FED, the country and these ‘lofty stock mkt valuations’….but that’s a story for another day…….
 
Commodities - led by oil and gold continue to surge, Asian mkts closed the day on or near the highs and European mkts have now opened and are marching higher in unison with their global counterparts…… Indications suggest that the surge will continue across the continent as stocks continue to run and run and run...... leaving everyone wondering - When is this going to stop? Is it going to stop?, Can it stop?
 
Oil keeps moving higher -  A roaring global recovery is stoking demand and a weaker dollar is not helping (think inverse relationship between dollar and commodities:  Dollar UP/Commodities DOWN/ Dollar DOWN/Commodities UP) …. the perception (or is it realization) that Russian and OPEC cuts are finally taking hold continues to cause a rush into this 'black gold'.  Some analysts are now saying that the world is no longer awash in oil and the glut that existed is now a dry well bed…. Apparently – they are now saying that the world NEEDS more oil……  US producers are giddy over this analysis and are celebrating the price of oil......and investors are climbing on board taking energy stocks and the energy ETF to new highs (XLE up 7% in 8 days)
 
And Gold?  Well that bounced off support at $1,310 last week and has once again surged towards the August highs of $1,360/oz.  Again, supported by the weaker dollar and the expectation that inflation is about to rear her ugly head as it stages a comeback in 2018....Why?  Well - both the US and the EU economies are the strongest they have been since the beginning of time…. (ok – that’s a bit dramatic, but the recent action would have you think so) US unemployment at record lows, dollar weakness causing a surge across the commodity complex and continued easy monetary policies around the world.... are all suggesting that we better prepare for inflation to surge. And gold is a store value when concerns rise about inflation….
 
Did you get the paperless post from Janet?  She is throwing herself a 'bon voyage party' (at the new Trump Hotel on Pennsylvania Ave) as she bows out before the sh*t hits the fan.... while Jay Powell has an office full of Depends!  I mean you can’t make this up! 
 
Last Friday we saw earnings from JPM, WFC and BLK - and they did not disappoint...  and while so many of the big banks are expected to take a one-time hit because of the tax bill - it is 'how the position it' that is telling the story.... JPM beat the number but reported a 34% drop in profits….... they took a $2.4 bil hit from the recently enacted tax reform bill - so most of this was expected....and like I said on Friday - it will depend on how Jamie tells the story....and that story is simple...
 
“U.S. companies will be more competitive globally, which will ultimately benefit all Americans……. The cumulative effect of retained and reinvested capital in the U.S. will help grow the economy, ultimately growing jobs and wages……. The tax law enacted late last year was a big, significant positive and much of it will fall to our bottom line in 2018 and beyond"
 
And that is all the algos needed to hear....as they kicked into overdrive sending the group higher......JPM was up another 1.6%, BLK up 3.27%.... other financials like: Citigroup were up +1.7% and GS up +0.74%, MS +1.7%.  Earnings for those companies are coming out this week and like I said - they have also prepared the mkts and investors for these one-time 'hits' when they report this week.  Like JPM - they are all bullish on the future as they expect that the one-time hit will turn into significant long-term gains...and so the rally continues.... unabated as the Dow added another 500 pts for the second week in a row - something it has not down since the turn of the century......and while the excitement continues - the concern grows over the speed and extent of this latest surge......
 
With earnings in full swing now - the mkts will focus on the reports and the guidance - expectations are for earnings to grow at 12% y/y - the bar is significantly higher than it has been and so - this IS important.........If companies hit the number then the rally continues but if we start seeing real misses - then investors will reconsider how they feel and the pullback will be swift and painful....
 
Look!  The longer-term outlook remains bullish – and NOT because rates are artificially low, and investors have no place to go.  It appears as if we have turned the corner.   The US economy is now growing at a 3+% clip, unemployment is at historic lows, The EU economy is alive and well and global interest rates remain artificially low (and even with 3 expected 25 bps increases here at home - they remain low.)  Volatility?  Practically non-existent still with the VIX at 9.15.  
 
