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Morning Commentary


By Charles Payne, CEO & Principal Analyst
12/30/2020 10:02 AM

Yesterday’s session had that “are we almost there” feeling, like the end of a long road trip. While those that stayed the course have been handsomely rewarded, it has been a weary ride, and we could all use a pit stop. 

Still, all the major indices opened higher at record levels before slowly giving up ground. The biggest news was no news - all eyes were on Senate Majority Leader Mitch McConnell, who blocked a straight-up vote on $2,000 in relief payments.

Later, reports of a new bill that would include Section 230 and other issues didn’t move the needle in after-hours trading. Such a bill would solve more Republican concerns, but it also brings back gamesmanship. It is a lot more debilitating than the wild ride in the stock market.

I do not understand the strategy, but it is what it is at this point. Meanwhile, Mnuchin says folks should see $600.00 stimulus checks beginning today.

As for the broad market, only Consumer Discretionary and Health Care finished higher on the session.  There were no disasters, although Energy continues its hasty retreat after a blistering run.

S&P 500 Index



Consumer Discretionary XLY



Consumer Staples XLP



Energy XLE



Financials XLF



Health Care XLV



Industrials XLI



Materials XLB



Real Estate XLRE



Technology XLK



Utilities XLU



Market Breadth

Early on in the session, there was no oomph. Consequently, market breadth was decidedly negative, although not a catastrophe. 

Market Breadth









52 Week High



52 Week Low



Up Volume



Down Volume



The market lost a fair amount of steam when Interactive Brokers (IBKR) Chairman Thomas Peterffy went on CNBC to A). complain about folks not taking advantage of his low margins with margins at record dollar levels and B). point to investor selling options.

“Our customers tend to be on the selling side of options, and there is such demand for these out of the money options that our customers tend to become sellers.  So, they carry a long position in stocks, but they override, in ratios say 4 to 1 or 5 to 1 against the stock.”  He went on to say:” it has never happened in our history that our customers as a whole were net short the market, but as of yesterday, that is the case.”

This seemed to unsettle the market, which is strange since individual investors are supposed to be contrarian indicators. I’m not sure what percentage of Peterffy’s customers are individuals. I think the story is great in the sense that it counters the guessing game and knee-jerk headlines, with little proof of too much exuberance other than record highs and more option activity.  

Intel Inside

You already know my disdain for the Dow Jones Industrial Average (DJIA) as a proxy for the stock market and the economy. The problem is the folks that make the changes are just too flat-footed. They react far too late when stocks begin to stumble. 

On November 1, 1999, four names were added to the DJIA:

They replaced names long overdue for removal: Sears, which had been in the club for 75 years, Union Carbide (71 years), Goodyear Tires (34 years), and Chevron.

It was the first time the index added names from the NASDAQ Composite. And a nod to the need for greater exposure to technology (SBC was seen as an Internet play because it gave users access).

Those moves were a few years too late; of course, in the aftermath of the tech bubble blowing up, it didn’t add a lot of value until Microsoft brought in a new CEO with a new vision and direction.

I get the powers that be don’t want to flip names very quickly. But hanging with the same names for seventy plus years isn’t going to work anymore. The venture capital world and the ability for someone to create new products and services today means faster changes at the top of industries.

Especially changes in growth rates.

Enter Loeb

Yesterday, however, the index, along with the S&P 500, got a nice boost from a fallen leader: Intel (INTC). I have avoided the stock for years. I felt it was too PC Centric in a world that has rapidly been moving toward other devices.

As it turns out, Hedge Fund Titan Dan Loeb has amassed a $1.0 billion stake - now, he is calling for changes.

The stock had its best session ever, and it was the top percentage gainer on the Dow Jones and the S&P 500. The last five years tell the story, however.

Advanced Micro Devices (AMD), an often-absent upstart, has seen its shares rally 3.057% to Intel’s 64%.  Look for more buyers in Intel. This would be a great chance for the folks at the Wall Street Journal (WSJ) to make their move and to replace the name.

Portfolio Approach

We are fully vested in the Hotline Model Portfolio.




Charles in the Senate when both sides are mad at you ---- You may be the guy with a good plan. Let us pray that guy is Mitch.

John Cowger on 12/30/2020 10:31:31 AM
No doubt McConnell is wily but I cannot figure how layering a $2,000 bill with poison pills will help?  CP

Charles Payne on 12/30/2020 10:34:37 AM
Always good Charles!

Lorin K on 12/30/2020 10:50:24 AM
Why are very few politicians actually talking about targeting the extra money to people that actually need the money, this is something like 20-30M instead of the 200+M that is everyone eligible right now. It seems way too obvious and logical. Moreover, I don't need the money, none of my family needs the money, none of my coworkers need the money and the hit to the debt is enormous. Where are the responsible adults who will stand up and stop this insanity?

walter on 12/30/2020 10:52:55 AM

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