Wolf on Wall St., Warsh Pick, Palantir Trouble

A long time ago. I don't remember exactly when. I think I was maybe 18 years old. I was just a private or possibly a PFC. I thought I was tough. The other guys, though, truly were tough. We had a training mission in northern Minnesota. It would take a while, now at this point in my life, to figure out exactly where we were. We had weapons, but no ammunition, so they were basically clubs. We were training on U.S. soil, if asking why no ammo. Don't want to accidentally shoot a civilian out there. Five of us. I don't remember why there were five of us. There were usually four. 

The howling started early and came closer as night darkened. We had seen a couple of large black bears earlier and were mildly concerned about running into them looking for food in the dark, but generally speaking, we knew that black bears were not a threat. Then they found us. The pack. Obviously, they had been tracking us for a while. Noise and light discipline. That means shut your pie hole. No radio. No fire. Blades and entrenching tools. 

We finally stopped moving. This is well before the invention of night vision, which hardly worked in the early days, anyway. (It still kind of stinks.) We decided to try to let three of us sleep every two hours and change off throughout the night. Then they closed in. So much for sleeping. A large group. Hiding in the tree line, quite noisily. Flashlight. The glow of the eyes. Maybe 10 sets of eyes. 

They would harass us all night. Individuals making occasional faux rushes at our position and then scampering away. I knew that gray wolves did not hunt humans for meat, at least not in North America. Maybe this was a territorial thing. Maybe, like a street gang, they just wanted us out of their "turf." 

Regardless, they would harass us throughout the extent of that moonless darkness. By early light, our company started to catch up to us and the wolves took off. Ten on five was maybe fun for them. Ten on a hundred-fifty with vehicles moving in was not their cup of tea. That was my very first experience with wild animals that I thought at the time might try to kill me. I was a New York City kid. 

I have enjoyed the wilderness ever since. The thrill of seeing wild animals, dangerous wild animals in particular, doing wild animal things, is something I never get enough of, and why I am often somewhere people don't go. I owe it all to a pack of wolves that would not let me sleep on a dark night forty-something years ago.

Gang, the market is going to get hammered when those twin bells ring down at 11 Wall St. and up at Times Square this morning. The wolves are coming. It may get ugly. Really ugly. Identify, adapt, overcome. 

Nervous? 

Narrow your book. Trade for a shorter duration. Go to an increased allocation to cash if you must, even if just for the weekend. Especially if one does something else occupationally and must focus elsewhere. It's okay to act. Just don't let fear be the catalyst. Fear, my friends, is but for the wicked, and the wicked tremble before us.

The Fed Chairmanship 

Late Thursday evening, news leaked and prediction markets narrowed. It would appear that later today, Pres. Trump will name former Fed Gov. Kevin Warsh as his nominee to replace Jerome Powell as leader to the world's most important central bank. The president said on Thursday, "It's going to be somebody that is very respected, somebody that's known to everybody in the financial world." 

While I had endorsed Rick Rieder for the position and I think that Kevin Hasset would also be an excellent choice, I have no problem with Warsh. Hassett, as long-time close ally of the president, would very likely have been viewed from the left as a political choice, which could have damaged his credibility even before taking the position in May. Rieder's place is in the private sector and that's apparently where he will stay. 

The problem for markets this morning is that a Kevin Hassett selection may have been priced into equity and debt security prices. Hasset is viewed as being as overtly dovish as is the president and as is Fed Gov. Stephen Miran, whose term on the Fed's Board of Governors expires tomorrow. Miran has indicated that he will stay on the job past Saturday until a new appointee is confirmed and acting in the position. 

So why have equities and treasuries shown a nasty bout of overnight weakness as Kevin Warsh became the front-runner for the chairmanship? Easy. Keyword reading algorithms. Warsh has a relationship with Pres. Trump that is not on the level of Kevin Hassett, but is quite strong. Warsh would be a more orthodox pick, having already been a Fed official. He has spoken in a dovish manner of late but has a hawkish past. 

Warsh has strong ties to both economic academia and to Wall Street, which would be positive, and made a name for himself as a young member of the Board of Governors (the youngest ever at the time) as an inflation fighter. His preference for higher interest rates earlier in his career is what is moving market prices overnight. In response, equity index futures are trading lower, the entire treasury security yield curve has re-rated higher, the U.S. dollar index has firmed, and gold, silver and Bitcoin have all been bloodied a bit. Warsh is not the end of the world, kids. Don't let the sensationalists at the four-letter financial network who pretend that everything is a crisis level event scare you.

