• Investors trade tech names for recovery names

  • It is the Growth vs. Value Play and yesterday – Value won.

  • ISM Prices Paid – Is it sounding the alarm bell?

  • Two FED speeches today…Evan’s and Mester – Listen to what they say.

  • Oil up 1.6% as demand surges, the 10 yr. stuck at 1.61%

  • Try the Pan Seared Pork Chops w/Caramelized Peaches.

Some stocks got off to a good start…. or as Tony the Tiger used to say – “That’s GRRRREEEAAATTTT!” as investors piled into the recovery names shunning almost everything technology…. leading to a break among the indexes……. If you happened to be a member of the Dow Industrials,  the Dow Transports, the  Russell or some of the S&P names you walked away feeling good about yourself….…..but if you were a Nasdaq name – oh boy….wasn’t your best day…..and while the broad Nasdaq index wasn’t beaten up that badly, there were a number of names that couldn’t get out of their own way –  Mega-cap AMZN led the pack – after reporting astronomical numbers last week – and making a new all-time high – investors took another 81 pts or 2.3% out of it today, leaving it down 5% from last Friday’s official trading day high of $3557 and more than high 7.2% from the afterhours high of $3667 hit on Thursday evening after the earnings were announced.  Facebook and Netflix also got hit falling 0.8% and 0.85% respectively.

And then there were the Tech Disruptor names…. think TWTR, TSLA, COIN, SHOP, TDOC, SQ, ZM, ROKU…blah, blah, blah all losing between 1.5% and nearly 4%....….and then guess who else took it on the chin?  Cathie Wood and her ARKK ETF – losing $3.83 or 3.2% to close at $116.91 share….Now as many of you know…I am a big fan of this stock and while the recent pullback is a bit unsettling – it also provides an opportunity to either begin to initiate a position or add to an existing position…something I that will do in the days ahead…..for me  - when we get a move like this – I like to see how it acts over the next couple of days….but that’s me. Recall that yesterday I did say – you must be able to stomach the very volatile moves in these names if you want to play in the space…. If you want more stability – then stick to AT&T!  (which I also own for just that reason!  Stability and yield….at 6.6%). 

By the end of the day – The Dow gained 238 pts or 0.7%, the S&P up 11 pts – well off its highs earlier in the day and that does make sense since many of the disrupter tech names are also in the S&P index and they brought some pain …. the Nasdaq ended lower by 68 pts or 0.5% and the Russell up 11 pts or 0.5%. 

And while the eco data yesterday morning was strong – there are warning bells going off everywhere…..Markit IHS Manufacturing PMI’s coming in at 60.5 which was on target vs. the ISM Manufacturing PMI at 60.7 well below its 65 target but still in the expansionary range….….But the other piece of this puzzle was ISM PRICES PAID…..it came in at 89.6 – well above its estimate of 86 and at its highest level since 2008….and why do I point this out?  Would anyone care to take a stab at it? 

The Prices Paid component is simple – it is an inflation indicator….it shows which service industries reported an increase in prices paid for various raw materials, goods, and services – such as software services.  If businesses are paying higher prices at the input level then expect those higher prices to be passed onto you and we are already seeing that – even though they tell us it isn’t happening….Higher prices could also be an indicator of a shortage in supply for particular goods - And while there may be some shortages around now, there will be more in the weeks ahead as companies are fore warning us of supply chain disruptions due to a global semiconductor shortage (see yesterday’s note).   My sense is that it is MORE than that…it is organic inflation plus supply chain disruptions that will cause the ‘monster’ to lift its head and surprise the talking heads…. but that is me – you must come to your own conclusions.  I am just sayin’ do not bury your head in the sand…

And so, we have the INFLATION monster again…. rearing its ugly head and putting a real damper on the high growth names…and this should be concerning -because why?  Oh boy….do we have to go over this again?  Because rising prices will cause a new conversation……and while Jay (Fed chair) says  ‘slow down big boy – inflation is not happening on my watch’ reality says – not so fast…..We have had near zero interest rates for a decade, we have had extreme amounts of stimulation for a decade, we are printing money at rates never seen before in the history of the Union and what used to be talk of millions and billions in congress is now Trillions….on its way to Quadrillions…..and after quadrillions comes quintillion, then sextillion, septillion and on and on…it’s all very Latin….just keep adding 0’s in groups of 3.  Now, that might be a bit dramatic – but it is all about the drama. 

So where did the money go?  Industrials – XLF + 1%, Energy – XLE +2.7%, Healthcare – XLV + 1.1%, Basic Materials – XLB + 1.5%....and not to be outdone – the homebuilders and retail shot higher as well.   XHB +2.2% and XRT + 2.1%.  Where did the money not go? Tech – XLK – 0.3%, Consumer Discretionary – XLY – 0.5% and Communications – XLC – 0.5%.

The 10 yr. treasury settled in at 1.59% and the VIX remains well below any trendline support at 18.31…. suggesting more complacency….and you know what that means…. when we get hit out of left field by something we do not expect – the VIX will surge higher, and stocks will come under pressure.  Just sayin’….no one should be surprised when that happens. 

