Alpha Trader

This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Scott Martin, head of research at Kramer Capital Research.
What might have been an episode focusing on the ramifications of last week's elections instead was dominated by Monday morning's vaccine update - Pfizer and BioNTech announcing positive preliminary data for their Covid-19 candidate. That news sent the Dow higher by more than 5% and the S&P 500 more than 3.5% at the time of recording. The Nasdaq - which housed many of the pandemic-favorite, work-from-home names - was in the red.
Martin reminds that the Pfizer news might not be the golden bullet that ends the pandemic, and suggests the market may be over-reacting (indeed, by the close on Monday, the S&P had more than halved its early gain and the Nasdaq closed down 1.5%). He also notes that e-commerce isn't going away. A stock like Chewy (CHWY) - which fell nearly 12% on Monday - might be thought of as a pandemic stock, but it's really the future of pet supplies. Investors who missed the rip this year might be getting a buying opportunity.
Treasurys are trash, says Martin. Why lock in an (inflation-adjusted) loss, says Martin, when names like Pfizer (PFE), General Mills (GIS), Johnson & Johnson (JNJ) - practically as safe as the government - yield plenty more?
Getting to an election-related idea, the hosts and Martin discuss how to play the potential national de-criminalization of cannabis. Stay away from the growers, says Martin, as that's a commodity business. Instead, look for ways to invest in the consumer angle - gummies, edibles, soaps. Procter & Gamble (PG), Unilver (UL), General Mills may all get involved. As for pot names, Martin has been and continues to be a fan of Aphria (APHA) - medicinal, growing market share, into conventional pharma sales in Europe, and nearing profitability. Under any circumstances, Martin believes marijuana investments should be minor positions around one's major holdings.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking the day before the election with Steve Sosnick, chief strategist at Interactive Brokers.
There's at least a modest amount of conventional wisdom out there that volatility (VIX) - which has been elevated for several weeks and spiked dramatically higher during last week's big market selloff - will return to normal levels after the election. After all, despite a lot of dramatic chatter, there's every reason to believe we'll know the winner of the presidential election, and the majority in Congress soon after. That means markets can start discounting a big fiscal stimulus, and there's still the Fed at ZIRP for as far as the eye can see.
Steve Sosnick would take exception to that thinking. First, he's not positive a stimulus will be agreed upon if the government remains divided. Stimulus is clearly more likely in the event of a "Blue Wave," but the inauguration isn't until Jan. 20 - it could be months before any money flows from this.
And concerning that Blue Wave, stimulus fans may want to be careful what they wish for, says Sosnick. A Biden-led government is likely to raise capital gains taxes, and thus investors' first reaction to the news next week (should that come to pass) might be to sell.
Sosnick's suggestion for those wanting to sell some volatility is to have a look at put options on the VIX in March, for instance. By the middle of 2021's Q1, there will surely be a lot more visibility on stimulus, and a Covid vaccine and/or treatment. Volatility should be down, and those puts will rise in value.
There's plenty more, including why Sosnick thinks the Fed is nervous, but not enough to explore the "nuclear options" like negative rates or outright purchases of common stocks.
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This week's Alpha Trader features hosts Aaron Task and Stephen Alpher talking with Scott Bauer, CEO of Prosper Trading Academy, and Chris Zaccarelli, chief investment officer at Independent Investor Alliance.
First up is Bauer, who in two previous appearances on Alpha Trader made prescient bullish calls on gold (last November) and mega-cap tech (last July). He remains bullish on both, though cognizant that Covid and election news could provide some volatility.
Try to look past that, says Bauer, and remember 1) the Fed has assured zero rates for well into the future, and 2) there's going to be a fiscal stimulus deal of some sort, whether it comes in the lame duck session, or early 2021. Also consider the chance that a vaccine and/or effective treatment becomes available, and we have a third prong of the argument for higher share prices.
Bauer's a Chicago guy, so of course the conversation moved towards the subject of volatility. Volatility (VIX) has come down of late, but remains elevated, and probably about where it ought to be given all the news out there (and potential for even more news), says Bauer. Should the election be calmly settled next Tuesday night though, there's potential for a crash in the VIX.
Zaccarelli has similar thoughts to Bauer on volatility, but is a bit more wary that we're going to wake up next Wednesday morning to a nicely settled election result. It's not enough to make him bearish, but he is advising clients to reduce risk by taking some money out of the hot-handed growth names, and putting it into some blander value plays. Think financials (NYSEARCA:XLF), industrials (NYSEARCA:XLI), and materials (NYSEARCA:XLB), instead of tech (NYSEARCA:XLK) and communication services.
Investors should also consider the upside surprise of a "blue wave" in the election. Yes, there may be higher capital gains taxes and corporate taxes, but the extent of how those might hurt stock prices isn't assured. Instead, investors may want to focus on just how big of a fiscal stimulus package might get passed early next year if the Democrats control Congress and the White House (remember 2009).
There's plenty more, including Bauer's super-simple explanation about how to interpret the VIX in terms of stock market movement, and Zaccarelli's argument for why energy (NYSEARCA:XLE) is very much not a buy even at these low levels.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking (mostly) tech with Jon Markman, founder and president of Markman Capital Insight.
