Yesterday’s open was a textbook example of a suckers’ market opening. I hope you did not get drawn into it. From the get-go, you had to be a buyer and I was. I told brokers, followers on Scutify, colleagues, etc. that the open was a great opportunity to buy the equity market.
Here are how events unfolded and what it really meant:
- The bill to repeal and replace Obamacare was pulled from consideration by the House of Representatives. It would not pass and it made sense to pull it rather thatn to have it fail. As I will explain later, the bill was meaningless to Wall Street.
- Immediately, the amateurs began to foretell the end of the Trump administration’s ability to pass legislation and the end of the “Trump Rally.” Market professionals know that the beginning of the post-election rally was one of relief that Hillary Clinton was not elected. Beyond that, the rest of the post-election rally was one that was imputing tax reform and an infrastructure bill. Vanity Fair was pushing its article Is The Great Trump Stock Bubble Beginning to Burst? If you get your financial information and research from Vanity Fair, you should not be investing on your own. All the same, it does not make sense to rely on The Wall Street Journal for photography or fashion advice.
- As for the failure to repeal and replace Obamacare, the less informed media, pundits and political financialists saw this as the genesis of a market crash. Little did they know. Wall Street and professional money managers could care less about a new health care bill. The reason is simply that Obamacare was a license for insurance and pharmaceutical companies to print money. The replacement bill just reaffirmed that fact. Thus, a replacement bill or lack thereof, was meaningless to stocks. It was also a partisan issue. Taxes and infrastructure are more meaningful to continuance of a bull market. They are also both bipartisan issues which will have a much easier time getting to President Trump’s desk.
- Overnight futures got sold by foreigners, who know little about how the US political system and markets operate. Also, selling futures were hedge funds who tried to incite a panic. You see, they have been so wrong since Brexit and have performed so poorly that they need a market crash to get even and gain some respect. I even heard some pundits saying that they were surprised that the futures market were not down limit, as they nearly were after the Brexit vote and election night when it appeared that Clinton, not Trump would win.
- Thus, stock markets opened lower, not quite 1%, but close; as retail investors got spooked from the futures markets and the pseudo-financial press publications over the weekend. However, the professionals knew better and were ready to buy in the early going. That they did. The major indexes bottomed at about 9:45 AM, give or take a few minutes and then rallied right into the close. By the closing bell; the Standard & Poor’s’ 500 (SPX) was off 0.1%, the Dow Jones 30 Industrials (INDU) was off 0.22% and the NASDAQ 100 (NDX) rose 0.19%. Make no mistake about it. This was a victory for the bulls and wiped healthcare legislation off Wall Street’s radar screen.
Do yourself a favor and don’t be a sucker. Ignore panic opens and learn to be a contrarian. If you continue to obsess about such legislation or continue to read lousy publications, you will be as wrong as the hedge funds.
I used the opportunity to put some cash to work in technology and industrials while booking profits in our material plays. I also added to Carnival Cruise lines (CCL) which is reporting results today. I have been building up positions in CCL for a few weeks now alongside a long term holding in Royal Caribbean (RCL).
Lastly, I was quoted by the Financial Times (the Wall Street Journal of Europe) about Sears Holdings. The link is active but unavailable unless you subscribe to the FT. Here is an excerpt from the article with my quote:
“Where are we today? Sears is in a death spiral. Malls are dying,” says Scott Rothbort, a professor of finance at Seton Hall University’s Stillman School of Business and president of Lakeview Asset Management, a boutique advisory firm.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long CCL, RCL, DIA, DDM, QLD, TQQQ, SSO and SPXL, — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
– You can email Scott at firstname.lastname@example.org
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