It was a Palooza – Try the Meatloaf

Stocks rallied on Tuesday – ignoring any of the concerns that sent stocks lower last week… all of the issues that concerned the markets last week are not a concern at all… and the star of the day? Janet Yellen! She ‘stormed the hill’ (which is probably not the right way to say it, considering what happened last week) telling lawmakers that not only should we pass the massive stimulus package that Joey has presented, but that we should also work with the OECD (Organization of Economic Cooperation and Development) and NEGOTIATE higher corporate taxes on multi-nationals to ‘try and stop the destructive global race to the bottom on corporate taxation’.

“In that context, we would assure the competitiveness of American Corporations even with a somewhat higher tax”

Essentially referring to a ‘coordinated global response’ that would lead to higher corporate tax rates in the developed world… Which means – that somehow, they (the multinationals) will all move their HQ’s to some 3rd world country that is not a member of the OECD to skirt any efforts by the developed world to snag a bit more in taxes… I guess – they’d then have to figure out how you can have a HQ’s in a 3rd world country but not have anyone in the C-Suite present! Covid could easily be the excuse that anyone needs to solve that argument… right? I mean think of all those big offices in NYC, Chicago, Miami, Boston, Dallas, Palm Beach or LA that are empty of people – yet remain the HQ’s! Think about Paris, Rome, Zurich, Berlin, Moscow, Vienna, Sydney, Tokyo and the list goes on… and on… That’s an easy fix, no? It’s called ZOOM and everyone got so excited that they took that stock up 2.56% on the day. OK – so maybe just a bit of a stretch, or maybe not… I guess we’re about to find out!

In any event – what she also said was that there should not be ANY movement on corporate or personal tax rates UNTIL we solve the pandemic. Bravo! Go Janet!!!

By the end of the day – the Dow added 152 pts or +0.5%, the S&P’s up 33 pts or 0.8%, the Nasdaq up 202 pts or 1.5% and the Russell up 27 pts or 1.25% – in the end taking back all of Friday’s losses…

And in another surprise announcement (driven by the left) – Joey boy is also proposing a $15,000 first time homebuyer tax credit used by the buyer serving to assist in what would be considered a partial down payment, all while some in Congress asking about 50 yr bonds (which led many to consider 50 yr mortgages! Can you imagine what that will do to housing prices!) Now this was the first time we heard about this and that helped lift the homebuilders – the XHB (homebuilder ETF) rising 1.12%, with individual names performing even better – TOL +3.5%, KBH + 5.19%, TMHC +2.8%, LEN +2.28%, HOV + 3%, PHM + 2.9% and DHI +2.8%. And think about all those toilets, sinks, faucets, shower heads, bathtubs, whirlpools etc…  sending WHR + 2.4%, GE +1% (appliances). And the paint for all of those new houses sent SHW up 0.3%. What about AC’s and Heaters? TT (Trane Technologies) soared 2.7% and all of those Generac Generators to keep the homes lit when the storm hits! GNRC surging $15 or 6%! Never mind the lumber, bricks, concrete and roofing… It was a palooza!

And in what was classic Goldman Sachs… they released their earnings for the 4th qtr… and as you might imagine – they ‘blew the wheels off the bus’! Reporting earnings of $12.08/sh vs. the expected $7.47/sh… ok – slow down for just one minute… that’s a 67% miss on behalf of all of the ivy educated street analysts… which leads me to ask – what information were they using? What data points did GS offer up when analysts asked the questions?  I mean – missing earnings estimates by 5% maybe… but 67%? Come on! That’s like when GS brings an company public and tells them that the company (DASH) will IPO at $102/sh (fair value) and the stock proceeds to open at $182/sh – a 78% premium to what they just told the company they were worth – (POSH, ABNB just some of the other recent examples) – what that reflects is a complete lack of understanding of the demand picture… and in the case of the analysts – it suggests a complete lack of understanding of the latest trends in the industry… In fact – if they have been paying attention – all we heard all year was how well all of these financial firms are doing… comments like “The best year in years!”, or “Demand was strong for our services” or ‘M&A activity has never been better’… Whatever… its initial response was to surge and trade higher in the pre-mkt only to succumb to the pressure soon after the bell rang… mimicking the action seen in JPM, C, WFC, BLK etc… (all companies that also beat the expectations) – in was has become the ‘Buy the Rumor/SELL the News’ events… Ok – time to move on…

Today is inauguration day… and the excitement is building. DC is in lockdown mode, Trump delivers his farewell address via YouTube and publishes a list of pardons – Stevie Bannon and ‘Lil Wayne’ only two of the notables (interestingly no Edward Snowden, No Rudy, No Ivanka, No Donny Jr, No Donny Sr)… The Bidens are getting dressed for church and then will make their way to the Capitol (bypassing the traditional WH visit prior to going to the hill)… Stanley Steemer cleaning the WH making sure that there are no traces of Covid hiding anywhere, investors digesting the afterhours earnings report from NFLX – which also beat all the estimates surpassing 200 million subscribers – saying that they now generate more cash than they need – so no longer anticipate having to borrow any money to stay afloat… and the stock surged 15% in the afterhours…this morning it is quoted up $67 at $567/$569… US futures are steady AND Bitcoin is down $1700 trading at $34,811 (recall what I said yesterday).  .

