Alpha Trader

If you’re looking for a tonic to the ceaseless flow of (mostly) disturbing news on any number of fronts, than this week’s Alpha Trader podcast is for you. Host Aaron Task is joined by J.C. Parets, market technician nonpareil and chief market strategist at All Star Charts (co-host Stephen Alpher is out this week) . 
His eye always on the price charts and never on the news flow, Parets remains bullish on stocks. To those who say the bull market needs a break, Parets would say there’s already been one, noting leading names like Apple, Microsoft, Amazon, Google, Facebook, and Alibaba are flattish-to-down (in some cases significantly down) since early September - that’s more than four months of lame performance.
If you ask him for a price targets, Parets will say 38K, or nearly 25% upside on the Dow (DJI), and 4.5K, or about 20% upside on the S&P 500 (SP500). New information rolls in every day, however, and Parets won’t be afraid to change his opinion if the facts change. For now, he’s keeping his eye on the above-mentioned names, and is looking for those stocks to move to new highs to confirm his bullish case.
And what might turn Parets bearish? Price signals of course … Treasury bonds outperforming stocks, a strong relative bid in consumer staples, widening credit spreads, a rollover in the aussie/yen currency cross, a deterioration in market breadth. At the moment, just the opposite of every single one of these bearish omens is happening, so Parets sees little reason not to stay long equities.
Want another signal? Take a look at Deutsche Bank (DB). It’s been hitting new 52-week highs. If the world (and the S&P 500) is really about to fall apart, would this most risky and sclerotic of banks be breaking out to the upside? Hardly, says Parets.
Turning to bitcoin (BTC-USD), Parets remains bullish, with $46K as his upside target. On the downside, he sees $30K as key support, and a sustained break below that level would be a sign of worse to come. As always, though, Parets is just looking at the charts, and isn’t treating bitcoin analysis any differently from that of stocks. He warns that once one begins buying into the religion status of bitcoin, they can no longer think rationally about the trade.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with LPL Financial’s Ryan Detrick and Eddy Elfenbein, editor of the Crossing Wall Street blog and portfolio manager of the AdvisorShares Focused Equity ETF (CWS).
Before getting into the outlook, Detrick (who was bullish on stocks at the March bottom) puts last year’s remarkable rally in perspective: The reversal from down more than 30% to up in the teens is unprecedented. While some may be tempted to view things as overdone to the upside, Detrick believes the strength we’ve seen is consistent with the beginnings of a years-long bull market.
In addition to the positive technical signs he’s seeing, Detrick reminds that even more fiscal stimulus is likely on the way, and the Fed looks to be on hold at zero for quite some time. Given all that, Detrick does acknowledge some bubbly signs in things like IPOs, cryptocurrencies, and certain stocks. He reminds that his long-term bullishness doesn’t mean there won’t be sizable setbacks along the way, but investors ought to consider those downdrafts to be buying opportunities.
Elfenbein’s 25-stock Buy List has consistently topped the S&P 500 over the past 15 years (though it did trail by a handful of basis points in 2020). Each year, Elfenbein discharges five names from the list, and adds five others.
Out this year, are Becton, Dickinson (BDX), Eagle Bancorp (EGBN), Globe Life (GL), Hormel Foods (HRL), and RPM International (RPM). Four of the names were notable underperfomers in 2020, so like any good portfolio manager, Elfenbein isn’t shy about cutting losers (and letting his winners run).
Maybe more interesting are the additions: Abbott Labs (ABT), HEICO (HEI), Miller Industries (MLR), Thermo Fisher Scientific (TMO), and Zoetis (ZTS). Peter Lynch said to look for companies that do something dull, says Elfenbein introducing perhaps everyone to Miller Industries. Based in Ooltewah, Tennessee, Miller makes and sells towing and recovery equipment. The company experienced a Covid-related slowdown in business in 2020, and the stock was similarly punished. Its recovery bounce since has been limited. Elfenbein likes management, likes the business’ “moat,” and likes that exactly zero sell-siders cover the name despite the company’s strong long-term success.
There’s plenty more, including a discussion of the 10-year yield rising above 1% for the first time since March, whether the dollar is set up for contrarian bounce higher, and why it’s always a better idea to look for good stocks to own rather than trying to time a bubble.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Cody Willard, hedge fund manager and editor of Trading With Cody.
“Please be selective with your trades,” Willard recently wrote, calling the current action a “bubble-blowing, bull market, blow-off top phase.” He takes note of recent massive moves in what are otherwise penny stocks, as well as the SPAC IPO frenzy. Those words don’t come easy to Willard, who has been mostly bullish for about a decade, but now describes himself as a cautious net seller of equities.
Certainly no penny stock, but surely a sign of the times, Tesla (TSLA) was up big again on Monday even as the major averages sharply sold off. Willard has owned the stock for much of its run higher, and still believes in the transformative nature of the company. Marveling that nothing seems to ever shake the shares, Willard continues to hold the stock, but wonders how much more upside there can be from the current $700B market cap.
Turning to what might be some other bubbly action, Willard’s been an owner of Bitcoin (BTC-USD) for many years, but feels it’s gotten ahead of itself. He thinks the most recent big run higher may have come at the expense of investors selling gold (XAUUSD:CUR) to buy the crypto (which has taken on the nickname of “gold 2.0”). A reversal may be in order, says Willard, adding that the SPDR Gold ETF (GLD) is one of his favorite positions right now.
Appearing on Alpha Trader almost exactly one year ago, Willard was excited about the multi-trillion dollar opportunity in space exploration. He remains so, but the pure-play publicly traded vehicles are slim, with Virgin Galactic (SPCE) and Stable Road Acquisition (SRAC) - which is merging with space travel company Momentus - maybe the two most well known. He’s most bullish and owns a stake in still-private SpaceX (SPACE), believing the company might be worth $1T if public. Alas, Willard doesn’t expect Elon Musk to ever make that move, given some of the regulatory headaches he’s dealt with at Tesla.
There’s plenty more, including a discussion of a still-private 3D printing rocket company, why Apple (AAPL) remains an exciting long, and host Aaron Task making a great elevator pitch for getting long the roughed-up dollar (USDOLLAR).
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This week's Alpha Trader podcast features host Aaron Task going it alone as he first reviews the holiday news you may have missed - President Trump signing the latest coronavirus relief bill and Beijing's offensive against Alibaba (BABA) - and then moves on a discussion of what some of our 2020 guests had to say, and how that might help us divine 2021.
Big thanks are in order for all of our guests this year - there's not a single one in the group that we wouldn't love to get their insights from in 2021.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher chatting with Jim Iuorio, director at TJM Institutional Services and a CNBC contributor. Jim was previously on the show five weeks prior to the election suggesting investors get ready to hit the buy button on stocks (and sell button on volatility) the day after November 3. It was a pretty fair call, and after a bodacious November into mid-December rally, Iurio wouldn’t be surprised to see the averages take a breather headed into the end of the year.

