Alpha Trader

This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Jim Bianco, president of Bianco Research.
It doesn’t take too long of a memory to remember the days when then-Fed Chair Janet Yellen was none too pleased about President Trump sticking his nose into monetary policy. Now that Yellen has moved to the Executive Branch (as Treasury Secretary), why does she think it’s okay to continue to opine on Jay Powell’s business, asks Bianco.
Of her latest comments about higher interest rates being a good thing for the economy, Bianco isn’t so sure. It depends why they’re rising, says Bianco. If it’s due to wholesome growth, that’s not so bad for the economy or stocks. But if due to bondholders demanding higher rates to compensate for higher inflation, the stock market might not react so nicely.
Politics aside, current Street thinking says the Fed is going to use the Jackson Hole confab in late August to lay the groundwork for the taper to begin, with rate hikes to maybe start in the second half of 2022. Bianco questions that consensus. He’s keeping his eye on the 10-year Treasury yield. If an inflation scare forces long rates higher, it could force the Fed’s hand a lot sooner than that.
Of his recent great interest in the promise of cryptocurrencies, Bianco takes us back to the days of Web 1.0 - peer-to-peer, decentralized. That was quickly supplanted by Web 2.0 - the rise of the great centralized platforms like Amazon, Facebook, Netflix, and Google. Web 3.0, says Bianco, will be a return to decentralization thanks to the power of blockchain technology.
It’s a fascinating discussion, with plenty more, including why Web 3.0 may not be kind to the above-mentioned (and other) mega-cap tech names, and why central bank digital currencies could be a major threat to the legacy commercial banking system.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Bob Iaccino, co-portfolio manager of The Stock Think Tank, and host of The Market Think Tank.
Talking as oil (CL1:COM) jumps 3% to a new cycle high, a bullish Bob Iaccino says demand for crude is rising a lot faster than OPEC is willing to supply it. With the American shale boom not coming back anytime soon, the cartel knows it’s the marginal supplier, and is only going to drip out as much oil as is necessary.
Speaking of those American supplies, Iaccino takes note of restrictive drilling/exploration policies of the Biden administration, as well as the growing power of the ESG movement, which last week took down a couple of board seats at Exxon Mobil (XOM).
Of possible crude-related investments, Iaccino reminds that when he’s bullish on oil, he buys oil. The correlation between the energy sector and crude isn’t always one-to-one, and it would be highly frustrating to be right on oil and watch energy equites not do a whole lot.
Zooming out to the larger inflation picture, Iaccino suspects the Fed will be proven wrong over its insistence that currently perky price levels are transitory. While commodities may go up and down in price, the cost of labor is far stickier. The wage hikes we’ve been seeing - Bank of America lifting its minimum wage to $25 per hour is but one example - aren’t going to be given back. Ultimately, they’re going to feed through into the price level.
There’s plenty more, including Iaccino’s view on whether the dollar is going to continue its downtrend, and what stocks he’s buying (non-energy-related, of course).
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Henry Blodget, co-founder and CEO of Insider, Inc., and a former top-ranked Internet stock analyst.
Blodget was pitched an investment in Bitcoin (BTC-USD) all the way back in 2011 (price then was about $80 per coin). His conclusion then was that Bitcoin was the perfect asset for a speculative bubble - finite supply, complicated, hard to understand, and with price determined not by any normal valuation metric, but instead completely by supply and demand. Thus, you’ve got downside of “only” 100%, and an upside not limited to any valuation benchmark - $100K per coin, $1M per coin, $10M per coin? Why not?
One thing that’s changed since 2011 … Back then, Bitcoin’s backers talked about it as a new type of money or currency. No one really makes that argument anymore. Instead bulls talk about a store-of-value, or a better gold. So don’t expect Bitcoin to disappear, says Blodget. Like gold, it will have its believers for a very long time. But also like gold for very long periods, an investment in Bitcoin may prove to be a dud.
Blodget came to some level of notoriety during the dot-com bubble, and he’s seeing some similarities now. In particular, the rolling speculative bubbles of the past year are looking very familiar to him. Checking valuations, he suspects equity returns will be pretty lame over the next decade. However, he would advise against trying to time the peak. Harking back to the mid-late 1990s, there were any number of what appeared to be bell-ringing tops, but the bull market kept getting bigger.
There’s plenty more, including Blodget’s view of the outlook on Amazon (AMZN) today, and his thoughts on last week’s mammoth deal for AT&T to sell certain WarnerMedia assets to Discovery.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with David Lebovtiz, global market strategist at JPMorgan Asset Management.
