Fangs may lead marts south; BTC heads north of $3K

On Thursday, I wrote about hearing on the street that Friday was going to be a difficult day for stocks.

I then wrote on Friday that futures were not showing any worries from either the James Comey testimony, the English election results nor the possible rate hike this week by the Federal Reserve. However, the headline I wrote was “Nothing to see here, please go buy some FANGs”.

Well the FANGs were the problem. The Nasdaq traded lower by 1.8% Friday as Facebook (-3.3%), Apple (-3.8%), Netflix (-4.7%) and Google (-3.4%).

The selloff came from a Goldman Sachs analyst report saying these and other tech firms’ stock prices are getting overvalued and reaching valuations like the pre-Internet bubble burst.

The pullback should not be too much of a surprise since the Nasdaq is up more than 15% year-to-date, which is double the Dow Jones industrial average’s gains over the same period.


Bitcoin spent much of the overnight trading session above the $3K mark, before pulling back to $2995 by 6AM EDT.

The cryptocurrency is finding strength on each pullback, which for a market technician means there’s a large base being formed. This base is allowing for $80-$100 spikes in daily pricing like we saw Sunday.

Weekends are still the best price appreciation days since the buying does not need any major trading outpost such as London, New York or Hong Kong to execute the trade.

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Nothing to see here, please go buy some FANGs

The British voters threw PM Theresa May a big curve ball Thursday in the general election by not giving her Conservative Party the majority she sought, forcing her to seek to form a new government with minority political parties.

Also on Thursday we had ex-FBI Director James Comey testify before the Senate on his firing and the probe into Russia’s influence into the US presidential election.

Neither of these events had an effect on the markets, which is puzzling in the brief and troubling in the longer term.

To say the possible beginning of a presidential impeachment occurring in Washington and equities give you a day where as traders say “was a waste of a clean shirt and car fare,” is astounding.

As I wrote yesterday, market participants that I speak with see Friday as a possible tipping point for equities, looking at the futures market then the tipping point maybe the markets building support instead of falling.

Not to get into high weirdness, but how does the British, US  and global investors see a government crisis in London and Washington as a buying opportunity unless there are bigger buyers to buoy prices?

So let’s see how US markets close today and then we may get an idea of what is to come.

Is there a Black Friday in our immediate future?

How many top Wall Street players need to come out and question the strength of the equity markets, before we see stocks pull back?

Many financial skeptics question the appreciation in bitcoin and other cryptocurrencies, yet ignore the rise in stocks since the Trump election without any economic growth to counterbalance or justify the run up.

Janus’ bond maven Bill Gross warned that the financial markets are at their most vulnerable since the 2008 financial crisis with investors paying too high of a price for the risks that they are taking.

“Instead of buying low and selling high, you’re buying high and crossing your fingers,” said Gross at a New York conference on Wednesday.

Gross pointed his finger at the Federal Reserve and other central banks pumping cash into stock and bond markets creating inflated asset prices without creating economic growth where individual savers and banks end up paying the penalty.

“Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced,” said Gross.

Gross’s latest warning follows a similar doom stated by global investor Marc Faber, who last week proclaimed the US markets are caught in the midst of a gigantic asset bubble.

“There is a bubble in everything. Nothing in asset price is very low,” Faber proclaimed.

In conversations with market participants they do sense this, but take the notion of “Why Fight the Fed.” In other words, Janet Yellen & Co. are in the market with their fire hose of monetary policy, buying assets, just go with the flow.

Curiously, Friday June 9th appears to be a date where there may be some reckoning by the markets. I don’t have a trigger for this but it seems to be an important milestone.

Is it coming out ex-FBI Director James Comey’s testimony? Is it a result of an announcement from the Fed or the result of the English elections?

I do not know, but Friday could begin a shift in the market, so be aware.

More dismal news coming out of the retailers

Tuesday brought more bad news for America’s biggest retailers.

Macy’s reported that margin loss was accelerating as the troubled department store continues with deep discounting of merchandise to stem eroding sales.

I have been documenting much of the hurt going on with the struggling consumers staying home instead of going to the mall.

Shares of Macy’s fell 8.2% in Tuesday’s trading as the company said it could see a 40% in margin levels as it battles with high inventory coming out of the 2016 holiday season.

Most retailers were down big on the Macy’s news. JCPenny was down 4%, Kohl’s fell 5.8% and Nordstrom was off 3.6%.

Many big box stores saw weak holiday sales forcing deep discounting, which squeeze already reduced margins and come right down to the bottom line.

In other retail retaliation, Sears came out after the bell on Tuesday to say it was closing an additional 72 stores this year. Earlier this year CEO Eddie Lampert announced he was closing about 180 Sears and K-Mart stores along with some Sears Auto Centers.

These new announced closures bring the number of Sears’ store to around 1,200, down from 2,080 fin 2012. Sears shares were off more than 1% in Wednesday pre-market trading.

So what can retailers do to stem the outgoing tide?

“We don’t need the massive parking lots that we had in the 1970s,” Doug Sessler, the head of Macy’s real estate division, told analysts during the company’s investor day on Tuesday, my New York Post colleague reported.

This is a huge departure for these big box stores. They have acres of parking lots, which sit idle for many months, and the Macy’s and others are looking to create strip malls and standalone properties to bring in rental revenue.

It appears the new model, which I doubt has legs since it’s doubling down on the thought that brick and mortar can still work. Macy’s says they are looking for restaurants and other businesses like medical facilities to take up the space.

Macy’s is already selling space inside its stores to different brands in order to bring in revenue. So now they will compete with the mall operators, who are looking at open storefronts inside the mall, to attract tenants.

 

Bitcoin gaining favor with 1 percenters — trading over $2K

Bitcoin just came up short of hitting $2,100 overnight as selling brought it back to mid $2,000 range.

Art auctions in NYC are seeing record prices for the work of former graffiti artists. A Jean-Michel Basquiat painting was sold last week for $110 million a Japanese investor.

So why are alternative investments becoming all the rage now?

Money is chasing these alternative investments, including high-end real estate and jewelry as fear of stock market topping out grows due to the ineffectiveness of the Trump Administration to get their agenda through of cutting taxes.

Economic growth while projected to hit decade highs this quarter, will — and I guarantee it — pull back to sub 2% growth for GDP. The economy is so bifurcated between the top percentage earners and middle class that growth will be difficult to come by unless a dramatic leveling of the playing field is achieved.

So where will the upper class put its money? Where it is treated the best. I don’t believe that has a lot to do with the dramatic rise of the cryptocurrencies just yet, but you never really know.

As acceptance in bitcoin and other digital “coins” grows the field could become very crowded and since there are a finite amount of bitcoins in circulation the price jumps could be astounding.

I have researched the availability of bitcoin investment advice at the large Wall St. firms servicing the 1 percenters and there is expertise and purchases being made for clients — or why else would they offer the service if it did not pay for itself.

Once this becomes common knowledge — to the 1 percent — $200 to $500 jumps in price may become far more the norm on the exchanges.

Hell, if a former graffiti artist who died of a heroin overdose at 27 can fetch $110M how absurd is $5,000 bitcoin in a few short weeks.