The dollar (USDOLLAR) remains key to the outlook, says Iurio, noting its big decline of late, and big rallies dollar hedges like silver (XAGUSD:CUR), Bitcoin (BTC-USD), and the Swiss franc (FXF). Iurio isn’t in any way calling for a dollar collapse, but the chances of something along those lines are at least non-zero.
And speaking of Bitcoin, Iurio is bullish on the idea of owning it as a hedge against the fiscal and monetary sins of D.C., but worries about a big air pocket underneath the price should the politicians feel like taking the crypto down a couple of notches. For that reason, silver is his favorite holding to benefit from the decline in the dollar.
The show then turns to stocks, and Iurio is medium- to long-term bullish thanks to vaccines, the Fed at 0%, and fiscal stimulus. He suspects the conditions for an inflation in 2021 are in place, and will be looking to buy energy names after what may be some year-end tax-loss selling. Iurio is also long and enjoying the ride Tesla (TSLA), calling it the poster-child for the question, “Is there too much money out there.” The answer at the moment is “yes.”
There’s plenty more, including a discussion of the bizarre state of modern-day central banking, the U.S. (of all governments) recently designating the Swiss as a currency manipulator, and why Iurio thinks the financial sector names might be big winners in 2021.
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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Jack Schwager about the latest book in his Market Wizards series, Unknown Market Wizards - The Best Traders You’ve Never Heard Of.
Prior to the chat with Schwager, the hosts discuss some of the busy news flow as we begin the last full trading week of a long 2020. Among the subjects: The beginning of vaccine distribution in the U.S. as Covid-19 cases (and shutdowns) shoot higher, the continued lack of any stimulus bill out of Washington, the red-hot IPO market, the remarkable comeback in Disney (DIS).
And of that IPO market, Task checked in with occasional Alpha Trader guest Eddy Elfenbein, who says the animal spirits are making him bullish. He notes that a key difference between this year’s IPO gold rush and that of 1999 is that 2020’s batch of newcomers are mature companies with real revenue and even (on occasion) real profits. In 1999, metrics like price-to-sales fell out of flavor to be replaced with things like price-per-click.
Beginning with the publishing of Market Wizards in 1989 and continuing with the new Unknown Market Wizards, Jack Schwager has been taking financial markets junkies inside the minds of some of the most successful traders to ever roam the pits in Chicago, the trading floors in New York and London, the halls of powerful hedge funds, and (today) likely nothing more than a WiFi-connected computer from pretty much anywhere on the planet.
Maybe the most important common trait running through each of Schwager’s books: A deep respect for risk management to the point where most of the traders believe managing the downside is more important than their actual trading methodology. Though markets have changed dramatically over the thirty years, what’s necessary for success in trading really hasn’t, he notes.
Speaking of dramatic change, Schwager spends some time discussing one of the subjects of Unknown Market Wizards. Using “neither fundamental nor technical analysis,” Chris Camillo has turned a modest stake into millions of dollars. How so? By creative use of social media, Camillo has been able to spot “anomalies” in which stock price action isn’t reflective of the trends he’s seeing. By stepping into some of these situations, Camillo has been able to turn great profits.
There’s plenty more, including more common traits across great traders, Schwager’s own evolving trading style, and his involvement with FundSeeder, a platform for finding and providing funding for top trading talent.

