Productive!

That's what they are saying about yesterday's negotiations between Joe Biden and the GOP Senators yesterday and that means $1,900,000,000,000.00 of MORE FREE MONEY is still on the table, so of course the markets like that. They also like that White House Press Secretary Jen Psaki said that, while Biden “is hopeful” that what he calls the American Rescue Plan “can pass with bipartisan support, a reconciliation package is a path to achieve that end.” That’s a reference to a procedure that would allow the legislation to pass the Senate with just 51 votes — potentially, all 50 Democrats plus the vote of Vice President Kamala Harris.

I was the first person to speak about a specific issue," related Sen Bill Cassiday of Louisiana. "I said, ‘Mr. President, I don’t want to seem rude,”’ Cassidy recounted in an interview. “He said, ‘Listen, I’ve been in all these negotiations. We’re going to have a difference of viewpoints on some things. We’re going to agree on some things. And when we disagree, we’re not being rude.” Isn't that crazy, discussing issues with a President who listens? The World has surely gone mad!

Fed_cartoon_10.27.2015

Meanwhile, on the other side of DC, the Fed has been doing their best to pump things up with MN Fed President, Kashkari, saying “I’m not fazed by the fact that there’s speculation going on in the stock market,” Kashkari said he wouldn’t worry even if there was a stock market correction. The dot-com bubble popped in 2000 and let to a “minor recession,” Kashkari said.

Atlanta Fed Presient, Bostic, continued the message, saying not only is he not worried about the U.S. economy overheating, but he thinks growth could happen faster than many expect. He based that on his anticipation that the economy could recover from the Coivd-19 recession rapidly once vaccinations become more widespread and the stimulus being pumped begins to go to more people in need. “A lot of the recent developments have been positive,” he added. “We should be open to the possibility that things might happen more strongly than they would otherwise.”

  • "Don't worry about the Economy"
  • "The market is not in a bubble"
  • "More Free Money is coming"
  • "The Economy is doing great"
  • "Rates will remain at near zero for a very long time"

That summarizes what we're hearning and, of course, they are ridiculous when looked at together as it makes no sense to be acting like there's a massive crisis going on while saying how great everything is but traders are more than happy to hold those two thoughts in their heads at the same time and that will allow the rally to continue until logic finally prevails.

chart (24)

Reality came and bit poor GameStop (GME) in the ass and we're back to $136 this morning – down another 40% from yesterday's close and now those fortunes won stories will begin turning into fortune's lost stories and Reddit will be treated with a bit more caution by the traders there as anyone who bought it since it tested $500 on Friday is out a considerable amount of money already. We made ours on Wednesday, when I put my valuation foot down in our Live Member Chat Room, saying:

GME Jan $300 puts are $190 and you can sell the March $160 puts for $75 so net $115 on the rollable $140 spread works for me as a fun play.

We'll see how that holds up with GME down around $130 this morning but, as of yesterday's close, the Jan (22) $300 puts were $232 and the March $160 puts were $78 for net $154, up $39 (33%) already. It may not be as sexy as buying straight puts and calls and hitting the lottery on a volatile stock but playing for the volatility to calm down. We can make bets like that this pay off regularly, rather than trying to guess which way the crowd stampedes on these manipulated stocks.

Today the focus is on Big Tech, with GOOGL and AMZN reporting this evening and all these big names reporting this morning:

EtKJ0lcXMAEWkU7

So far, of the 189 (37.8%) of the S&P 500 companies that have reported, 81% have beaten their earnings expectations. That's why the S&P 500 is testing 3,800 this morning and, even though that's getting close to 40 TIMES the anticipated earnings of the group – investors are not letting that stop them from chasing the components even higher. And why not? 40 times earnings is still a 2.5% annualized return and, at the moment, that's as good as it gets.

Speaking of returns, Municipal Bond downgrades have exceeded upgrades for the first time since 2014 with $215.2Bn worth of bonds being cut while just $42.1Bn were raised. Many municipal governments are facing budget shortfalls because of rising costs and falling revenue amid the pandemic. President Biden’s proposed relief package includes $350 billion of emergency aid to states and local governments, but the Republicans have outlined a stimulus package that omits that.

The outcome of this will have a very profound impact on you, your family and your business at a local level and, of course, be careful if you have a pension plan of some sort that invests in Muni Bonds. Despite the narratives – all may not be that well.