Somewhere in an apartment on the east coast of Florida there is a very tired, very battered, and very old looking stuffed toy monkey sitting on a shelf as if in a place of honor. His name is "Rowboat", his plastic face now almost too heavy for his neck to bear. Why is Rowboat tired? Why does he have such a strange name? Why is he honored so? I'll tell you.
I have a little brother, now also a middle aged man. Well, he's a middle aged man, I am probably getting a little long in the tooth to keep referring to myself in that way. Rowboat was my brother's first toy, now over half a century old.
My brother carried Rowboat everywhere when we were kids. To Grandma's house, on vacation, to the grocery store with Mom. All of my relatives would address my family and pretend to say hi to Rowboat because my brother was the youngest among all of the cousins. As my brother was just about reaching the age where boys don't carry stuffed animals around with them anymore, he noticed that Rowboat's fabric was starting to unravel. Rowboat had become weak. The monkey was placed upon a shelf, but still held by that little kid in high regard.
We grew older. We all moved multiple times. My parents eventually sold - decades ago - the rowhouse in Queens, NY where we grew up. My brother made sure he rescued Rowboat before they did. That black and yellow monkey has held a place of honor wherever my brother has lived ever since. Strange story. So strange that something similar probably exists in your family or in most families? Rowboat is us. Rowboat is the young Irish kid growing up in Queens, as much as he is the old widow still living on the farm that she has worked with her own hands since forever. Rowboat is the teenage girl texting her friends on Friday night as much as he is the orange clad hunter freezing his tail off in the upper Midwest. The firefighter. The immigrant who just got here. The fourth or fifth generation American. Fabric.
My point is that Rowboat became frayed. Rowboat became weakened. More than 40 something years ago. Yet, Rowboat has been preserved and still matters because that stuffed animal was loved by a little boy. My bet is that this particular toy has not been sold since the mid-1970's at the latest. Love. Love is more durable than you think when someone cares... and so are we. I know we are. Respect each other today, gang. We are fabric. We are weaker without each other. We all deserve a place of honor, especially when we disagree.
You see that? Over there. Through the darkness of the darkest night... through every single night... that flag... our flag is still there. Even frayed. Especially when frayed. Honor it. Keep its image in your heart, until your last day. I can not even begin to express the joy it gives me to know that after I breathe my last, they will drape Old Glory over what is left of me. Honestly, could a common man even begin to ask for anything more?
Electoral turnouts were high. Everywhere. Equities appeared on Tuesday to be pricing in a Trump victory, while Treasury and currency markets appeared to be pricing in Joe Biden. There was no consensus. There still isn't. It did not take long after the sun went down on Tuesday evening to realize that most well known polls had missed the mark yet again. Not only was a blue sweep of the executive and legislative branches of government becoming extremely far-fetched, but that President Trump actually stood more than a fair chance of winning reelection, and could even keep the popular vote very close. All after being written off once again by much of the mainstream media.
Then, as the night wore on, as morning beckoned... the worst happened. Our fears were possibly being realized. With former Vice President Biden leading in the Electoral College, but with President Trump apparently leading in literally every significant state left undeclared at that time, some of these states stopped counting ballots. The president went public, which I think maybe he should not have done, at least not until he no longer seemed to be leading, and indicated that he felt that there had been fraud. Those fears? That this election might be decided in the courts now move into the realm of potential reality. None of us want that. The markets won't either.
While not necessarily agreeing with the president's aggression overnight, I do understand his sentiment. Why stop counting? That makes no sense at all. A pipe broke in Georgia, no ballots were destroyed. So take 10 hours off? That's inexplicable. I have spoken to people in Georgia. They are very skeptical. To put it lightly. Pennsylvania? Could a state (commonwealth) even try to be less transparent? I mean, Wow! I have spoken to people there too. They are sick over what is going on.
Yet we really know nothing. Pennsylvania will take all week. To Wisconsin's credit, they might be slow, and too close to call, but at least they are still counting. European markets and U.S. equity index futures markets have been all over the map, rallying early, when it appeared that the incumbent appeared to have some big leads in some swing states, and then selling off as outcomes became less certain. Understand that I think uncertainty will be the enemy here. Now that a blue wave is almost certainly off of the table, the markets will manage under, or despite whomever is sworn in as Commander-in-Chief on January 20th. Knowing who it is sooner would be far better than later.
My bet is that the markets hang in there this morning. Markets may actually hang in there as long as either candidate still has a path to victory without Pennsylvania's 20 electoral votes. Should the nation get to the point where the state becomes necessary to reach 270, neither side will trust the process... then it gets ugly.
Should this develop into reality as we move toward Friday, markets will crave certainty. (I remind you that I am neither red nor blue... in fact I truly dislike both major parties, green is my color, and I ain't exactly talking about the environment. I am here to feed a family and pay the mortgage. That's the mission at hand.) It is then that I would expect market volatility to become elevated and portfolios to become more difficult to manage. Drag out beyond that, and end up with a president chosen by the court? Don't even go there.
Tuesday's rally left the major large cap indices short of making a run at their individual 50 day simple moving averages, while the S&P 500 managed to fill the gap created during last week's selloff.
By some measures, Tuesday was the best day for equity markets since July. Ten of 11 sectors closed higher for the day, with Industrials (led by Transports) and Financials leading the way as yield spreads expanded. Energy closed lower despite commodity strength on a weaker currency. Trading volumes moved sideways at both of New York's primary exchanges on spectacular breadth. That does not necessarily negate the positive movement, but it does mean that investors need to proceed with caution. No kidding. Oh, one more thing... small caps were as hot as a pistol on Tuesday.
Amazon (AMZN) ? No, I haven't unloaded any of those yet. (Oh, baby). I'm talking about Treasury securities. What now? I mean while most of you were watching the election not exactly play out, the U.S. Treasury Department reduced the estimated amount that the federal government would need to borrow over the balance of the calendar year from $1.216 trillion to "just" $617 billion due to the failure of our nation's legislative chambers to agree on increased fiscal support for businesses and households as the pandemic rages on.
While some economists saw this as temporary, expecting this now non-existent blue wave to develop, what now? What if regardless of executive preferences, Nancy and Mitch remain miles apart? Less borrowing. Less demand across the curve. Less growth. Less inflation. Stronger dollar. That's what. Just a kid with an opinion... who arrogantly thinks he could do a better job than just about everyone in DC.
Economics (All Times Eastern)
08:15 - ADP Employment Report (Oct): Expecting 642K, Last 749K.
08:30 - Balance of Trade (Sep): Last $-67.1B.
09:45 - Markit Services PMI (Oct-F): Flashed 56.0.
10:00 - ISM Non-Manufacturing Index (Oct): Expecting 57.6, Last 57.8.
10:30 - Oil Inventories (Weekly): Last -892K.
10:30 - Gasoline Stocks (Weekly): Last +4.32M.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (SMG) (.06), WEN (.17)