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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher first talking with Blu Putnam, chief economist at CME Group, and then with Lindsey Bell, chief investment strategist at Ally Invest.

The strength of this wave of the coronavirus has surprised Putnam, who says the economic recovery will now take longer than he expected when he last appeared on Alpha Trader back in August. He also takes note of the uneven nature of the recovery and says traditional central bank stimulus - lowering rates, buying assets - isn’t necessarily suited to the task. Instead, he says, fiscal stimulus - targeting particularly stressed areas of the economy - is what’s needed.

It’s no secret that markets for the moment are looking past some nasty news on Covid-19, and instead focusing on 6-12 months from now when a vaccine might be begin to take hold around the country (and the globe). Fair enough, says Putnam, but he believes markets are also pricing in as many as two rounds of fiscal stimulus - one this month, and another perhaps larger package after January 20. The combination of government action and a vaccine should be highly favorable in particular for the cyclical sectors like energy (XLE), industrials (XLI), and financials (XLF).

While there will be near-term bumps in the road in terms of bad Covid news and its effect on the economy, Lindsey Bell also believes investors are looking over that valley and seeing vaccine availability and fiscal stimulus as reasons to be bullish about 2021.

Maybe not talked about enough is the enormous amount of “dry powder” being held by the U.S. consumer, even as the economy remains soft and fiscal stimulus benefits run out. Bell notes consumers this year have been building savings to double-digit percentage levels, sending retail deposits across the banking system to a record $15T. While there surely needs to be a near-term fiscal bill targeted at those most hit by the pandemic response, Bell says a viable vaccine is liable to unleash an explosion in spending next year as consumers look to move some of that massive savings stash. The sell-side 2021 consensus S&P 500 EPS forecast of $167 might prove too modest, suggests Bell.

Bell is particularly bullish on the Dividend Aristocrats - names in the S&P 500, but those that have been paying and raising dividends every year for at least 25 years. Over long periods of time the Aristocrats have nicely outperformed the broader index (assuming reinvested payouts), but that hasn’t been the case this year as big cap tech and work-from-home names have done way better. The gap has narrowed a bit since early November (alongside vaccine optimism), and Bell expects that to be just the start of a move for the dividend players. One of the better-known ETFs for playing is the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).

