Alpha Trader

This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Danielle DiMartino Booth, CEO & Chief Strategist at Quill Intelligence, and a former advisor to the president of the Dallas Fed.
The Fed is "winning" (for the moment), says Booth, but that doesn't mean she approves of the central bank's massive interventions into the markets. Booth wasn't surprised by Jay Powell's quick action as markets disintegrated earlier this year, but what did take her back was the Fed's move to buy junk bonds, and the fancy accounting and legal footwork needed to do so.
If all one cares about is the S&P 500 or the Nasdaq, it's all looking wonderful. But underneath the surface, says Booth, there are millions of homes and cars that need to be foreclosed upon, millions of rental tenants who can't pay, and tens of thousands of businesses that are bankrupt. The Fed has bought time, but the underlying issues remain.
Booth isn't arguing that the Fed should have done nothing, but instead that they went too far. Businesses are still bankrupt, only now they're going to head into bankruptcy with far more debt than if markets had been allowed to clear a bit more.
The discussion then moves to homebuilding ([[ITB]], [[XHB]]), where the outlook at the moment is rosy thanks to "people of means" leaving the cities for the burbs. For the rest, though, there are nearly 9M mortgages in forbearance and levels of delinquencies way higher than anything during the global financial crisis. Banks can't do a whole lot about it right now, but they know a good percentage of these properties are going to be hitting the market. While home searches, mortgage applications, and pre-qualifications might be going through the roof, deal closings for all but the most pristine of borrowers will be a different story. Prices need to come down.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Jim Bianco, president of Bianco research.
Prior to the chat with Bianco, Task and Alpher note that equities continue to march higher (or at least hold their ground) in the face of a batch of disquieting headlines pointing to a renewed surge in COVID-19 infections. Task wonders if the so-called "second wave" and the upcoming election might keep the market in a trading range for a few months.
Jim Bianco wasn't too surprised by the bounce from the March lows, particularly given the Fed's unprecedented efforts to support markets. The size of the equity bounce and the Fed's doubling down on what was already massive action took him by surprise though. And last week, Bianco made news by fully embracing this bull move.
Not making enough news last week, says Bianco, was the fancy legal footwork the Fed had to go through to enable its program to purchase individual corporate bonds. To Bianco, it shows the central bank will stop at nothing to support markets - including the purchase of stocks should the need arise.
As to where this ends, Bianco wonders if it ever will, noting nothing was ever really wound down from the post-global financial crisis interventions. How far have we come? Quantitative easing (QE) was thought of as completely radical when it was announced nearly a decade ago, but today it's considered par for the course, and in use by major central banks across the globe.
Finally, Bianco suggests the result to all this will be rising inflation in 2021 and beyond. Interestingly, this doesn't make him a gold (or crypto) bug. The hope of bulls in both assets - that they're a hedge against monetary disrupt - hasn't played out. Thanks to ETFs, gold (XAUUSD) has been financialized, he says. And thanks to the need to at some point shift crypto to dollars, Bitcoin (BTC-USD) is financialized as well. The result: The fortunes of both are at least somewhat dependent on the financial markets. He reminds that both gold and Bitcoin crumbled alongside stocks in the March meltdown, and both recovered as equities recovered.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher chatting first with Avi Gilburt, founder of ElliottWaveTrader.net and author of The Market Pinball Wizard serviceon Seeking Alpha. After that, the hosts talk with Marc Chandler, chief market strategist at Banncokburn Global Forex, and a longtime Seeking Alpha contributor.
Gilburt wasn't too surprised by last week's pullback, but the key question is what type of correction are we in. By his calculation, if the S&P 500 (SP500) can hold above the 2,890 region, another higher high may be in store in which the market could challenge its all-time high in the 3,300 area (the S&P closed at 3,066 on Monday). Following that though, Gilburt would expect a much larger pullback. One way or another, says Gilburt, a far more sizable slide in stocks is likely coming this year.
Bulls can take heart though - that's a short-term forecast from Gilburt. Longer-term Gilburt continues to have a minimum 4,000 target for the S&P 500, with a chance of as much as 6,000 before the bull market from 2009 ends.
There's plenty more, including Gilburt's basic explanation of how Elliott Wave analysis works, and how it can apply to any asset class that reflects "mass sentiment," with gold (XAUUSD:CUR) coming up for discussion.
