Look Who’s Back…and talking

Hello folks!  We’re going old-school again and bringing NYSE Institutional Floor Broker, Kenny Polcari, back into The BlackBay community.  Many of you have asked for his sensational analysis and exceptional recipes.  Well, guess what…it’s back!!

From today…(please spread the word):

By: Kenny Polcari, NYSE Institutional Floor Broker

The stock market stood up and celebrated a horrendous jobs report on Friday – the rally this past week reflects the idea that investors (traders) are expecting more sugar from the Fed….……if you did not hear – new jobs created came in at ……+96,000 new jobs – well below expectations of +140K and well below the +250k that we need to make any headway at all –   Unemployment – came in at 8.1% – actually down from 8.3% but for ALL THE WRONG reasons….people just leaving the work force, giving up, no longer being counted…..

This is the old – bad news is good news – and since this was one of the worst NFP reports since the “recovery” began in 2009 – speculators quickly placed more bets on Uncle Benny and the Jets…..that we will hear the news of a new program this week…..

If you say that the mkt did not really react – you would be mistaken – remember that the mkt “overreacted” on Thursday after the ECB announcement of nothing……the mkt moved up some 237 pts and on Friday moved up another 14 pts…..the S&P closed the week at 1437 or some 2.5% for the week – closing out a new high for the year.  But further evidence that traders are fully expecting QE3 from the Fed and guaranteed bond-buying from the ECB can be found in the currencies and precious metals markets. 

First Europe – Since the ECB accommodation is “sterilized”  their action means that the money comes from the Eurozone countries on behalf of their weakest siblings and no increase occurs in the euro currency supply.  This should mean that the Euro should rise if the ECB pulls this sovereign bond-buying plan off in any significant measure.   But in the States -  the Fed accommodation is all about turning on the printing presses……just print more money – resulting in strong currency debasement, – meaning that the value of the dollar is going to be trashed – yet again and the dollar should fall on an actual QE3 program.   So – with the Euro finding support and the dollar under pressure -  precious metals, equities, food commodities should spike – as these are ALL priced in dollars…..

The euro rose by 1.45% on Friday, very near the mid-May highs, and much higher than the June/July/August levels. In fact, the euro closed well above its upper Bollinger Band, indicating extreme bullishness for the euro currency.  So -  Everyone is convinced that no roadblocks will stand in the way of Draghi’s promised unlimited bond-buying for Eurozone sovereigns needing assistance. ….. so the only problem with this interpretation is that most of this ECB funding will come from Germany, and Germany certainly hasn’t ratified anything or transferred any new funds to the ECB for distribution on an “unlimited” sovereign bond buying basis.  Sept 12^th is the next key date….this is the day that the German High Court will rule on the legitimacy of the ESM (European Stability Mech) – all expectations are for them to SUPPORT the move but If they do not support the plan then Uncle Mario is in a bit of trouble…..remember – in order for this plan to work – the nations must ask for help first and then be subject to very strict oversight – On Friday – Italy’s Mario Monti stated emphatically that Italy will not be accessing the ECB’s program anytime soon!  This qualification leaves the door open for Italy to come to the table in the future. 

Now onto the dollar – we were down slightly.   In fact, if you look at the dollar chart you can see that the dollar pierced and closed below its 200m DMA of 80.756.  if the FED does indeed enact QE3  then expect the dollar to drop further – until then we may see it flounder around looking for direction.   

Precious metals continue to tell the story……..They are screaming STIMULUS……On Friday we saw Gold +$35 or 2%, Silver +0.97 cts or +2.9%…..but that does not really tell the story….you have to go back to mid August and look at the move – silver +23% while gold is +9%…..So tell me…..what do you think?  Will we be celebrating QE 3 on Wednesday?    The presidential election, the poor earnings seen in July – and the very clear warnings  for October,  the persistently slow growth GDP, the even slower new jobs growth and high real unemployment. . . all point to a much needed Obama administration policy response – a response other than monetary stimulus.  But with politicians more worried about saving their own backs – that will not happen at this time – so someone has to say something – Once again it appears it will Fed Chairman Bernanake…..Will any plan he announces be enough to satisfy the mkt?  With the election only 2 months away - any move is clearly controversial and many continue to question the value of more stimulus. Prior efforts have yielded little in the way of reform – but many will tell you of a surging stock mkt as proof that the plan is working…..ARE YOU KIDDING?  Interest rates are zero and will stay there for another 2 yrs…..Benny has forced this trade – economic funamentals do not support mkt action at all….investors are not believing it – note the massive exodus from equity mutual funds……..if the FED does nothing the mkt will collapse…….the more he adds the higher the potential for run away inflation, financial instability and further debasement of the dollar….. 

Overnight in Asia – Chinese trade data weakens further, outlook continues to deteriorate, CPI moves higher (food and energy up) slowing industrial production and exports demand more sugar…..Japan -0.3% , China +0.3% , ASX +0.2%,  Hong Kong +0.13%

In Europe this morning mkt are mixed…..most opened broadly lower ahead of the German court decision on Wed and the decision out of the Fed on Thursday.  Lots of chatter over the weekend….George Soros tells Germany to put up or get out, IMF offers strong support for Uncle Mario’s bond buying program.  French Pres Hollande outlines a host of austerity measures and tax increases to help balance the budget as he acknowledges the deteriorating conditions in that country…..- he gives himself 2 yrs to accomplish this task – while Obama had 4 and now is asking for 4 more years……Lack of clarity on all fronts causes mkts to stall.  Italy -0.5%. FTSE flat,  DAX +0.07%, CAC 40 flat, Eurostoxx -0.2%, Spain -0.3%. 

US Futures are -3 right now….trending at 1435….mkts in hold mode as they await the macro news midweek.  Clearly the 2% move up last week – needs to be digested and verified as realistic…have traders once again jumped ahead of themselves?  In the end – you CAN NOT FIGHT the Fed….. There is no macro data in the US today – the news picks up tomorrow with trade balance, mort apps and NFIB small business optimism……

Take good care –

Kp

Chicken Scampi!  This is an easy dish to make and you can serve it over linguine or even white rice.  It is the perfect alternative to the more traditional shrimp scampi for anyone that does not like shrimp. 

For this you need:  1 1/2 lb. skinless, boneless chicken cutlets cut into bite size pieces, s&p, butter, Olive oil, thinly sliced garlic, 1/4 cup dry white vermouth, 1 tblspn freshly squeezed lemon juice, finely chopped parsley leaves,  1/4 tspn grated lemon zest and 1 lb of linguine (if you choose to serve it over pasta).

Rinse and pat the chicken dry –  season with s&p and set aside.

In a lg non stick skillet – add butter, splash of olive oil and the garlic – sauté around for a couple of mins.  Now raise the heat to high and add in the chicken pieces.  Cook the chicken for about 8 – 10 mins.   When cooked – remove from pan and set aside.

Next – add in the vermouth and lemon juice – bring to a boil – it should begin to thicken a bit – no more than 40 secs or so.  Add the lemon zest and parsley…scrape the bottom of the pan to get any bits.  Turn off the heat and add back the chicken. Stir well to coat. 

At this point you can serve it over the linguine or the white rice.  You should also make a large mixed salad, tomatoes, cucumbers, scallions and dress with oil and vinegar.  A squirt of lemon juice and a shake of dried oregano and s&p finishes this off nicely.  Don’t forget the garlic bread. 

Buon Appetito.