Friday, June 4, 2021

Morning Note: All the Cover the Fed Needs -- And -- My Advice to the "Student"-Trader

So, equity futures were struggling a bit to find direction this morning before the release of the May jobs report. As I type, however, 10 minutes before the market open, and 50 minutes after it was reported that 559,000 folks found jobs, futures are trading nicely in the green.

Now, believe it or not, that number was actually quite the disappointment; the consensus estimate was for 675k. And, recall that Wednesday's ADP number was north of $900k. Nevertheless, 559k is nothing to sneeze at, and (or, although), better yet for stocks, it's nothing to raise interest rates over either (although, trust me, while stocks would've likely tanked on a north of 1 million number, and rates via bond traders would've spiked, the Fed's a long -- a very long -- ways from raising their benchmark interest rate).

In a nutshell, the economy bled 22.4 million jobs in the spring of last year, it's recovered 14.8 million since. So we've quite the row left to hoe -- and that's all the cover the Fed needs for now to keep the monetary spigots wide open. 

3 of the 16 Asian markets we track were closed overnight, only 4 of the remaining 13 finished higher on the session.

Europe's in rally mode so far this morning, with all but 2 of the 19 bourses we follow in the green as I type.

U.S. equities are up across the board: Dow up 110 points (0.33%), SP500 up 0.54%, SP500 Equal Weight up 0.40%, Nasdaq 100 up 0.89%, Nasdaq Comp up 0.77%, Russell 2000 up 0.50%.

The VIX (SP500 implied volatility) is down 6.43%. VXN (Nasdaq 100 i.v.) is down 5.08%.

Oil futures are up 1.21%, gold's up 0.91%, silver's up 1.22%, copper futures are up 1.47% and the ag complex is up 0.72%.

The 10-year treasury is up (yield down) and the dollar is down a big 0.49%.

Led by MP (rare earth miner), solar stocks, ALB (lithium miner), uranium miners, silver and gold miners -- but dragged by bank stocks (only) -- our core portfolio is up 0.57% to start the session.

A young man/family friend whom I'm quite fond of reached out to me last evening for a little advice. He knocked it out of the park yesterday on a heavily-shorted, ultimately insolvent company that was pumped to the sky by the crowd of social media pals who -- with the aid of off-guard hedge funds and options sellers -- were responsible for the recent GameStop, etc., frenzy. 

First of all, I suggested that he may come to deeply regret soliciting my advice, although I did suggest that maybe he thinks about pulling his initial investment and simply playing with the house money from here. 

I also recommended that if indeed trading markets is something he sees himself seriously doing going forward, that he slow way down, start thinking of himself as a student (not remotely a "trader" just yet), and, to begin with, read the two books that I refer to all newbies who ask my advice: Reminiscences of a Stock Operator and Extraordinary Popular Delusions and the Madness of Crowds.

Here's from Madness of Crowds:

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
By the way (just cuz it's interesting to note) these books were written in 1923 and 1841 respectively. And, alas, I can count on maybe two fingers the youngsters over the years who've reported to me that they actually took up my reading challenge. As the protagonist in Reminiscences pointed out:
"If I told the average man, “Sell yourself five thousand Steel!” he would do it on the spot. But if I tell him I am quite bearish on the entire market and give him my reasons in detail, he finds trouble in listening and after I’m done talking he will glare at me for wasting his time expressing my views on general conditions instead of giving him a direct and specific tip, like a real philanthropist of the type that is so abundant in Wall Street..."

Have a great day!

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