Before getting into individual stock picks, Markman first looks at the big picture: Going back about 80 years, whenever the Fed steps in to put the brakes on a bear market, one should expect the averages to go up five times over the following ten years. The Fed helped end the bear market, says Markman, on March 23 this year. Applying that 5x multiple to what the Dow (DJI) and the Nasdaq (COMP) were that day leads to 91,000 on the Dow and almost 34,000 on the Nasdaq in roughly 10 years.
Before considering that extreme, consider that the S&P 500 (SP500) bottomed in 2009 at 666. Markman's target then for that index was 3,330, which was hit late in 2019.
This, of course, doesn't mean that there will be any number of scares and sizable corrections along the way. These should be thought of as buying opportunities, particularly for those companies leading and benefitting from the "digital transformation," which Markman defines as the use of data and software to build new business models.
A great example of this is Netflix (NFLX), which over two decades went from being a mail-order DVD business to offering bits of data in the cloud. Tap an image on your electronic device of choice, and the show begins. The company has 193M customers, a $234B market cap, and a stock that's up something like 15,000% over 20 years - all from harnessing the digital revolution.
As you might imagine given the major wave he's talking about, Markman doesn't have a ton of interest in Netflix's earnings this week. Over the next 10-20 years, Netflix and others leading the digital revolution - think Amazon (AMZN), Peloton (PTON), and Zoom Video (ZM) to name just three - are all going to be multi-baggers (though Peloton and Zoom might be due for a correction).
Now the above are very well-known (and hot) names. Maybe not as well-known, but with an equally great opportunity, is a player like Schrodinger (SDGR), a company delivering healthcare using digital tools. Another digital healthcare play is
For those wishing to ride the digital revolution, but undecided about which horse to ride, Markman suggests Visa (V) and Mastercard (MA) as - more than any other companies - perfectly levered to e-commerce and the transformation of money to software.
Other digital transformation long ideas discussed in the podcast, include The Trade Desk (TTD), a platform for the buying and selling of digital ad inventory, and enterprise workflow platform operator ServiceNow (NOW). Both have eye-popping charts, but massive opportunity over the next decade still awaits.
We couldn't let Markman go without comment on two tech megacaps - Microsoft (MSFT) and Apple (AAPL). He's a fan of Microsoft, giving its post-Ballmer management kudos for moving the focus of the company away from selling devices and instead selling into the high-margin areas of digital space. He's not bullish on Apple though, worried about waning iPhone sales, and questioning the ability of the company to replace that revenue with other devices and services.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Randy Frederick, VP of derivatives and trading at Schwab.
Frederick previously saw little-to-no resistance to the S&P 500 (SP500) returning to its previous high of 3,580, but things are moving quickly. Thanks to last week's big rally (which continued on Monday), the index has already moved back to within a stone's throw of that level.
Maybe most interesting about Frederick's expectation of higher share prices is that it comes alongside his anticipation of rising volatility - the two don't typically go hand-in-hand. Why now? The upcoming election is to be thanked for the volatility, and the still-massive monetary and fiscal stimulus is helping the rally in stocks.
Earnings season - which somewhat officially begins this morning - may provide another catalyst for higher stocks. Frederick reminds that earnings were expected to fall 44% Y/Y in Q2, and they ended up sliding only 7%. For Q3, earnings are seen dropping a full 22% from year-ago levels. This suggests there's plenty of room for results to surprise to the upside. One caveat: Earnings expectations actually ratcheted higher into the end of the quarter - an unusual occurrence that's worth paying attention to.
There's plenty more, including why Frederick is a fan of the underperforming financials, why he expects the big tech names to skirt antitrust issues, and why the best time to invest is always "now."
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Jeff Saut, formerly chief investment strategist at Raymond James, the founder of Saut Strategy, and currently chief investment officer at Capital Wealth Planning.
Now on its 52nd episode, Alpha Trader has had a large number of bullish prognosticators on the program, but perhaps none as bullish as Saut. His advice in a nutshell: Stop focusing on the day-to-day news and market gyrations, and instead recognize that we're in a secular bull market that began early in 2009. Secular bull markets, says Saut, tend to last 15-20 years, meaning there's plenty more to go in this one.
Turning to sectors, Saut says it's hard to pick a wrong one in secular bull moves. Energy (XLE) fans for the past few years would beg to differ. Patience, says Saut. He reminds that we're entering tax-loss selling season, and plenty of investors are underwater on their energy holdings. Take advantage, he says, by beginning to accumulate energy shares that investors are unloading for tax purposes.
There's plenty more, including why Saut's not paying attention to election polls, why he's a fan of gold, and one other struggling sector that Saut's a fan of.
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This bonus episode of Alpha Trader features hosts Aaron Task and Stephen Alpher talking with Jim Iuorio, director at TJM Institutional Services and a CNBC contributor.
The reversal in the dollar ([[USDOLLAR]], [[UUP]], [[UDN]]) bear market over the last few weeks has been notable. While some believe money has flowed into the greenback because stocks got shaky, Iuorio thinks the opposite. The dollar, he says, is the "dog," and most everything else is the "tail." When the dollar rose past 94.00, says Iuorio, it called into question a lot of the thinking behind the equity rally.