With the market coming off its worst week in three months, the inflation question is atop many investors’ minds. Lebovitz is willing to agree at least in part with the Fed that the current inflation scare is transitory - a supply/demand “mismatch” as the economy rapidly emerges from the pandemic - but he believes the wage pressures we’re seeing now may prove stickier than the central bank anticipates.
Bottom line: While the Fed’s forecasts are probably too dovish, the market’s are far too hawkish in an expectation of a rate hike in 2022. The Fed, says, Lebovitz remains laser-focused on jobs, and as long the unemployment rate remains elevated, expect them to stick with the “not even thinking about thinking about raising rates message” language for quite a while longer.
What that means for the markets is anyone’s guess, of course, but Lebovitz reminds that each year brings an average 14% correction at some point, so it wouldn’t be unreasonable to expect the current downturn to run into the double-digits. Still, with earnings growth expected to be about 50% this year and the Fed unlikely to all of a sudden turn hawkish, it’s hard not to see the markets regaining their footing later in 2021.
There’s plenty more, including what sectors are set to benefit most from the current environment, and why Lebovitz is quite a bit more constructive on Bitcoin than some of his JPMorgan colleagues.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with David Bahnsen, founder, managing partner, and chief investment officer at The Bahnsen Group.
Speaking shortly after the cyberattack on the Colonial Pipeline, Bahnsen says the news speaks to the need for a robust, voluminous, highly effective, and technologized pipeline system to transport oil and gas in the U.S. He notes that the publicly traded pipeline owners are catching a bid on the Monday morning following the weekend attack - and this follows on the best quarters in years for those operators.
Bahnsen says that those interested in clean energy should also be pipeline fans, reminding that most of the product that flows through pipelines is liquified natural gas. To the extent that pipelines allow the use of natural gas instead coal, that lowers carbon emissions.
Getting to investing in pipelines, Bahnsen says many of the weak operators have been weeded out in recent years, leaving a more high-quality field today. His two favorites are Enterprise Product Partners (EPD) and Kinder Morgan (KMI). Both are among the larger pipeline players, offering not just dividend growth, but also excellent dividend coverage, i.e. payouts are easily covered via free cash flow, rather than the balance sheet. For those who prefer ETFs, Bahnsen is a fan of the recently-launched USCF Midstream Energy Income Fund ETF (UMI).
Turning to interest rates, Bahnsen recently warned about the Japanification of America. That means a number of things, but mostly that the government’s policy of loading debt on top of more debt to keep the economy afloat is not a recipe for an overheating economy and inflation, but instead is a recipe for continued sluggish growth, deflationary conditions, and a continuation of the secular bond bull market.
Bahnsen expects the Fed to continue with ZIRP and other extraordinary measures for years to come, but Bahnsen doesn’t anticipate that to be any more effective at breaking the deflationary trap than the BOJ’s efforts of the last three decades.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research.
“The risk of a larger pullback is growing even though [sentiment] indicators remain mostly neutral,” says Frederick, who has taken notice of the remarkable similarities between the post-Covid and post-financial crisis bull runs. If form holds, we’re very close to the same point in 2010 at which a 16% correction took place. While Frederick doesn’t expect nearly that large of a downdraft in stocks this time around, today’s markets - with new record highs hit almost every day - are vulnerable to a move lower.
Longer-term, Frederick remains bullish. He reminds of last week’s personal income/savings report showing personal income up 21% thanks to stimulus checks, but spending ahead just 4%. That leaves a lot of money currently sitting idle and waiting to buy any dips.
What might derail the bull market is a rise in inflation forcing the Fed’s hand far quicker than the currently promised 2023. While Frederick acknowledges the current economic boom and price pressures, he’s on board with the Fed’s description of “transitory.” Covid, he says, has caused massive supply disruptions - just look at the large number of ships sitting in the waters outside West Coast ports. This too shall pass, he says, and with it will be the current inflation scare.
There’s plenty more, including a discussion of what current volatility and put/call readings are telling us, crypto, and why the collapse of the a number of mini-bubbles is a healthy thing for the broader market in the long term.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher chatting first with Ben Laidler, global markets strategist at eToro, and then with stock trader Mark Minervini, author of best-selling books Trade Like a Stock Market Wizard and Think and Trade Like a Champion, among them.
Markets continue to underestimate the growth surprise in the U.S., says Laidler. Continual surprises on the upside for the economy should be good for earnings, and good for stock prices moving forward.
