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Morning Commentary

MARKING TIME AND SCRATCHING HEAD

By Charles Payne, CEO & Principal Analyst
11/18/2021 9:57 AM

Wednesday was one of those flat-footed sessions out of the gate that looked to  be a downer. Instead, buyers actually rotated into Amazon (AMZN) and Apple (AAPL), which have been drifting lately and looked like perfect spots to chill.

Other than those names, there wasn’t much to cheer about, as market breadth pushed numbers to the red on the Heat Map. Nothing in particular sparked selling, but investors need prodding, as many are spying the exits.

Market Breadth

NYSE

NASDAQ

Advancing

1,118

1,468

Declining

2,227

3,199

52 Week High

106

160

52 Week Low

82

242

Up Volume

1.27B

1.76B

Down Volume

2.66B

3.09B

Housing Comfort

Housing starts came in well below the consensus, but permits soared, reflecting the fact demand is unwavering, but supply is a serious issue.

Home Construction Trends

Act

Est

M/M

Starts

-0.7%

+1.5%

-2.7%

Permits

+4.0%

+2.8%

-7.7%

Just like that retail sales report that crushed the consensus, there would seem to be a strange disconnect between angst and action. Everyone seems to be pissed about inflation, and for many, it has driven them to shop more. In the case of the housing market, consumers say this is the absolute worst time ever to buy a house…

…and yet homebuyer demand continues to surge. It’s just a weird time in this country that promises to get even weirder.

Portfolio Approach

There are no weighting changes this morning to the Hotline Model Portfolio.

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Today’s Session

I’m paying close attention to the hearing for Saule Omarova to be Comptroller of the Currency. I’m shocked she has gotten this far.  Also, we are watching Covid19 closely; underestimated short term impact on the economy and market of the Delta variant (mostly overreach by government).

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Inflation & Consumers

The Philly Fed Manufacturing report came in at 39.0, the highest level since April, and well above the consensus of 24.0.

Current and Future General Activity Indexes

Prices paid climbed to 80.0, which is the highest in the 42-year history of the report. Meanwhile, prices received edged up to 62.9, which is the highest since June 1974.  Interestingly, a special question reveals inflation will continue to sizzle next year, but there is an expectation, consumers will pay up.


For the past couple of years, I have been pounding the table on brick and mortar retailers. It has been almost impossible for me to get any market expert guests to agree with me – even retailer experts.

Brick & Mortar Rule & Lesson for Investors

Meanwhile, they just keep going higher.  Great earnings from Macy’s (M) , Kohl’s (KSS) and Victoria Secret (VSCO) has them higher.  Of course, there’s Dillard’s (DDS), which is up more than 500% this year and 900% from the March 2020 low.   These is not a news story about consumer anxiety over missing items during this Christmas due to supply chain problems.

This is a story of survival and adaptation – the essence of capitalism. 

The internet created destruction, which coupled with decades of overbuilding stores and malls, triggered an avalanche of closings and bankruptcies.  While surviving the onslaught, smart companies adjusted their approach.  There was the advent of the Omni-channel, and now, online players must have brick and mortar presence.

For investors, the moral of the story is clear.  When Wall Street and the financial media declares something is dead – it is always hyperbole. Sadly, too many investors listen and miss golden opportunities, even though like in the case of retailers, they still spend money at those establishments.

I get the anxiety, as we had Macy’s at ten bucks and sold for a huge profit but left a grand slam on the table. 

For the viewer, my message to you is listen to the experts, decide who is the best, but always do some work yourself.  Do not be afraid of going against the Wall Street consensus – it is wrong a lot more than it is right.

We are still pounding the table on Dick’s Sporting Goods (DKS) and think Party City (PRTY) is way oversold.  If you are not a current subscriber to our Premium Hotline service, email Info@wstreet.com to get started today.


 

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