Add in the fact that the tax reform bill is expected to add $200 bil in economic stimulus, fiscal spending will add in about $100 bil in stimulus and the infrastructure bill should add some $75 bil more in stimulus and you have a recipe for real growth… and not this artificial growth created by ultralow interest rates....the fact is that the GOP stimulus plans will let the FED off the hook and create real opportunity for Americans....and in the end - that is good for the US economy and then for stocks - around the world! 
 
But with this real growth comes the possibility of inflation and that ultimately that is what could and will kill this explosive rally.... but that apparently is a conversation for another day....
 
On Friday - Facebook stock sank 4% or $8.40/sh, its worst day in more than a year, after Marky Mark announced he will prioritize posts from friends and family over news stories and content from businesses. 
 
The goal?   Well according to Zucky (what all his closet friends call him)
 
‘the changes are meant to boost the "well-being" of the billions of people who use the social network by encouraging users to have more conversations and connections with peers, rather than being bombarded by brands’.

Yo Zucky!  Here’s a thought – and one that I think is catching on …  If you want to ‘boost the wellbeing’ of people and encourage them to have more ‘conversations and connections with peers’ – then I say – TURN OFF THE DAMN FB. 

People will have more connections and conversations when they GO OUT. When they go dancing, or out to dinner. When they go to hiking, biking, skiing, golfing, boating, sightseeing. When they go to a museum, or go out shopping – Look even a walk around the block produces more meaningful conversations than the ‘fake’ crap that is posted on FB…I mean according to FB – Everyone lives in La La Land, Everything is coming up roses, and NO ONE IS EVER DEPRESSED.  Everyone gets a prize!  I would argue that there is MORE depression and anxiety because of FB and the like. But again - I guess I am showing my age.... Screw that! 
 
Now Zucky hopes the changes will shut down the critics and benefit the company in the long run. Investors are worried that the makeover will hurt advertisers and make it difficult for them to reach Facebook's 2 billion monthly users to hawk their products. Brokers are downgrading the stock until they can assess the impact of the changes on the future performance.   The stock broke short-term support on Friday and is up this morning attempting to right itself……
 
Earnings reports due today include:   UNH (beat), C, CSX, and FRC….
 
Eco data today includes: Empire Manf – exp of 19….
 
Overnight - Asian mkts exploded to the upside as investors didn't know where to go first.... Japan +1%, Hong Kong +1.35%, China +08% while Australia gave back 0.47%.... And in Europe?  Mkts there are getting off to a strong start......as they move higher in unison with their global counterparts…. stronger earnings and weak UK inflation are the story there.  FTSE -0.13%, CAC 40 + 0.28%, DAX + 1.04%, EUROSTOXX + 0.61%, SPAIN + 0.58% and ITALY +0.21%.
  
 
On Friday I said:
 
 “BOOM!  US futures are up again and are about to tease 2800 on the S&P”. 
 
By the time the bell rang on Friday – the S&P closed at 2,786 and this morning – Guess what?  Futs are UP 10 pts now at 7 am…. (have backed off a bit in the past hour) and now we are kissing 2800 on the S&P.  Again, we are in unchartered waters – there is no resistance levels to target…. it’s all a guessing game now…. Momentum is a funny thing….

Take Good Care

KP

Veal Piccata that melts in your mouth

For this you need:  1 doz veal scalloppine, pounded thin, s&P, flour, olive oil, butter, dry white wine (nothing fruity), parsley, chicken broth, fresh lemon juice – 1 lemon. 
 
Now first – season each pounded scalloppine with s&p, then dredge in flour – shaking off any excess. 
 
Now in a lg sauté pan – add in ¼ stick of butter and a splash of olive oil.  When the butter foams – add in the scalloppine – but do not crowd.  Cook on each side for about 2 mins/side.  Repeat until you have sautéed all the veal.  Remove and set aside. 
 
Now – add 1 cup of the white wine, some chopped parsley, 2 cups of chicken broth, and the fresh lemon juice.  Stir to blend – once it starts to boil – turn it down to simmer and add back the veal pieces.  Simmer for about 5 mins.  Then remove from the heat.   Place the veal on a warmed plate and serve with your favorite veggie and a lg mixed salad dressed in red wine vinegar and olive oil, s&p and oregano.
 

  
Buon Appetito.