Strong economic growth and rising inflation usually means the Fed coming into play sooner, rather than later, but Laidler suspects not this time, as full employment remains a ways off. There’s also been some large recent inflation prints, but Laidler reminds these are comped to the extraordinary weakness of one year ago, and the Fed has made clear it’s willing to tolerate “transitory” inflation stronger than the 2% target.
“Never buy the numbers, never buy the story,” says Mark Minervini, “unless it’s confirmed by the technicals.” The result of this discipline has Minervini usually buying stocks in uptrends, near 52-week highs, and with at least the appearance of being expensive. As for where’s he’s seeing this sort of setup currently, Minervini mentions Yeti (YETI), PayPal (PYPL), and Duluth Holdings (DLTH).
Maybe most interesting from the talk, Minervini says trading is the same today as when he started in the business several decades ago. Yes, there’s the rise of technology and zero commissions, but chart patterns and setups today look exactly like they did in 1980s, and for that matter look just like they did in the 1920s or the 1880s. The reason: Human nature never changes, no matter the era and no matter the market.
Listen to the full forty minutes for plenty of great insights from these two market veterans.
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This week’s Alpha Trader features hosts Aaron Task and Stephen Alpher speaking with Jim Iurio - director at TJM Institutional Services and a CNBC contributor - making a return appearance on the podcast.
It’s time to start measuring the dollar (USDOLLAR) differently, says Iurio, noting most forms of the dollar index more or less gauge the greenback vs. other flawed currencies like the yen or euro. Nobody would be talking about dollar strength, he says, if the dollar index had a significant weighting in something like Bitcoin (BTC-USD).
And of bitcoin - which tumbled nearly 20% in minutes over the weekend on some pretty thin news - Iurio is a fan, but suspects we could see a 50% drop at some point when the U.S. government decides it wants to try and squelch the dollar’s competition.
Turning to interest rates, the 10-year Treasury yield is down about 20 basis points in April despite surging equity markets, and way stronger than expected prints for non-farm payrolls, ISM, retail sales, and CPI. What gives? Iurio notes that at 1.75% or so, U.S. long-end yields are a relatively attractive investment given how much negative-yielding developed-world sovereign debt is out there. He also reminds that bond bears - having made a few dollars - were prudently trimming bets just in case the Fed decided to step in and announce yield curve control.
There’s plenty more including a discussion of lumber’s roaring bull market, why identifying a bubble doesn’t make you any money, and why the recent drop in volatility makes it a good time to buy option protection.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking asset allocation with Phil Camporeale, portfolio manager with JPMorgan Asset Management.
Fed Chair Jay Powell has been “unbelievably consistent” in his dovishness amid the panic, says Camporeale, expecting no imminent policy - or even communication - changes out of the central bank despite what’s been a raft of strong economic prints of late, and what’s likely to be whopping 9% GDP growth in Q2.
Wage pressure will be necessary to make perky inflation numbers anything more than transitory, says Camporeale, but despite some impressive job gains, the unemployment rate remains elevated and labor force participation rate under serious pressure. With all that unused labor sidelined, it’s hard to imagine the sort of wage-push inflation that might put the Fed on alert.
It adds up to Camporeale and team remaining overweight stocks vs. fixed income, overweight cyclicals like financials (XLF), industrials (XLI), and energy (XLE) vs. big-cap tech, overweight cyclical economies like the U.S., Europe, and Japan, vs. tech-dominated emerging markets, and equal-weighted market indexes vs. cap-weighted indexes.
There’s plenty more, including what areas of fixed income Camporeale is allocating money to, why he’s not sold on Bitcoin as an appropriate diversifier for his portfolios, and the lesson Jay Powell learned (and won’t forget) from late 2018.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Peter McNally, Global Sector Lead, Industrials, Materials & Energy at Third Bridge.
Speaking a few hours after the OPEC decision to gradually boost production in coming months, McNally notes oil (CL1:COM) inventories have been falling since early last fall, thus making the OPEC move a logical one. Even with the boosted production, McNally expects inventories to continue to fall through Q2.
As for prices, McNally says since supply is being so well-managed, it’s all about demand. If global economies continue to reopen, crude could be headed to $70, but if the renewed lockdowns currently taking place in parts of Europe become a trend, oil might retreat back to $50. 
But what about the potential of more U.S. supply coming online? It’s not as easy as flipping a switch, reminds McNally. He expects it would take three months of oil in the $60s, and then another six months after that to restart much of the domestic drilling that was lost over the past year.
There’s plenty more, including why gasoline prices might rise even if oil prices flatten out, whether Deere (DE) is now a space-exploration company, and an early take on possible winners/losers from the president’s multi-trillion dollar stimulus proposal.
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