There’s plenty more, including Putnam throwing a little shade at the Black-Scholes options pricing model as he describes the CME’s new Group Volatility Indexes ((CVOL)), and Bell reminding that financials might return to hiking dividends next year as the Federal Reserve lifts pandemic-restrictions on bank payouts.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Brian Portnoy, the founder of Shaping Wealth, and co-editor with Josh Brown of the new book, How I Invest My Money.
Prior to speaking with Portnoy, the hosts discuss an historic month for equity markets - the S&P posting its best November ever, the Dow posting its best month since 1987, and the Russell 2000 outperforming them both. They remind that while the headlines about growing Covid-19 cases, hospitalizations, and related shutdowns look grim, markets look ahead and - thanks to what appears to be outstanding news on vaccines - are pricing in a better world six-twelve months down the road.
And don't forget the election. Markets really appear to be liking the prospects for divided government and - contrary to some pre-election worries - Biden's early cabinet picks show someone who is set on governing roughly from the center.
How I Invest My Money explores the investment choices of 25 prominent finance players. The common theme across this spectrum of experts: There is none, says Portnoy, other than the maxim that personal finance is more personal than finance.
Even in this age of quantification and robo-advisors, says Portnoy, everyone has different goals they're optimizing, meaning investment choices will remain personal. Adding it up, nearly no one's portfolio is necessarily going to fit into the perfect efficient frontier, and there's nothing wrong with that.
So many folks beat themselves up over not being fully invested in the kind of bull market we've seen over the past several months, but Portnoy reminds that we tend to undervalue the optionality and freedom of holding cash. That's not just Portnoy's belief but - in a book of 25 different professionals talking about how they invest their money - the beauty of cash is a common theme.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking Bitcoin (BTC-USD) with Dan Held, an old hand in cryptocurrency, who is currently growth head at crypto exchange, Krakenfx.
Held has been in Bitcoin since it was $10, so what does he think about this year's run that has taken its value north of $18K, and how does it differ from the crypto's other major bull markets? Institutional acceptance of Bitcoin is the key, says Held, noting not just hedge fund legends like Paul Tudor Jones and Stanley Druckenmiller as new hodlers (particularly Jones), but Rick Riedler, the CIO of fixed income for the world's largest asset manager, BlackRock.
One hedge funder not yet convinced is Ray Dalio, who is of an open mind on Bitcoin, but wonders if governments could just ban it at some point. "You can't kill an idea," says Held, who addressed that very issue in a tweetstorm late last week. The very nature of Bitcoin and de-centralization, he says, makes it highly difficult for governments to outlaw it, even if they wanted to. Held suspects that if Dalio takes the time to further study Bitcoin, he'll become as big of a fan as some of his institutional brethren.
Held also addresses Bitcoin as "Gold 2.0," i.e. similar but way better than gold (XAUUSD:CUR) in terms of being a hedge against money printing and an overreaching government. He reminds that Bitcoin's supply can never exceed 21M - increasing prices may result in increased attention, but it doesn't result in boosted supplies. The exact opposite is the case with gold - higher prices almost assuredly bring about higher supplies. Also, Bitcoin by its nature can be explicitly verified with very little effort. Gold? Do you fancy carrying a spectrometer around? Never mind the ease with which Bitcoin can be held in our own personal custody and transported.
There's plenty more, including a discussion of Ethereum (ETH-USD), the "religion" of Bitcoin and why it's a good thing, and Held's thoughts on Bitcoin creator Satoshi Nakamoto.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Eddy Elfenbein, portfolio manager of the AdvisorShares Focused Equity ETF (CWS), and editor of the must-read Crossing Wall Street blog. His Buy List of 25 stocks - it only gets changed once per year on January 1 - has a 14-year compounded gain of 309.6% vs. the S&P 500's 247.1%.
One of the key questions before the court is whether - after all these years of underperformance - value is finally having its day vs. growth. This time is real, argues Elfenbein, noting value has been outperforming since September. The initial boost for value was thanks to market shudders post-Labor Day that drove high-fliers like Tesla (TSLA) sharply lower. More recently, the positive news about vaccines has investors selling work-from-home plays, and buying re-opening/value sectors like financials, travel, energy, and mall REITs.
Turning to stocks he owns, Elfenbein says Disney's (DIS) investment in streaming has paid off. The company surprised all by turning a profit in Q3, with a whopping 73.5M streaming subscribers. Disney, says Elfenbein, is now a streaming service a la Netflix (NLFX), but with amusement park and film production businesses on the side. The stock's been on a big run of late - rising about 20% just this month - but Elfenbein would be a buyer right now all the way up to $150 (shares closed at $144.67 on Monday).
More generally, Elfenbein loves companies with a strong market niche and strong competitive advantage. Other names on the Buy List are Aflac (AFL), which does about 75% of its business in Japan and has lifted its dividend every year for decades. Another stock is Moody's (MCO), with Elfenbein noting the only thing better than a monopoly is a near-monopoly - and Moody's fits that description.
There's plenty more, including Charlie Munger making the bull case for Disney as only Charlie Munger can, why Elfenbein is a big fan of Ross Stores (ROST) despite its lack of online presence, and just a taste of a preview of what changes he might be making to his Buy List in December.
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