I know I am. Maybe you are too. Not just a baseball guy, but one who was never close to good enough to play the game as an adult. Managed the kids in youth leagues, and they were pretty good, but this just wasn't their favorite sport. They were soccer guys. Had to learn the nuances of a sport that had just been a peripheral game in my own youth, either that or not coach my own kids. Not acceptable. At least not for me, but there were nights. Nights when we would still go to the batting cages. Nights when there were long lines for the 70 mph, and 80 mph cages, but not the 90+ mph cage. Nobody wanted any of that. You know me, and if you know me, then you know how athletic I become (in my mind) if my wife/girlfriend (same person) or my kids are watching. Of course I found a way to hit the ball in that cage, even if I had to start my swing a bit early and guess a little on location. I mean, c'mon. It's showtime. The wife and kids think I am "that" guy. I have to hit a couple of line drives. Either that or we stay all night.
The times have changed. The kids are no longer kids. The wife has not thought about a batting cage or a soccer game in a long time. Been even longer since she sat in the stands at one of my hockey games with either my home/road jersey on. Nothing makes a guy play harder than a gal in the stands wearing his number. Nothing. Those decades have passed into memories. Happy ones. Still, I find myself playing the game, this game... making a living, and trying to make sure those around me are "okay", harder than ever. The game has evolved from one of youthful exuberance to one of risk management, but the competitive fires that burn within still come in handy. The willingness to step into the batting cage that intimidated some of the other dads, even if I have to "trust the force" a little bit, still comes in handy. These markets don't always make sense, ahead of time. Trust me, they do, or they will in hindsight.
Mark Twain is often credited with having said, "History doesn't repeat itself, but it often rhymes." I can find no evidence of Twain having said this, but someone did, and it was not me. I do think this quote however, to be something we must all take with us as we venture on our way each and every day. Sometimes we think we know the game, given our years of experience, or what we see individually as our own cognitive abilities. Yet, light passes through the twin prisms of common sense and stressful conditions. Things look different under that light.
The short version of what I am trying to say early this Monday morning is the following. A lot has been priced in. A lot still has to be. None of us know for sure. About anything. To win, one must sometimes anticipate. One will win some, and yes, even lose some. To continue to compete one must learn to be flexible enough to adapt. A little pressure is a good thing. The ending is unknowable, as there is no ending, just one's own passage into the fabric of evolution. Know how you fit. Know thy purpose. Driven by love? Indeed. A little ego maybe? Not necessarily a bad thing. Who do you want to read the map when 12 other pimple faced, camouflage clad scared kids look for leadership? The kid who's a wreck every time he's out in the jungle, or that one kid who thinks he can do this?
They say that short weeks are always long. Mostly that's because for those who work for commission or make a living off of their book (profit/loss), holidays are unwelcome events. The pressure ramps up during weeks or months with less trading days, as one's monthly bills are not reduced just because the individual was offered less opportunity to make money. One's necessary daily average profit in order to make ends meet goes higher, as does the pressure. This delicate game becomes infinitely more difficult when markets become more challenging as they are right now.
Last week was a tough one for some markets that had not experienced "tough" in a good while. The Nasdaq Composite finally gave up it's own 50 day SMA on Friday, closing in the red for the fifth day in six, making Tuesday's rally, decisive looking at the time, appear rather feeble. The S&P 500 looks different for now, even if that broadest of large cap indices still gave up 2.5% for the week, it managed to rally enough off of the lows on Friday to basically close flat for the day, and much more importantly, hold that important line.
The level of "angry" for the headline averages of course, is controlled in the year 2020 by the level of exposure that any said index has to the Information Technology sector, or mega-cap big tech to be more specific. This includes a few mis-categorized names that have been designated for membership in non-tech sectors. Among the highly followed FAANG (coined by Jim Cramer) names, Amazon (AMZN) , Alphabet (GOOGL) , and Netflix (NFLX) all surrendered this important 50 day line in the sand last week as well. Even Apple (AAPL) , and Facebook (FB) had to defend that spot on Friday though technically they came out of the week in better shape than the other three.