It's since slipped, but Iuorio is keeping his eye on that level, and another solid break above would give him plenty of reasons to worry about another leg down in stocks.
Getting a bit more granular into stocks, Iuorio is sympathetic to the value investor in what's been a period of massive underperformance, and he thinks some sort of comeback might be in order. A warning though: If things get rough for the FAANG names, things are probably going to be rough throughout equities. Value may not lose as much, but you can't eat relative performance.
Looking post-election, Iuorio has cause for a bit more bullishness. Think about the morning of November 4. Despite a lot of chatter about vote counts, there's a high likelihood the uncertainly of the election outcome is going to vanish, and the Fed and its massively easy monetary policy will have gone nowhere. It sounds like the recipe for a rally.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking markets with Bob Iaccino, who is making a return appearance to the show. Bob is co-founder of PureXposure Growth Series, as well as Chief Strategist at Path Trading Partners.
September wasn't the best month for stocks, and last week was a volatile one, but Iaccino notes the market as having shaken off a lot of the negativity by last Friday. It doesn't necessarily make him bullish over the near term, but the price action is worth paying attention to (an idea that might have been borne out by the big rise in stocks on Monday).
The dollar ([[USDOLLAR]], [[UUP]]) has been on a nice run higher of late, and Iaccino has been, and continues to be a bull. While the conventional wisdom says money has flowed into the greenback thanks to shakiness in equity markets, Iaccino over the summer noticed the Fed's balance sheet actually shrunk for several weeks. It was this slowing of dollar creation by the central bank that turned him bullish.
Turning to some stock picks, Iaccino is staying away from the FAANG players, but does want to be long names that might not be too affected no matter the outcome of the election or the virus. Among them is Cheesecake Factory (CAKE), which might seem an unusual pick given its big presence in malls. But Iaccino notes the company's sizable market position gives it pricing power in terms of rent concessions, its large spaces allow for social distancing, and takeout is a big part of the business.
Another long is Dollar General (DG), which Iaccino considers his recession play.
Turning to growth, Iaccino is a fan of PayPal (PYPL), calling it the "anti-XLF stock." Iaccino: You want to be long stocks whose product becomes a verb, and PayPal has that ("Venmo me").
There's plenty more, including why Iaccino is flat gold (XAUUSD:CUR), is intrigued enough by Bitcoin (BTC-USD) to have just a small position, and why he recently got long oil (CL1:COM). As Iacinno advised in his first Alpha Trader appearance, if you're bullish on oil, buy oil (not an ETF, and not the oil producers).
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking about the markets and more with Market Rebellion co-founder, and longtime CNBC contributor Jon Najarian.
Do you even remember the fight over oil in March between Saudi Arabia and Russia that helped send crude prices into negative territory? In any other year, it may have been the top markets-related and geopolitical news story, but in 2020 it's just another headline.
The point of this, says Najarian, is not to rehash that story, but - on a day when the Dow was down nearly 1K points (at the time of the interview on Monday) - to remember not to get too caught up in the day-to-day action.
Instead, Najarian - expecting the VIX (VXX) to be range-bound between 25 and 35 - is likely to be buying stocks and selling options when the VIX is near the top of that range, and selling stock and buying options when the VIX is near the bottom.
Turning to the election, Najarian has a bit of a contrarian take, and expects volatility to go dramatically lower following November 3. Why? Unlike many, he's not expecting the vote count for the presidency to take very long. We should know relatively quickly who wins the White House.
Moving on to alternative assets, Najarian is not in the camp that believes gold (XAUUSD:CUR) and Bitcoin (BTC-USD) are too "financialized" to be safe havens anymore. Yes, they plunged alongside the market in February and March, but look over a longer time frame. Both have substantially outperformed during 2020 - gold up 30%, Bitcoin up 50%, and the S&P 500 ahead just 4%. Putting his money where his mouth is, Najarian has 7%-8% of his net worth in cryptocurrencies, and about another 5% in gold and silver (XAGUSD:CUR).
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Morgan Housel, partner at Collaborative Capital, and author of recently-published The Psychology of Money.
There's a cost of admission to the stock market, says Housel, and that's putting up with uncertainty and volatility. In order for the market to give an you - an investor - strong returns over time, you need to be able to put up with that cost. It's very common, says Housel, for the market to not "make sense," i.e. its performance seem disconnected from the news or the economy.
Turning to the extraordinary events of 2020, the major takeaway for Housel is the broad belief that monetary and fiscal authorities know just what to do when financial panic hits, i.e. provide massive, nearly open-ended stimulus. As recently as the global financial crisis, notes Housel, there were intense debates about the advisability of swiftly cutting rates, ZIRP, QE, and a major fiscal boost. This time around, the Fed and the government in a matter of weeks took rates to zero, launched a massive QE program, and passed trillions in fiscal measures.
Does this mean the end of financial panics or even bear markets? Of course not, says Housel - the business cycle has not been repealed. What Housel expects going forward, though, are sharper, swifter panics, followed by equally impressive recoveries.
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