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Morning Commentary

NEW COMMANDER-IN-CHIEF

By Charles Payne, CEO & Principal Analyst
1/20/2021 9:57 AM

Top 10 ways to go BIG with Yammer - All Together Now

So, Janet Yellen pressed the case on behalf of the Biden Administration, urging Senate members to ‘act big’ to avoid recession. I was taken aback at the things that got folks riled up, including several conversations on a potential $15.00 minimum wage. It would be a job killer in small lower-income towns and cities.

I came away more convinced the new President is giving serious thought on how to tax assets like that Picasso or maybe your baseball card collection while it’s still in your possession. That is madness. Yellen did say there were other ways of leveling capital gains; however, she did not rule out this destructive idea of taxing assets.

I was also puzzled over the notion of coordinating U.S. tax policy with other nations. According to Yellen, the Biden administration looks forward to actively working with other countries through the Organization for Economic Co-operation and Development (OECD).  It’s nuts. 

Essentially, the administration is saying to the world we can all raise taxes on corporations. That is in unison to avoid a race to the bottom that saw a strong exodus of American companies to foreign shores.   Higher corporate taxes will only lower domestic investments and stop overseas profits from coming home.

As it stands now, President Biden has promised to hike corporate taxes to 28% from 21%. Before President Trump, the corporate rate was 35%. The good news is the Biden administration has come to a sobering reality that hiking taxes now is especially dangerous, and they seem content with forcing the issue after the Covid-19 crisis has faded.

Interestingly, the Biden administration will maintain tariffs on China but continues to believe there can be a multilateral effort to enforce universal rules of the road – such as not stealing intellectual property. I do not think that will happen and going down that path is a waste of time. 

Climate Change

The spoke in the wheel of Biden’s economic policies apparently will all center around climate change.  Yellen mentioned clean technology (which is open to interpretation) and pointed to electric vehicles as a good way to address climate change.

The market took note of those climate change comments as electric vehicle stocks raced higher.

Janet Yellen was not a fan of cryptocurrency, suggesting Bitcoin (BTC) and other cryptocurrencies could be used to finance terrorists and to facilitate money laundering. 

Sanity Will Prevail…Someday

Understanding that adding more to the nation’s economy is starting to look like a Jenga tower with a lot of missing pegs, Janet Yellen acknowledged: “The Treasury secretary has to be a voice for fiscal sanity. I pledge to do that. Our finances need to be on a sustainable longer-run course.” She reiterated the need to ‘act big’ now.

Message of the Market

Market breadth was extremely bullish. There are far more advancers than decliners on the NYSE and the NASDAQ, but the volume tells the story. My goodness, look at the 2:1 ratio in ‘up to down’ volume on the NYSE and almost 3:1 one on the NASDAQ.

Market Breadth

NYSE

NASDAQ

Advancing

1,979

2,632

Declining

1,194

1,228

52 Week High

203

410

52 Week Low

3

14

Up Volume

3.24B

4.86B

Down Volume

1.76B

1.36B

Coming into the week, 39% of the stocks on the S&P 500 were in the red just as in 2020. The much-hyped rotation hasn’t really broadened the rally as much as one would think. The good news is money is moving side to side within the market rather than moving in and out of the sidelines.

S&P 500 Winners :

S&P 500 Losers: 

The NASDAQ is a different story. It’s Mardi Gras!  Take a look at the number of winners and average gain less than three weeks into 2021.

NASDAQ Winners: 

NASDAQ Losers: 

Portfolio Review

Last week, we took profits on several positions in the Model Portfolio. And yesterday, we put some to work on the Morning Hotline and Afternoon Note.   This morning, we are adding to Materials.

Today’s Session

Today, Joe Biden will be inaugurated as President of the United States. Amid the tumult, anger, fear, and lingering resentment.  Each new President also brings hope, reflecting the outcome of the election.   Currently, Biden enjoys a honeymoon with financial markets-  and probably will always have a honeymoon with the media.

