We were set up for another fairly quiet day. A lower open attracted some buyers. But then the Europeans ruined the party for everyone. Christine Lagarde, the French head of the International Monetary Fund or IMF strongly suggested that the US Central Bank, Federal Reserve hold off on any monetary tightening till 2016. That is because Europe is still an economic and monetary mess. Then the oldie but badie concerns over Greece sent another round of jitters through the markets. This sent the stock renters selling in a panic ahead of today’s labor report. Soon after, the major indexes fell over 1% but then recovered in the final hour, still closing in the red by about 0.8%.
Labor report Will Dictate Market Direction
Europe aside, what is going to really matter is today’s labor report for May. Expectations are for 225,000, plus or minus a few thousand, jobs to be added. That seems like a reasonable expectation and within trend lines, save one outlier month, likely due to the winter weather. I expect retail jobs to be weak but construction hiring to pick up.
Wynn Resorts (WYNN), which was acting like a great short, suddenly spiked higher on an analyst upgrade. I don’t think that a bottom is in yet for that stock.
Opko Health (OPK) got sold hard after agreeing to purchase Bio-Reference Labs (BRLI) for 2.75 shares of OPK. So, the arbs were in force buying BRLI and shorting OPK. At current prices, BRLI is selling at a nice discount to the deal price. While we owned OPK going into the deal announcement, we nibbled on some BRLI to take advantage of the risk arb discount.
What everyone will be talking about the rest of today and into tomorrow is the Belmont Stakes. If I was not in upstate NY I would be going. That being said, American Pharoah is vying for a Triple Crown and is a prohibitive favorite at 3-5. My biggest mistake ever at the racetrack (and trust me when I tell you I have done quite well there) was in 1999 when I was at the Belmont Stakes as Charismatic tried to capture the Triple Crown. I handicapped Lemon Drop Kid to win the race. Lemon Drop kid has great bloodlines and was set up to win the race. I told everyone I could to bet Lemon Drop Kid. Foolishly, I did not and instead bought a few $1 win tickets on Charismatic, thinking that if he won, I would not cash them in and sell them on EBay (EBAY). Lemon Drop Kid won at a big price. As I said, my biggest mistake at the track.
Handicapping the Belmont Stakes
This time around, I won’t make the same mistake. I like Frosted. Frosted is well rested after skipping the Preakness. After a bad early start and wide trip, Frosted came on quite strong in the Kentucky Derby to finish 4th. Had the colt more room to run, as it does in the Belmont Stakes, it might have caught the winner. The early line on Frosted is 5-1 but will likely come off to 4-1 or 9-2 by post time. I will bet Frosted to win and in some exactas with the Pharoah and perhaps Materiality.
I will be travelling late Sunday and will be back with commentary for Tuesday.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long OPK & BRLI and short WYNN — 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
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