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Morning Commentary

Black Swan or Black Eye

By Charles Payne, CEO & Principal Analyst
3/29/2021 9:26 AM

It was a strange finish to yet another rollicking week of wild swings and wild guesses, as the rotation trade still dominated the conversation. But I could see smart money buying growth on weakness.  

Friday was particularly intriguing because a hedge fund blew up, and began forced liquidation of stocks, which saw billions in block trades during the session.  Such action typically raises red flags and sends traders to the hills, but the market rallied strongly into the close.

The biggest winners were semiconductor stocks, although the top winner was Nucor (NUE), a proxy of excitement over the proposed infrastructure bill to be announced on Wednesday.  That bill will be more about renewable energy than fixing bridges and patching up roads. 

Be that as it may, there will be demand for raw materials and building equipment. 

Energy rebounded, and after slipping on news Ever Given, the ship stuck in the Suez Canal, has been partially pulled out and refloated, West Texas Intermediate is edging higher again (10% of the world’s seaborne oil transverses the canal along with 13% of global maritime trade).

S&P 500 Index



Communication Services XLC



Consumer Discretionary XLY



Consumer Staples XLP



Energy XLE



Financials XLF



Health Care XLV



Industrials XLI



Materials XLB



Real Estate XLRE



Technology XLK



Utilities XLU



Portfolio Approach

Yesterday, we added two position on Friday in our Hotline Model Portfolio, one in Consumer Discretionary and one in Consumer Staples.

Today’s Session

The debacle at Archegos Capital Management family fund, which was triggered when sellers materialized on news Viacom CBS was raising $3.0 billion, continues this morning.  The fund was leveraged in a way individual investor could never imagine.  On Friday, the result was massive block trades and hits to shares of several investment firms.  The big bank trade has been a Wall Street favorite for months, and had begun to take off, making this an even larger concern.

Nobody knows how deep this has to go, as the fund has begun to unwind. 

The fund also owned a lot of high-flying Chinese tech names as well.  I do not think there is a systemic issue here.  Even if this is not a black swan event, it’s a black eye for Wall Street, which extended enormous credit to someone that had to pay a giant multimillion dollar fine, because they could not resist the lure of the fees.

It 's what we don't know that should concern us!

Lorin K on 3/29/2021 11:00:41 AM
RE: "there will be demand for raw materials and building equipment". Note all the precious metals needed and materials and 'mined' : silver, nickel, etc.' or electronics materials are from CHINA.

Steven D Hungerford on 3/29/2021 2:43:24 PM

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