There's More... 

Add some geopolitical risk to this morning's broad market weakness. The U.S.S. Abraham Lincoln carrier group (or Carrier Strike Group 3) has joined other U.S. naval and air-based assets in the CENTCOM area of responsibility. Carrier Group 3 is part of the Pacific Fleet, so this is significant and is meant to put pressure on the regime in Iran. 

The group, besides the carrier, adds Destroyer Squadron 21 (Three guided missile destroyers) and a large mix of F-35 Lightnings, F/A-18 Super Hornets and EA-18G Growlers. Three Littoral Combat ships are also in the region. These are smaller, fast, and agile vessels that operate in shallow waters close to the shore. These ships can carry about 100 US Marines apiece for special amphibious or land-based operations.

And Still, There's More... 

Apparently, Pres. Trump and Senate Democrats have reached a tentative deal to avert a government shutdown. Or have they? The deal funds the Homeland Security Department for two weeks to allow for negotiations to continue. Democrats want agents to use bodycams and obtain judicial warrants, which is probably a good idea. Democrats also want to forbid agents from using masks and stop broad immigration sweeps. Those might be terrible ideas. With so many dangerous actors looking to intimidate these officers and their families, they should not be unmasked. As for the broad sweeps, I'll have to let that debate play out.

The Tempest, Act 3, Scene 1

Hear my soul speak: 

The very instant that I saw you did

My heart fly to your service 

                 - Ferdinand to Miranda (William Shakespeare), 1623

I Didn't Forget About Palantir 

Over the past 48-hours or so, I have received so much email and some Twitter comments from readers asking me to address the selloff in Palantir Technologies  (PLTR) . I did write a feature piece on the stock on Jan. 21. That was last week, gang. In addition, did you really think that I would forsake you in your hour of fear? You already know what I think about fear. We fear for the welfare of those we care for. We never fear for ourselves. For we seek purity and the preservation of honor. That is our code and this is our way. 

Yes, my friends, our beloved Palantir is in some trouble. This is why we always act at target prices. This is why periodically taking profits is better than periodically getting kicked in the teeth. For those that have never had the pleasure, getting kicked in the teeth is more than moderately unpleasant. Let's take a look, shall we? 

​ 

Readers will see the Rising Wedge pattern of bearish reversal that we discussed in the past as a threat to the share price. ​Unfortunately, the Double Bottom pattern of bullish reversal that we talked about last week, simply failed. The real danger is not the speed at which this stock moved towards its 200-day SMA after losing contact with its 50-day SMA. The danger is that the stock gave up its 200-day line without a fight on Thursday. 

This forces professional managers to reduce exposure to the name. The summer low bore a $142 handle. The stock could be going there. Hence, there could be something else that bails the stock out of this tailspin. 

Palantir will report after the closing bell this Monday, Feb. 2. Wall Street is looking for an adjusted earnings per share of $0.23 on revenue of $1.34 billion. That would compare well to the year ago comp of $0.14 while the sales print would be good enough for annual growth of better than 62%. 

Oh, and of the 21 sell-side analysts that I track that cover PLTR, all 21 have revised their estimates higher since the start of the period. All CEO Alex Karp has to do on Monday is get a good hold of a fastball down the middle with no movement on it and drive that ball into the seats. Now, helmets, flak jackets, gas, masks on the hip. I want clean socks in your ruck and at least two quarts of water on every one of you. Full battle rattle... let's go.

Economics

(All Times Eastern)

08:30 - PPI (Dec): Expecting 0.2% m/m, Last 0.2% m/m.

08:30 - Core PPI (Dec): Expecting 0.3% m/m, Last 0.0% m/m.

08:30 - PPI (Dec): Expecting 2.9% y/y, Last 3.0% y/y.

08:30 - Core PPI (Dec): Expecting 3.0% y/y, Last 3.0% y/y.

09:45 - Chicago PMI (Jan): Expecting 43.1, Last 43.5.

1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 544.

1:00 - Baker Hughes Oil Rig Count (Weekly): Last 411.

The Fed 

(All Times Eastern)

5:00 - Speaker: Reserve Board Gov. Michelle Bowman.

Today's Earnings Highlights 

(Consensus EPS Expectations)

Before the Open:  (APD)  (3.04),  (AXP)  (3.55),  (CVX)  (1.46),  (CL)  (.91),  (XOM)  (1.70),  (VZ)  (1.06)

At the time of publication, Guilfoyle was long PLTR equity.