In some ways, that will mitigate the bad news that was an anchor at times, but it could also embolden the battles that stall efforts or derails partisanship.  I hope we can come closer as a nation, and I wish President Biden all the best. 

The markets begin with a positive open, especially the Nasdaq, as President Trump and his family head to Florida, and President Elect Biden begins his day of inaugural events.

Earnings Continue

The results continue to come in, including Morgan Stanley (MS).  Let’s see if MS sparks Financials, which have not lived up to the hype this earnings season.

 Morgan Stanley (MS)

UnitedHealth Group (UNH)

Procter & Gamble (PG)

Fastenal Co (FAST)

 

 


Comments
I am afraid, very afraid. I was really hoping for another 4 years to bulk up our retirement funds which are inadequate. I know it is our fault. I will be learning and listening as close as I can, Charles and team, to do the best I can with your help. Thank you for the reasonable clear head on a day of sadness. My husband and I were up at 5:00 a.m. PST to watch the President's farewell and I can only say....it's very sad.

Cheryl Fewell-Brown on 1/20/2021 9:19:39 AM
Sir,
My membership may have expired but I read you just the same. The vital question to me is how to invest when the insane P/E's still prevail? How can a PE of 35 be successful in a ETF or mutual fund! Even if the price of the investment increases the high P/E's are just a train wreck waiting to happen. I do not think most investors even know the overpriced situation we are in right now. Help me if you can tell me we can continue to buy.


John B Larkins on 1/20/2021 10:13:34 AM
There are a few things I would like to note. A) we are looking at individual stocks and investment ideas and management them in an active portfolio B) this means we are riding the wave but also banking profits along the way C) waiting for the market to get "cheap: is a gigantic mistake that only money managers that get paid no matter what can afford to make D) I don't care about the PE ratio - I care about the value proposition over the next several years Most market mavens on Wall Street consider a PE above 20 to be high and on the way towards being frothy.  With that in mind most would have scaled back investments in Dec 2014.  In fact many did and have woefully underperformed since then (more than usual) Link to chart https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart Today the number one percentage gainer in the S&P 500 and NASDAQ is NFLX which has now missed the earnings in 16 of the last 22 quarters and currently sports a PE of 93. The market has been on a fabulous run and at some point there will be corrections and even crashes but we live to take advantage of opportunities.  I hope we will have a large cash position when the market is dealing with a downward swoon and I look forward to aggressively buying that dip.  Meanwhile there are dynamic changes to society and the stock market that cannot be ignored. These changes will play a role in  our lives and I would like a small piece of the action. If you want to go chill with those folks from Dec 2014 understand they are an ornery bunch and spend all day hoping for disaster.  Not a good way to live.  During a big pullback there will be loses but I think we have banked enough over the years to handle it and take advantage. CP

Charles Payne on 1/20/2021 10:28:49 AM
God help us all....please. 'Nuff said.

Jay Bodner on 1/20/2021 10:42:21 AM
Well, it would be nice to see the world get along. It's very scary when they all seem to agree on taxing all of us together,,,,,,more! Politicians seem to like other people's money all over the world. Already missing the Donald.

Lorin K on 1/20/2021 10:55:42 AM
Rockstar smart reply to John B. Charles.


Donald McArthur on 1/20/2021 11:09:47 AM
Charles Payne, you are the best of the best! IMO, although the market is high, there are opportunities to buy whatever the individual's investment style and goals. For value investors there are stocks like TSN, INTC, PRU, BMY. For momentum investors, the FAAG stocks long term will go up. There just are not as many stocks that are inexpensive in traditional terms. A larger cash position than normal while waiting on a correction is common sense.

Martin Weber on 1/20/2021 11:41:02 AM
Charles, you speak like a financial Sage.

Jim C RAWSON on 1/20/2021 11:53:09 AM
 

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