We kissed the bear and ran away.
Joey ignites a firestorm around China/Taiwan and then again around the Indo-Pacific ‘understanding’ that doesn’t include China.
Oil higher, sends gasoline higher – CA has a $6 handle on a gal of gas (a Ford 150 now costs you $150 to fill it).
Try the Short Rib Burgers.
Stocks tested the limits on Friday…. with the S&P kissing 3800 down 1000 points over 5 months - from the early January highs – marking - if only for a brief moment – a bear market….and then in a sweeping turnaround – investors pushed stocks higher in the final hour of trading. The drama holding investors and trader’s hostage for much of the day….as the expectation was for stocks to end on the lows of the day – in a full-blown bear market. But – that is not what happened – and by the time the closing bell rang – the Dow added 9 pts, the S&P ended the day up 1 pt., the Nasdaq gave back 34 pts, the Russell lost 3 and the Transports added 52 pts.
10 yr. bond yields ended the day yielding 2.74% - losing ground for 8 of the last 10 trading days, 30 yr. treasury yields also fell ending the day yielding 2.99% while 30 yr. mortgage rates remain elevated at 5.5% and that is beginning to put pressure on the housing market. And as the FED moves more aggressively – we can expect even more pressure on the housing market. – because the housing market has not reacted yet to rising rates….right now – its been all about stocks, but when reality really starts to set in – watch out for housing……watch out for ‘adjustable rate mortgages, adjustable rate home equity lines of credit and revolving credit……because as base rates begin to rise so do the rates on those lines of credit and the pressure is on….….Capisce? This isn’t rocket science.
Oil was up on Friday and is up again this morning… WTI trading at $111/ barrel up 66 cts….My sense is that the risk for oil remains to the upside….given the Russian oil embargo by the EU, the reopening of China after the most recent series of lockdowns (Shanghai is due to reopen on Wednesday – June 1st ) and the natural global demand for energy….Near term resistance is at $112.80 – which if pierced will take oil back to test the March highs of $120/barrel. And that is going to send gasoline at the pump even higher – CA is now the first state to report an ‘average’ price for a gallon of gas that exceeds $6/gal. Consider what those rising prices will do to the cost of transportation for anything! So, for anyone that thinks the monthly CPI rate has peaked – I would suggest you re-think that position…at least for now.
On Saturday we found out that our friends at Goldman Sachs ‘made a funny’…. the team of ‘economists’ at Goldman told the WSJ that by their calculation- there is a 35% probability of the US economy entering a recession sometime in the next 2 years! Hahahahahaha…. I spit my coffee out all over my computer when I read that! They think there is a 35% chance of a recession happening in the next 2 years. To that I would say – Hey, Goldy – Wake Up….or do you live in the metaverse where everything is perfect and the sun is always out, the grass is always green, the flowers are always blooming, people can give themselves a complete makeover to become ‘new people’ and no one ever dies….I would dare you to take a poll and ask the participants…because the sense I get is that the recession is much closer than that IF not already here! People are feeling it in their pocketbooks and everywhere they go. 1st Qtr. GDP came in at -1.4% and even the revision this week has it at -1.3%....and the second quarter doesn’t look much better……but if they do ‘fancy math’ and change the equation – then maybe they can push it off, but let’s be honest…. a recession not until 2024? Now, that’s funny.
Over the weekend – there was lots of news about China and the US…. – Joey ignited another potential geo-political crisis…while he was in Japan – he announced (when questioned) that the US will defend Taiwan militarily – IF Xi Xi pulled a fast one and tried to take Taiwan by force…as you can imagine – Beijing is not happy with that statement and the WH is already dancing that comment back…..but look - while many agree that Taiwan needs to remain independent – and that the US and the West was always ready to defend it – we always operated under an ambiguous understanding and that was by design…..but now he made it clear that there is no more ambiguity….OK – then….and again – shame on us for moving ALL the semiconductor manufacturing to and allowing Taiwan to become the ‘key tech center’ that it is…forcing us and the west to come to its defense in the event of an aggressive takeover. But don’t worry – INTC is building a big facility in Ohio – to be completed in 2025!
Additionally – Joey announced that 12 Indo-Pacific countries will join the US in a ‘sweeping economic initiative designed to counter China’s influence in the region.’ All while he is considering lifting Trump imposed tariffs on China…. So, all very interesting.