Last week's market correction was long overdue, says Chandler, and he notes the pullback was reflected in the currency markets as well, where bull move favorites like the aussie, the Mexican peso, and the Scandinavian currencies also took big hits.
For those trying to lay Thursday's plunge at the feet of the Fed and its gloomy outlook published the day before, Chandler isn't buying it. He notes that the central bank's forecast - gloomy as it may have been - was actually somewhat stronger than most had been expecting. The Fed Funds futures contracts, says Chandler, didn't really react. The December 2021 contract two weeks ago was implying a negative yield, and today its implying positive, meaning it's seeing a brighter economic outlook.
Going forward, Chandler expects markets (and risk assets in general) to struggle a bit more, but past that the enormous liquidity being made available by both monetary and fiscal authorities should again kick in. He reminds it's not just the U.S. - the ECB this week is about to make available to European banks 3-year loans at negative 100 basis points! And the EU in the next few days might be approving a €750B stimulus package.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Jack Bouroudjian, chief economist, co-founder and director of the Universal Compute Exchange, and chairman of the Global Smart Commodity Group.
Prior to chatting with Bouroudjian, Task and Alpher discuss this remarkable rally which has sent the Nasdaq to a new all-time high and brought the S&P 500 back to green for the year. Stan Druckenmiller less than one month ago said the risk-reward was the worst he'd ever seen. Following an 11% rally in the S&P 500 since, he was back on the airwaves yesterday morning pronouncing himself "humbled" by the market.
Druckenmiller's bearishness a few weeks back was shared by other great investors like Sam Zell and David Tepper. If you missed this rally, you're in good company.
Items arguing for a continued rally include a widening yield curve (the 10-year Treasury yield was up 25 basis points last week), and a broadening of stocks participating - financials, industrials, and cyclicals have joined the move in the last few weeks. Items arguing for a reversal include rising speculative fervor - Seeking Alpha colleague Nathanial Baker says FOMO - fear of missing out - has been replaced with POMO - panic of missing out. There's also the issue of the coronavirus, and whether the reopening of the economy might lead to a resurgence.
Asked for his thoughts on this rally, Bouroudjian reminds that the Fed in the space of a couple of weeks put in place more stimulus than it ever did during the many months of the global financial crisis. Similar action is happening in Europe via the ECB. Despite scary headlines in March and April, says Bouroudjian, in his mind there was always an optimism that the lockdowns would be short-lived. For now, that's looking like the case.
As for the economy going forward, Bouroudjian does worry about employment returning to previous levels. Companies have been forced to become more efficient, and that means doing the same amount of work with fewer workers. Without COVID-19, it may have taken 3-5 years for the work-from-home trend to fully take hold. Instead it's taken 3-5 months.
Perusing Friday's surprising jobs report (2.5M jobs added vs. expectations for a loss of 8M jobs), Bouroudjian isn't so shocked. The early months out of a recession, he says, are the easy ones for job gains. Going forward, Bouroudjian expects far softer employment adds thanks to the productivity gains afforded by work-from-home.
Turning back to stocks, Bouroudjian calls himself a reluctant long, noting either the economy needs to get a whole lot better in coming months, or the stock market will take a hit. Not going so far as to sell in May and go away, he suggests hedging in May and going away.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with David Trainer, CEO of independent research firm New Constructs, and the author of Value Investing 2.0, a newsletter available on Seeking Alpha's Marketplace service.
While Trainer doesn't see a ton of upside to the averages after their big rally from the March bottom, more important to him is what might be a topping out in the passive investing trend.
That doesn't necessarily mean a bear market if he's right. Instead, it could be the averages and passive investing - dominated more and more every day by a very small handful of names - might suffer relative to the rest of the investing universe, i.e. a comeback for active investing and value names.
As the name of his service makes clear, Trainer is a value investor, and all that money flowing into FAANG + Microsoft is leaving a lot of stocks to choose from. Among some recent picks is Southwest Airlines (LUV). It's a best-in-class operator, says Trainer, and those types of companies tend to pick up market share during crises, and we're surely in one now. Another super-important point for Trainer: Never assume executives care about you. As for Southwest, Trainer is pleased that management is explicitly compensated for creating shareholder value.
An industry facing maybe an even larger existential crisis than airlines is shopping malls, and Trainer is a fan of Simon Property Group (SPG). Yes, the retail apocalypse is real, but some malls will survive and thrive, and Simon - like Southwest, best-in-class in its sector - is going to the player owning a high proportion of those survivors.