So, where does this pressure come from? Our current environment pits what has looked to be an early vee-shaped economic recovery, supported by extremely accommodative monetary policy and the simultaneous wild loosening of fiscal policy. The problems here are that fiscal authorities (both houses of Congress) have appeared to fail the public well before the pandemic threat to not just life but economic performance has passed. Now that our legislative leaders have disappointed, this puts the Fed in a similar position. It would appear that all that can be done at this point, is to talk up inflation. While recent producer and consumer prices have surprised to the upside, without more fiscal help, this trend likely halts in place by the end of September. Just a fact.
One just has to look at U.S. Treasury yields or a Materials sector last week that led the way, but did so without the help of packaging, steel, aluminum or paper, to question future prospects for either inflation or economic growth. This leaves election risk, and not normal election risk. The markets must price in abnormal risk around the election to include the potential for a length of time necessary to determine results that markets will not like, and may not tolerate. Contested results would exacerbate this negative impact. While we know that the polls still have one candidate well in front of the other, we also know that polls mean nothing after 2016. We also know that many of the betting sites across the pond that take money on this election have it very close to 50/50.
Help On The Way?
Oh, there are a ton of events scheduled this week. Plenty of it potentially positive. The FOMC will talk to us on Wednesday. That's fine. By Tuesday, most of you will feel as if you have put in a full week. Tuesday brings us Apple's "Time Flies" product launch event. Expected are a new line-up of smartwatches with increased healthcare applications and improved battery life. There is also talk of maybe a new tablet launched at this event, and then another such event to be held next month for the line-up of 5G capable smartphones.
Also, on Tuesday, both Adobe (ADBE) and FedEx (FDX) report quarterly earnings amid an otherwise bare week for such releases, while Kraft Heinz (KHC) , Peloton (PTON) , and Camping World (CWH) hold investor days. In addition, Salesforce (CRM) presents at the Jefferies Virtual Software Conference.
Extra !! Extra !!
- Nvidia confirms the planned acquisition of Arm Holdings from Softbank for a cool $40 billion. Nvidia (NVDA) states that Arm will indeed continue to operate the open-licensing model that has made the firm central to virtually the entire cell phone/tablet market. This deal would be expected to be immediately accretive to both non-GAAP earnings and gross margin, according to the purchaser. I like the deal for Nvidia, not only because it takes sales for the elite chip maker from little more than $9 billion to roughly $11 billion, but also because Softbank ends up with a large stake in Nvidia. Do I expect there to be multiple regulatory hurdles across several jurisdictions? Very possibly. That will cause volatility. I love Nvidia, but I almost certainly sell some this morning on this pop in the share price.
- As excited as I am for Nvidia, I am disappointed for Microsoft. News broke on Sunday night that Microsoft (MSFT) was out of the bidding for TikTok, and that Oracle (ORCL) had won the right to partner with ByteDance to "address" national security concerns in the U.S., as well as beyond. Some of this cooperative deal had been priced into MSFT and will now have to be priced out, then reallocated toward ORCL. Congrats to those of you long that name. The wildcard here remains the level of participation of Walmart (WMT) , as there is talk that America's largest retailer may be involved either way.
-Plenty of news broke over the weekend, or will break soon on the Covid-19 vaccine front as well. For one, AstraZeneca (AZN) has said that it has received confirmation form the Medicines Health Regulatory Authority (UK) that it was safe to resume clinical trials in that country.
-In a CBS News interview with Margaret Brennan, Pfizer (PFE) CEO Albert Bourla said the firm should know if it's leading vaccine candidate "works or not by the end of October". Bourla put the chances of such knowledge (regarding safety and efficacy) by that date at around 60%. Investors be alert that Pfizer holds a two day investor event starting today (Monday) that will include potentially a lot more than prospective Covid vaccines. Interestingly, Moderna (MRNA) , another leader in developing a vaccine in this fight will hold their own day for analysts and investors this Thursday, September 17th.
Economics (All Times Eastern)
No Significant Domestic Economic Data Scheduled for Release.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: (LEN) (1.58)
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