Davos 2022 has begun, and the hills are alive…. just beautiful in Switzerland, so expect to hear all kinds of interviews and analysis about the state of the global economy. Ukrainian President Zelensky was the Keynote speaker today – streamed in live from the ‘Russia War crimes Pavilion’.
US futures are higher this morning…. Dow futures up 190 pts, the S&P up 25 pts, the Nasdaq up 50 pts and the Russell is up 12 pts. Today’s feel-good mood – in my opinion – is nothing more that a rebound from a short-term oversold position and a couple of volatile months. There is no economic data to drive the action so investors appear to be going shopping – looking for bargains amongst the wreckage. Nothing more…. There are a bunch of additional retailer reports to watch out for this week…. COST, NVDA, DGN, JWS & M. Recall what happened last week when we heard from WMT, TGT, TJX, ROST and KSS.
Look – markets have been all over the place and opportunities are being created….and as such investors who have been patient are now finding bargains in very good, solid quality names and that is what is driving the action today…. What I am saying is – do not let the noise distract you and while that is difficult – that is exactly what you need to do…. remain focused and don’t get caught up in the emotion of it.
Stocks across Europe were all higher in the early morning as well but have since sold off and are now mixed… At 6:30 this morning – markets across the region are trading around the flat line - France and Italy lower while the UK, Germany, and Spain are all a bit higher.
The S&P closed at 3901…. and while I don’t think it is over just yet, it does appear that we might get a reprieve at least for today. The talk of a more aggressive FED will cause stocks to remain volatile – so don’t get too comfortable just yet…. but don’t let opportunity escape you…if you have been building a cash position – take some and put it to work in stocks that are presenting an opportunity.
On Friday we tested 3800….and bounced….if we hold right here at the 3850/3900 level then look for 4100 to be the resistance point on any move higher….….If we rally and pierce 4100 – then a swift move to 4300 would not surprise me…..but if we fail to hold 3850/3900 – then the push lower could take us to 3600….Which is why I say – stick to the plan…do not try to call market bottoms or market tops. Buy quality names that offer long term stability and pay you to own them. In the end expect more turbulence ahead…because stocks will continue to thrash around. While the risk to the downside is still very real – I do think it is subsiding.
Short rib burgers
Refer back to the Short Rib recipe below. Make 1/2 dozen ribs - the night before......cool and then shred the meat off of the bone.... Now when ready.... bring the shredded meat to room temp and then mix the cooked short rib meat with the ground chuck (now use real ground chuck - not lean hamburger meat...you want it to have the fat for flavor) season with s&p and form the burgers. Light the grill and let it get nice and hot and cook. Top with sautéed onions and Monterey jack to complete this burger.
While this is cooking - butter the Brioche buns and toast either on the grill or in a frying pan......Then place the cooked burger on your bun - with fresh lettuce and the sautéed onions. Mayo and Ketchup on the side. Outstanding.
Braised short ribs
Begin with 6 / 8 beef short ribs. season with s&p and then brown in a frying pan with a bit of Olive oil. Make sure to brown all sides being careful not to burn the meat. After you have browned them - place them in a large/deep baking pan. Lining them up on their sides.
Next - large Chop - 2 lg White Spanish Onions, 1 bunch of celery stalk, 1 bag of carrots. Smash 4 /5 cloves of garlic and add to the meat - making sure you disperse the garlic all around. Next add the chopped veggies right on top.
In the frying pan that you used to brown the meat - add: 1 can beef broth, 1 can tomato paste, and 1/4 to 1/2 bottle of red wine. mix well and let the broth come to a boil for a couple of mins as you steam away some of the alcohol in the wine. Bathe the short ribs in this mixture and cover tightly. Place the baking dish in the oven - preheated to 350 degrees. Let cook for 4 hours - tightly covered.
The presentation: Remove the baking dish from the oven. Puree 1/2 the veggies in the food processor. On a warmed serving platter - pour the pureed veggies down the center of the platter. Arrange the short ribs on top of the pureed veggies and then place the balance of the cooked veggies around the meat.
Complement this meal with oven roasted new red potatoes. - Rinse the potatoes - toss in baking dish.... season with s&p, add a bit of olive oil to coat the potatoes. mix well. Prior to putting in oven - add 1/2 stick of butter - cut into pieces and strategically place around the potatoes. Cover and roast at 400 degrees for 40 mins. Remove cover and lower heat to 350 degrees and roast for another 15 mins or so - .... check for doneness by piercing with a fork.
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