And then -

In a move to blunt any of the concerns that Dallas Fed President Bobby Kaplan raised over the weekend when he said that we need to begin to discuss tapering – NY’s FED President Johnny Williams tells us that the current conditions are NOT NEARLY RIPE ENOUGH for a shift in monetary policy stance!  Now recall – investors and the markets have been obsessed over the inflation story….and with everything under the sun going up in price – you must ask – What world is the Jay, Janet or Johnny living in? 

And today – two FED spokespeople are scheduled to speak…. Chicago’s Charlie Evans will give a virtual speech on behalf of Bard College and Cleveland’s Loretta Mester will speak to the Boston Economic Club via zoom as well.  These will be KEY speeches……. listen to what they say, how they say it, are they falling in line with Jay or beginning to splinter away…. FYI – Charlie is a voting member while Lorretta is an alternate member this year….so pay particular attention to what Charlie says…. Remember- the Fed is floating balloons to test the atmosphere…. Strap in….and get ready….

Eco data today includes Factory Orders – exp of 1.3%, Factory Orders ex Transports of 1.8%, Durable Goods of +0.5% and Durables Ex Transports of +1.6% and finally Capital goods Orders and Capital goods shipped – 2 different stats…. ordered and shipped (or not).

More earnings and that means more of the same…

Overnight – US futures are lower….as the churn & burn continues…. At 5:30 am – Dow futures are – 30 pts, S&P’s down 7 pts, the Nasdaq off by 52 pts and the Russell down by 6 pts.  Think about adding consumer staples in the months ahead…..because the markets are obsessed with inflation,  pricing power and supply chain management…..These also tend to fall into the ‘value camp’ (re-iterating that value over growth theme)  as they have underperformed and offer decent dividend yields and by the way – do not depend on semi-conductors – names like General Mills,  Kellogg and Coca-Cola all have yields greater than 3% and have room to run if this story plays out….and they will offer shelter from the storm.

European markets are mixed as investors across the region consider the prospect of increasing inflation in the US as well as across the continent – although – they are behind us in terms of opening and returning to normal – so inflationary pressures there may still be a way off…. As of 6 am the FTSE +0.6%, CAC 40 + 0.21%, DAX -0.64%, EUROSTOXX -0.15%, SPAIN +0.85% and ITALY FLAT.  

 DXY – rose and then fell hard yesterday – ending the day at 90.97 – below trendline support at 91.04….  This morning it is trading up 37 cts at 91.36 – well above trendline again but will surely hit resistance at 91.97. 

Oil rose on Monday – taking back everything it lost on Friday….as the weaker dollar sent commodities higher….The sense is also that demand for energy is alive and well and that as we continue to open up – demand will come surging back….and if you’ve been to an airport recently – you will see throngs of people travelling and that takes airplanes and lots of jet fuel and jet fuel comes from oil….and the world is only partially open….imagine what happens when the whole place is open?  And we have not even talked about cruise liners and the transportation stocks only adding to the demand story…as trucks, container ships, air freight and railroads move goods around the country and the world and last time I checked that is NOT happening with solar power, wind power or battery power.
Capisce?  This morning WTI (West TX intermediate) is surging up and through $65/barrel to a high of $65.70/barrel….and here we go….

Bitcoin is trading at $56,000, Ethereum is at $3,300 and Doggy Coin is at 48 cts.

The S&P closed at 4192 – up 11 pts after testing as high as 4209…… the action over the past week has kept the S&P in a very tight range….and with futures weaker this morning I suspect we will test below the lows of last week (4175) and if they do not find buyers there, then a move to 4140 ish seems right.   Again, I am not gonna lie, it feels a bit toppy to me, and while we certainly could go higher – I would like to see it come in and shake the branches to see who falls out. 

Pan Seared Pork Chops w/Caramelized Peaches

 For this you need: 4 bone in pork chops, s&p, olive oil, 4 peaches – not hard but not completely ripe and soft either….they need to just have a bit of give when you squeeze them,  You need to remove the pits and slice in half and then each half 2 more times to make 3 slices for a total of 24 slices (6/peach x 4 peaches) , 4 tsps. of lemon zest and fresh juice from 2 lemons.  2 tsp sugar, fresh raw spinach and ½ stick of butter.

Begin by rinsing and patting dry the chops. Season with s&p – set aside. 

In a large skillet – enough to fit the 4 chops, heat up about 3 tblsp of olive oil, when nice and hot, add the chops and listen to them sizzle – cook until nicely browned – maybe 4 – 6 mins…Flip and repeat for about another 4 mins.  Remove and place on a plate and cover with foil to keep them warm.

In the same pan – turn heat to med low and add the lemon zest, sugar, 1 tsp of salt…. mix well, and let it begin to melt…. once melted – add the peach slices and (stir gently) do not break up the peaches if possible.  Using a spoon – baste the peaches with the sugary syrup.  No more than 4 – 5 mins max…depending on the firmness of your peaches. 

When plating this dish, put a bed of raw spinach on the plate – top with the pork chop.  Now add any juice that is left on the warming plate to the skillet.  Now add the softened butter and the fresh lemon juice – allowing the butter to melt and blend with the peaches and syrup.  Taste and adjust with s&p if needed.  Use the peaches to adorn each plate around and on top of the chop then spoon some of the juice on top.

Serve immediately with a robust red and if you do not drink wine, your favorite beverage. 

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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