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Morning Commentary

Rally Snapped

By Charles Payne, CEO & Principal Analyst
3/3/2017 9:17 AM
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The market rally hit a series of speedbumps, all emanating out of Washington, D.C., except for the SNAP IPO, which traded more than its 200,000,000 share float in its first day of trading.  I think the stock is overvalued already, but it obviously captured attention from a lot of investors, many I’m sure that have missed the rally and think they can make it up chasing shares of their favorite app maker.

I’m cautious on the stock, but I would like to see the IPO market open up; although, I warn investors shut out from years of private growth to be careful becoming the dumping grounds for many of the so-called unicorns.


Federal Reserve

This week saw a seismic shift in consensus on the monetary governing body’s next move when they meet this week.  From almost zero, to almost a foregone conclusion, the street expects the Fed to hike.  The good news is the day after that general epiphany occurred, the Dow rallied more than 300 points.  The bad news is this would cast the Fed as an aggressive body ready to shoot first and ask questions later. 

Sure, the economy is doing better, but is it doing so well to erase years of flaccid growth and inflation just as it is getting going?  I think a March hike is a mistake, but it’s not a rally-killer.

Today, we get a parade of Fed speakers:

Commerce Department & Caterpillar

There is still a lot of confusion and anxiety over the raid on Caterpillar yesterday, which has been reported as part of an on-going tax probe.  This morning, Commerce Secretary Ross hinted it might be over import rules enforcement. 

Last week, President Trump was singing the praises of the company, and now, the federal government is making a public spectacle of an investigation that involves an overseas subsidiary.   It is too early to know how it shakes out, but I’m confident the dip in its shares is a buying opportunity.

Speaking of Wilbur Ross, his comments this morning on leveling the playing field with Mexico on trade, including the need to lift the Mexican Peso, has turned that currency higher. 

AG Sessions

Stories and news continue to roll out on Attorney General Jeff Sessions meeting with Russian officials during the presidential campaign.  President Trump is calling the entire episode a “witch hunt,” but Sessions has recused himself from any investigations into the Trump campaign connections with Russia.   I don’t know the whole story, and there will be more, but it’s the kind of thing that seems like noise during the tricky period of trying to launch the economy.

Today’s Session

It would be very impressive is the market closed higher today, but if it doesn’t, we are going to learn a lot.  Many stocks are overvalued, but many are not in relationship to current and future growth and profits, so we want to see if there is any pressure to close out the latter.   Of course, Fed speakers could hijack the session, which is another reason to keep our powder dry this morning.

Caterpillar and AG Session's error in judgment are things that will hinder the new administration's progress.I believe AG Session's answered Franken's question honestly, especially when you listen to the full question, but this should have been corrected in the follow-up questionnaire. And the Caterpillar raid looks like the left-hand doesn't know what the right is doing. Hopefully, these speed bumps level out!

David Toops on 3/3/2017 10:07:05 AM
"The market is overvalued..." That may be true UNLESS...

What if most, not all, BUT most in the country thought things were absolutely going to be not just better but MUCH better? That might mean that they not only would step up and buy homes and cars, but go out more and basically spend more at restaurants and everywhere. And employers would look to hire and grow. Up until now most if not all of the growth has come from efficiency and downsizing employment, which is most employers greatest cost.

How would we know? By higher consumer confidence readings and small business confidence readings. Wait, they are reporting record readings.

I say this is a foreshadowing that we have not seen what actually happens when this country really kicks it into gear. I say we are undervalued and have no idea just where real valuation will go when we begin to produce a full volume! Cheers!

Ray Weldon on 3/3/2017 10:11:49 AM
In times like these we need critical thinking skills and keep our eyes focused on the BIG idea.

Eileen SullivanScully on 3/3/2017 1:06:11 PM
The Democrats are in the face of the Republicans. When will the Republicans be in the face, tic for tac, with the Democrats. Sound to me that the so call “Clinton Foundation” is the perfect prop! What are the Republicans waiting for? The Republicans want to be the so nice. D. Trump wins the election by being in the face of his opponents, Republican or Democrats?? Democrats chose the war strategy, the Republican must follow suit and have a smarter tactic!

Philippe on 3/3/2017 5:06:35 PM
Demographics is still the economy's Achilles heel in spite of the fact that Wall Street and the media ignore this. So far, we've had over 60 million abortions offset by 60 million immigrants, so we're net even. But if we had both, the economy would be at least 18% bigger. The economic drag each year is now about $5 trillion a year and will keep growing. Reaching 4% growth with less than 1% population growth is impossible. This is Trump's biggest problem, but we keep on ignoring it. Meanwhile, the libs have taken over corporate polity; but when the you-know- what hits the fan, you heard it hear first. I had this same argument in 1998 with Gene Epstein of Barron's and warned of a coming halt to the incredible growth rates of the '90's when the Boomers were still a major factor. I was right and he was wrong. Maybe this time, someone will listen. We have a great opportunity ahead but to enjoy it, we've got to stop killing our future. What's happened to the black community is a prime example. The Democrats lost after 45 years of aborting their own base among blacks and Hispanics. If not for abortion, Hillary would have won in a huge landslide. One of these days, the left may just wise up. But it could take 30+ years.

Dennis Howard on 3/3/2017 6:23:06 PM

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