The investor proceeds on his or her mission. To provide. To succeed. The focus must be both on the goal as much as on the method. Work hard, with no goal, and where the trail leads literally could be anywhere. Set a goal or goals without working up a framework or some kind of outline (mission statement) and one's goals eventually become unrealistic as distraction along the way becomes inevitable.
I know. I have made every mistake across the decades that traders and investors make. Every once in a while my mind takes me back to Homer. Tough reading? You bet. Tough reading is as good an exercise for the brain as push-ups and cardio work are for the body. It's something you need to make yourself do. It's how you train yourself so you can go through white papers written by economists that you disagree with, or fight your way through corporate conference calls after the fact because you had to be a dad or a husband at the time that the call went live. (Prioritize)
Odysseus had a goal, He was to return to Ithaca. That is until he runs into Circe, the goddess of magic. A sorceress. A witch. A temptress. Living among a pack of wolves, Circe could turn men into animals, namely swine. That's what happens to Odysseus and his crew. Odysseus distracted.. for a year. The crew, swine. Odysseus eventually convinces Circe to return his crew to human form and wins back his freedom, but has lost time, much time in the pursuit of luxury and excess.
Today is Friday, the third Friday of December. Not only will Tesla (TSLA) enter the S&P 500 as well as the S&P 100, but Apartment Investment and Management (AIV) and Occidental Petroleum (OXY) will exit those respective indices. In addition, for the fourth time in 2020, single-stock options, single-stock futures, stock-index options and stock-index options all expire simultaneously. For this is the hour of the witch; today is a "quadruple witching" expiration event.
With certainty, I can warn the novice investor that trading volumes will rise well above recent trends on this day. With something close to certainty, I can warn the novice of the likelihood that there will be an inefficient distortion of routine price discovery in various spots that will have nothing to do with fundamentals or technical analysis. The highly trained (and some hunter-sniper algorithms) will seek these dislocations as opportunity. For the rest of you, I suggest a mental resistance to act rashly as what transpires this day in spots may have very little to do with what happened on Thursday, nor what happens on Monday. This day, or at least what happens on the open and close, will belong to the witch. Odysseus will still have to work Monday, and Tuesday, and so on. If he's lucky.
Juke Box Hero
Just one guitar, slung way down low
Was a one way ticket, only one way to go
So he started rockin', ain't never gonna stop
Gotta keep on rockin', someday gonna make it to the top
- Louis A. Grammatico, Michael L. Jones (Foreigner) 1982
The Nasdaq Composite set a record on Thursday, as did the S&P 500. Again. The Nasdaq's winning streak has now hit four days. Our two most important and focused-upon large-cap indices were out-performed by the small-cap Russell 2000. Again. There was an old saying on Wall Street. On days like Thursday, someone would yell out loud "The take 'em gang is here!" Others would repeat the exclamation as all toiled away in the name of impressing the big hedge funds and mutual funds enough so that they might choose you over your fellow floor traders.
Those trade ideas that I write up for Real Money several times a week are really just more colorful versions of the trades that I used to send to the various hedge fund managers in my attempt to get their attention. (You thought these guys came up with their own trades? LOL) I am not special. I grew up in an ultra-competitive business. If your cousin did not run money, you had to impress someone who had no reason to throw you his or her business. If you could not "expense" everything, you had to show them a mix of talent and work ethic. Or let some other moron steal your lunch.
Winners clobbered losers at both of New York's primary equity exchanges, as did advancing volume over declining volume. Nine of 11 sectors traded higher as Materials and the REITs led the way. All on increased aggregate trading volume. Guess a weaker dollar, hopes for fiscal support and hopes for a second Covid-19 vaccine from Moderna (MRNA) outweigh the reality of once-again increasing initial jobless claims.
Oh, I saw the data on housing starts and building permits. Permits are a proxy for optimism at the household level. How far forward has the re-opening trade been brought forward? I don't know. Credit Suisse's Jonathan Golub was more than mildly optimistic about the coming year on Bloomberg TV on Thursday. I see a coming period of confused labor market inefficiencies that must be ironed out (and will be) perhaps painfully, but statistically, from an economist's perspective, Golub may be right. This might just be for you and I... "The Odyssey."
You all know by now that an advisory panel of scientists voted 20-0, with one abstention, that in their opinion the benefits of Moderna's Covid-19 vaccine outweigh the risks for those 18 years of age and older. One abstention? I have the name. I won't publish it. About 17.2 million Americans have contracted the infection, 233,000 of them on Thursday alone. The virus has now killed more than 310,000 Americans, almost 3,300 of them on Thursday. I don't know. Is maybe an opinion too much to ask? These are real people. Our people. Either carry the flag or give it to someone who will. A "no" vote is a valid opinion, but do not sit on your hands while Americans die.
Let's hope Moderna's mRNA-1273 joins the Pfizer (PFE) /BioNTech (BNTX) vaccine in being available for emergency use at some point here on Friday. As the planes leave the hangars, as the trucks leave their depots, as the vials are loaded into freezer boxes, as front-line health care workers "jab" one another, godspeed to all of our life-saving warriors. May you be honored as you deserve. There is but one aim, but one common end. Victory.
How 'Bout That?
Coinbase has filed with the Securities and Exchange Commission (SEC) for an eventual initial public offering. There is talk that this could be one of the earliest IPOs of the new year. Can you just imagine the valuation? Wherever they price this company, it will not be enough. Every single retail investor with no exposure to bitcoin or other cryptocurrencies will try to gain such exposure through proxy once such a proxy that in theory would probably be less volatile than bitcoin itself is available. As an exchange,
performance would not be directly tied to individual cryptocurrency valuations in dollar terms. This will almost surely prove to be a fascinating story as the story develops. Thought the cloud kings were wild?
FedEx (FDX) reported its fiscal second-quarter results on Thursday evening. FedEx crushed projections for both earnings and revenue. Adjusted earnings growth of 92%. GAAP earnings growth of 114% on revenue growth of 19%, as the suddenly improving metrics for this parcel delivery business that first showed up during its fiscal first quarter only accelerated to the upside for the period reported. FedEx declined the opportunity to provide forward guidance, and I find that completely understandable in this environment.
I wrote a piece on Wednesday comparing United Parcel Service (UPS) to FedEx. I thought UPS the better of the two stocks, but I also wrote that I thought an investor could win with either stocks as the holiday season grinds down to an e-commerce driven conclusion and as the massive job of rolling out Covid-19 vaccines both nationally and globally only begins. The thing that impressed me most about last night's numbers was that adjusted operating margin really hung in there, beating consensus despite the need to focus so much on the last mile of household delivery.
Traders sold FDX hard in response to the company offering no guidance. When the closing bell rang Thursday night you all knew that I was long UPS, which is a holding of Jim Cramer's Action Alerts PLUS charitable trust. I jumped on that fat pitch last night like Willie McCovey looking for a fastball. Needless to say, I awoke this morning long both names. Rock and Roll.
Economics (All Times Eastern)
10:00 - CB Leading Indicators (Nov): Expecting 0.4% m/m, Last 0.7% m/m.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 258.
The Fed (All Times Eastern)
11:00 - Speaker: Chicago Fed Pres. Charles Evans.
11:10 - Speaker: Reserve Board Gov. Lael Brainard.
16:30 - Fed Bank Stress Test Results.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (DRI) (0.69)
After the Close: (NKE) (0.62)