“The sense is that $40k appears to be a level that it needs to not only retest, but retake and soon, if not – then there are some that suggest that the Bitcoin trade is so overcrowded that there could be some ‘unrest’ causing it to come back down and test trendline support at $27,500 – which would represent a pullback of about 30%… after a 12-month surge that took it up 375%”

$27,000 is only 20% away from where it stands this morning…

As of 6:15- Dow futures are up 77 pts, the S&P’s are ahead by 14 pts, the Nasdaq is up 107 pts and the Russell is struggling to stay flat.

The morning will be all about the pomp and circumstance of the moment and the storied tradition of what is like a ‘royal event’… All while this is happening investors will continue to parse the comments given to the Senate yesterday by soon to be Treasury Secretary Janet Yellen when she implored the Senators to ‘act big’ and react to the slew of earnings due out.   USB, UNH, BK, PG, FAST, MS, UAL, DFS, AA, and KMI…

Eco data today includes: Mortgage apps… not a market moving event at all.

European markets are trending higher either leading or following US futures action… I would say lead, but the industry is suggesting that the Europeans are following… (Challenge!). And while they will be watching the event – they have enough of their own issues to keep them busy. In Italy – Italian PM Guiseepe Conte has won a vote of confidence in the upper house – following the vote in the lower house on Monday… and this will allow him to remain in office avoiding immediate political upheaval.  And in the UK – the gov’t reports that inflation surged in December – climbing to 0.6% up from 0.3% in November.   At 6:30 am – the FTSE +0.06%, CAC 40 +0.50%, DAX +0.58%, EUROSTOXX +0.64%, SPAIN -0.36% and ITALY +0.61%.

OIL rebounded yesterday (again ignoring the negative tone from Friday) and is once again higher this morning +67 cts at $53.65/barrel… Talk of the Biden presidency is supposedly getting the oil traders all excited… Bjornar Tonhaugen – Head of oil markets for Rystad Energy had this to say:

“As we are approaching the beginning of the Biden Administration era in the US, traders now have their hopes up for a rapid positive effect on markets coming from the promised $1.9 trillion stimulus package.”’

In addition – HAL (Haliburton) is now predicting a ‘recovery’ in the global oil and gas industry after reporting better than expected earnings yesterday.

I have been saying that $55 would represent resistance for oil and last week we did trade as high as $54 before pulling back. My guess is that we will attempt to test $54 again and once again fail… remaining in the $45/$55 range until we get more clarity on the global economy.

The S&P closed at 3798 once again knocking on the door of the next century mark (3800) – It feels a bit tired and yes while the news is all good none of it is a surprise at all – meaning that so much of it has been priced into the markets already. Today will provide time for reflection as we transition to the new administration. I continue to think that we are at a short-term top and expect to see the market pullback a bit.

Earnings season is expected to produce a 75%-80% beat rate (trend) and like I said – the juice will come from the guidance – we can only hope for more upbeat news like NFLX.

So stick to the plan, create a well balance and defined portfolio… trim and rebalance where necessary, call your advisor and focus forward…

Take good care

Kp

Meatloaf with a Brown Sugar Glaze

This is truly a ‘comfort dish’ nothing fancy, just good.

For the Glaze you need: ½ c of ketchup, ¼ c of brown sugar, 4 tsp of white vinegar – mix together and set aside.

For the Meatloaf – you need:  vegetable oil, 1 chopped onion, 2 garlic cloves (pressed), 2 lg eggs, ½ c of whole milk, 2 tsps Worcestershire sauce, s&p, 2 lbs of meat – 50% ground chuck, 25% ground pork and 25% ground veal (or you can just use 100% ground chuck!), unseasoned breadcrumbs.

Now – Set the oven to 350 degrees. Heat a pan with the oil and sauté the onions and garlic and allow to soften – maybe 5 mins… Then set aside to cool.

Now – mix the eggs, milk, Worcestershire sauce, s&p. Add this to the meat and then toss in the breadcrumbs.  Mix well – now add in the onions and garlic and mix well again.  Form into a loaf and place in a 9×13 greased loaf pan.  Brush with half the glaze and bake until the center of the loaf reads 160 degrees… (I usually leave it in the over for an hour). Remove, cover and let sit for 15 mins.

Simmer the remaining glaze on the stove top and then slice the meatloaf and serve with the extra glaze.  You have to serve this with mashed potatoes – period.

Enjoy.

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Kenny Polcari

Kenny is the editor of Morning Thoughts and has been with Seven Figure Publishing since 2019.

Kenny is a CNBC exclusive contributor appearing on shows like The Halftime Report, Power Lunch, and Closing Bell. His market commentary has reached audiences across the nation on media outlets such as Bloomberg, Fox, ABC, and more.

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