Finally, there's D.R. Horton (DHI). When Trainer picked the stock at $41 per share (it's at $55 at publication of this podcast), the valuation suggested profits wouldn't get back to 2013 levels for ten years. In Trainer's mind, there's tons of growth opportunity for the company - particularly in DHI's mid-market area of housing - but even without that growth, the stock would be a buy.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking first with Jeff Kilburg, the founder and CEO of KKM Financial and a CNBC contributor, and then with investor, entrepreneur, and host of his own podcast, James Altucher.
Kilburg sees the risk in the market now being with those overweight cash, and expects the S&P 500 (SPY) to soon test the 3,000 level (it closed at 2,955 on Friday).
What might throw the market off is what we saw a bit of last week, and that's a resurgence in trade tension between the U.S. and China. While acknowledging that possibility, Kilburg sees as far more important the drive towards a COVID-19 vaccine, and acceleration in economic reopening across the nation.
Speaking of reopening, Kilburg takes note of what drove the market higher last week, and that was economically sensitive plays like energy (IYE), financials (XLF), and industrials (XLI). That doesn't necessarily mean this bull move is about to shift from tech leadership - Kilburg expects the Nasdaq (QQQ) to soon return to its February all-time high.
Altucher recently published an article on Seeking Alpha titled "Stocks: The Good, The Bad And The Ugly." In it, and on the podcast, he describes his cautiously optimistic outlook as driven by the end of the lockdowns and the massive government stimulus.
He takes note of comparisons to the Great Depression, but says that makes zero sense. He reminds that the initial response then - hiking tariffs, crimping fiscal policy, and allowing the banks to fail (and the resultant crash in money supply) is the exact opposite of what policymakers did this time around.
Getting to the "Ugly" part, Altucher describes why it kind of makes sense for the stock market to surge as the economy crumbled: The economic shutdown is to the benefit of the large, well-capitalized companies that make up the major indexes. Just think about Starbucks (SBUX) vs. mom-and-pop cafes. Yes, Starbucks was already grabbing market share from them, but the pandemic has sped the process up - those mom-and-pops aren't coming back, and Starbucks will end up with their business.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Rick Bensignor, president of In The Know Trader, and a former chief market strategist at Morgan Stanley.
Bensignor's thesis for now is that the market has seen both its high and low for the year. He's inclined to be a seller of S&P 500 (SPY) rallies above 3,000, and a buyer below about 2,650.
For bulls, the potential for more bad news, i.e. a possible 2nd wave of infections as the economy reopens, likely caps upside. For bears, the bad news (and the market's reaction) won't ever be as bad as it was in late February to mid-March, likely putting a floor on the downside.
Bensignor cut his teeth as a pit trader, and he's got plenty to say on the subject as it pertains to crude oil. First, novices need to avoid trading the U.S. Oil Fund (USO), which is no longer a very good proxy for front-month oil. Second, he sees oil's current rally topping out in the mid-$30s, which would somewhat fill the gap set in early March when the Saudis over a weekend launched a price war and sent crude plunging on the Sunday evening open.
Moving to gold (XAUUSD:CUR), Bensignor is a long-term bull, but currently kicking himself a little bit after cashing in on the current rally about $40 per ounce ago. He's looking for a spot to get back in, believing the global central bank rush to paper over the current crisis means new highs are in store for the metal. The next level of resistance: Roughly $1,780-$1,805.
As opposed to the oil ETF, he's got no issue with the popular SPDR Gold Trust (GLD) or the iShares Gold Trust (IAU) as acceptable vehicles. And don't forget the folks who actually mine the yellow metal - the VanEck Vectors Gold Miners ETF (GDX) two weeks ago broke through long-term resistance.
There's plenty more, including Task and Alpher discussing some of last week's big stories, the dour outlooks by the Jay Powell, Stan Druckenmiller, and David Tepper among them.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Cullen Roche, the founder and chief investment officer at Orcam Financial Group, and author of the Pragmatic Capitalism blog.
First up for discussion is Friday's employment report, the massive numbers of jobs lost, and stock investors reacting by continuing to buy low and sell high. Roche isn't expecting another Great Depression for a couple of reasons ... 1) Today's U.S. economy is so much more diverse, and 2) The response this time around - trillions in fiscal and monetary stimulus - is 180 degrees different than that of the 1930s, when policies were tightened in response to the downturn.
