Evening Note

Just a quick rundown of the day's action, then a couple of quotes. One from a Wall Street legend whose story is on my shortlist of recommended bios to study anytime a newbie trader asks my advice. The other's from an article published this afternoon on the latest actions of today's newbie traders.

Stocks rolled over late in today's session on -- according to the headlines -- a mix of concerns that include the risks of "reopening" and issues around US/China relations. Credit markets were slightly less messy on news that the Fed started buying junk this morning (I touched on that this morning). 

In terms of leadership, today looked like a bear market's supposed to. The top four performers, in order, were gold, the yen, silver and the dollar. As for US sector leadership, the top three (least of the losers) were staples, utilities and healthcare. Coincidentally, our currency/commodity exposures consist of gold, the yen, the dollar and silver, and our top three sector weights are staples, utilities and healthcare. Man, if only every day could turn out that way (can't)...

As for the internals; the volume actually didn't scream "bear market"; it came in 13% below the 20-day average. In terms of NYSE up/down volume (1114/4024), S&P 500 advancers vs decliners (41/462), and advancers vs decliners for the Nasdaq composite (676/1954), bearish describes it.

Now, for the quotes:

Stan Druckenmiller is a name familiar to long-time readers (the latest here and here). He is recognized and revered as one of history's greatest investors; his track record and his net worth more than support his reputation...

Speaking of track record, here's from a 2018 article by CMG Capital Management CIO Stephen Blumenthal:

"Druckenmiller is the Ted Williams of investing. Perhaps the greatest investor of all time. He is a global macro investor with a track record that spans decades, has annualized returns near 30% and has never had a down year."

Well, the billionaire investor phenom was interviewed this morning at a webcast event held by The Economic Club of New York.

Here's from Bloomberg's article on what Druckenmiller had to say about the present state of macro affairs. This will sound very familiar to regular readers:

Druckenmiller Says Risk-Reward in Stocks Is Worst He’s Seen. By Katherine Burton and Melissa Karsh(Bloomberg) -- 

Stan Druckenmiller said the prospect of a V-shaped recovery in the U.S. is “a fantasy” and the risk-reward calculation for equities is the worst he’s seen in his lifetime.

“Stimulus programs aren’t building future growth but rather are just giveaways to companies and business owners,” the legendary hedge fund manager said Tuesday during a webcast held by The Economic Club of New York.

“Most traders say that stocks and corporate bonds have soared since late March because they believe the Fed will do anything to prop up markets,” Druckenmiller said.

“The consensus out there seems to be ‘don’t worry, the Fed has your back,’” he said, with both stimulus that is much bigger than the problem and massive liquidity. “There’s only one problem with that -- our analysis says it’s not true.”

“That’s because liquidity will soon shrink as Treasury borrowing crowds out the private economy and even overwhelms Fed purchases.”

As for the newbie trader, another article appeared today on a phenomenon that, as I mentioned in this weekend's video commentary, is too reminiscent of the dot.com days of the late 90s:

Here's a snippet:

"Robinhood — millennial favored stock trading app — saw a mind-blowing 3 million new accounts in the first quarter, despite glitches and crashes on heavy trading volume days.

“The access to trading, there are no barriers to entry anymore, its on your phone, you can buy whatever you want, fractional shares are available so if you can’t pony up $1,400 to buy one shares of Google you can still own the FANG stocks,” Welsh added."

Uh oh!!

Here's another: 

“Traders here are ‘buying the dip’ in a lot of names with questionable fundamentals now, i.e. airlines, highly volatile stocks, low in recent price momentum, and ones with that have recently (in the last 3 months) had lottery ticket like upside payoffs occur,” added Krause. “Robinhood investors are making all the classic mistakes in the short
term. May work for today’s market, but not in the long-run
if repeated.”

Hmm... "May work for today's market"... Well, alas, I have my doubts...

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