So, contends Roche, the stock market - marching higher in the face of bad economic data - is pricing in what just might be super-high, or even record corporate profits in 18-24 months. See also Roche's recent article: "What the hell is the stock market doing"
As for the sectors/names that have led the rally, Roche says there's very good reasons stocks like Amazon (AMZN), Peloton (PTON), and Zoom Video (ZM) have done so well during the pandemic, but he's skeptical such outperformance is sustainable.
Roche, in fact, suspects value stocks - which have suffered relative to growth for many years - may soon have their day. Why? There's a not negligible chance of rising inflation becoming the story within a couple of years. Growth is where you want to be in times of disinflation, says Roche, but it's the staid, Buffett-like plays that do well in the opposite environment.
There's plenty more, including Roche's take on The Oracle's ([[BRK.A]], [[BRK.B]]) reluctance to put any money to work, and his thoughts on Bitcoin (BTC-USD) in the wake of Paul Tudor Jones' recent investment in the most-popular of cryptos.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking about the markets with fund manager and Behavioral Macro blog author Mark Dow.
Prior to chatting with Dow, Task and Alpher consider that we might be entering a new phase for markets. Phase one was the panicky crash from late February into mid-to-late March, and phase two was the straight from central casting big bounce.
The "hard" part may be starting now. The idea of a re-opening economy may seemingly have the bears on the defensive, but the bulls need to ponder profits, or lack thereof. Amazon (AMZN) plans on spending its anticipated $4B+ in profits in Q2 on safety measures for workers and customers, and business is booming for the House of Bezos. Pity the retailer or restaurant that - even if allowed to open - will surely be doing so at reduced customer capacity and higher labor costs.
Following the stunning move higher, Mark Dow is now positioned for some momentum to the downside. He turned from being bullish only last week after the market was unable to rally despite a decent amount of good news - Wednesday's Fed meeting and pledge to support markets, positive data on Gilead's (GILD) COVID-19 treatment, and strong results from important players like Apple (AAPL) and Amazon.
But shouldn't the Fed's continued pumping assure that markets march even higher? No, says Dow. Fed liquidity is important to keep the engine of the system running, but the money the central bank "prints" doesn't find its way into equities unless investors place it there. While the Fed might assist through a placebo effect, ultimately it has to be investors taking on more risk appetite.
There's plenty more, including Dow's review of Fed Chair Jay Powell (Cliff's Notes: Thumbs up), why he likes the homebuilders (XHB), and his continuing thesis that a shortage of investable assets ultimately means good things for stocks.
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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking COVID-19 treatments and vaccinations with Adam Feuerstein of Stat News.
Much of the treatment talk has been about Gilead's (GILD) remdesivir, and Feuerstein - who has been at the center of much of the reporting - takes us through those ups and downs. First, there was anecdotal evidence on April 16 out of Chicago which suggested the drug as being almost miraculously effective - the news set off a nice move higher in Gilead (more on that later), and a furious rally in the broader markets.
Next, there was a "leak" one week later out of the WHO that a trial of the drug in China was a flop - the news took the starch out of a sizable rally in stocks that day. Finally, one day after that, there was a report that results from U.S. government's all-important trial of remdesivir were going to hit in mid-May, and chatter that those results might show the drug as being effective.
Feuerstein does find it somewhat curious that Gilead's stock rises and falls with the news about remdesivir given that the company has more or less said it will give the drug away (after recouping costs). The halo effect? Possibly, but Gilead has added nearly $20B in market cap over the past three months.
In any case, Gilead reports Q1 earnings after the close on Thursday - it might make for a good time to report on remdesivir results from one of the company trials (not from the above-mentioned U.S. government trial).
Feuerstein reminds that remdesivir is only a treatment for COVID-19, and even in a best-case scenario will be effective in curing only certain patients. What the world ultimately needs is a vaccine, and there are currently five in clinical development, i.e. being tested on people. There are a number of others in pre-clinical development as well.
One of the more advanced at this time is Moderna (MRNA), and that stock has nearly tripled over the past couple of months. Major pharmaceutical players (and experienced vaccine hands) Johnson & Johnson (JNJ), Pfizer (PFE), GlaxoSmithKline (GSK), and Sanofi (SNY) are also hard at work.
Vaccines, however, take time to develop. If all goes right, says Feuerstein, we're looking at 12-18 months. Any stumbles, and it would take even longer.
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