Market Briefing For Tuesday, Dec. 28

'Treacherous' is the term widely-applied to the coming dichotomy of 2022. It's both a question of 'living with' COVID, and as we emerge from the chronic phase of the virus into relatively normal life, and whether 'living with Fed monetary policy 'snugging-up' is going to be challenging in a different way.

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As I've indicated, and it's over-simplification, we'll see a couple volatile phases perhaps of the 10-20% swing proportions in the S&P, albeit not instantly here. If all this migrates into later phases of the 'Roaring '20's' (generally describes the emergence from COVID), we'll get some drama, but in both directions.

Executive summary:

  • Tax-selling should be out of the way, as future sales will settle in 2022.
  • Small-caps are mixed, with higher volume often implying transfers from those bailing-out to nail down losses while others absorb for rebounds.
  • There are lower prospects for higher tax rates, though those may arrive.
  • Importantly, U.S. LNG (natural gas) sales to Europe are underway, and it is proper the United States provides gas, not letting them rely on Russia (UNG).
  • Oil & Gas stocks continue acting well and are expected to remain stable.
  • Russia withdrawing 10,000 of their troops from Ukraine's border regions, a perceived sign of goodwill ahead of more negotiations in Geneva.
  • China is questioning what's 'really' in Starlink satellites, as they verbally attack Elon Musk (certainly his posture in China is slightly delicate) after 'their' space station had to shift orbit to avoid collision with the U.S. birds.
  • One Beijing story accused SpaceX/Starlink of 'seeding' orbiting weapons, a) I don't think Musk would be cooperating on that, b) that's China's game some say, and c) the satellites are physically too small to be weapons, so d) they are indeed linked (by LightPath (LPTH) infrared?) to encircle the globe with internet carriage capabilities, where faster fiber isn't available.
  • Over the weekend, Sorrento (SRNE) upwardly-revised a shelf-offering incredibly to the level of $5 billion, more than double the company's market cap.
  • No reason for this unless: a) building out new facilities for CoviStix and/or other forthcoming products, b) convincing FDA they have the capacity to indeed mass-produce CoviStix (although FDA didn't require if of others), c) plan an acquisition or two, d) retire over 200 million notes of Scilex, which carries a large 28 million penalty if extended beyond February, or e) combinations of all of the above (no dilution until they actually 'offer').
  • FDA really needs to authorize 'public health' rapid-testing for COVID, which is the case in Europe and parts of Latin America, the USA has focused on mandating testing verified by medical establishment instead of 'trusting' a public test, approval of CoviStix or similar would update FDA's approach.
  • I took a look at CUE Health, in the high 'teens', which I think is risky since it's an expensive system to check 'near-PCR' COVID levels, require a 'box' for over $200 and about $50 per individual test (HLTH).
  • Only one can be run at a time, hence a family or business of 5, wanting tests run in a 30 minute period would need 5 boxes, so that' over $1000 committed to start with, at the moment that all seems unwieldy.
  • Also 'if' Sorrento gets approved for CoviStix, sensitivity is about the same at a far-lower price (at the moment the NBA and NFL are using CUE and ads appears on-air, so they're getting some play, but maybe temporary).
  • And I'd not get carried-away with Dr. Fauci's comment of 'vax passports' for all flights basically, he said in his 'ideal' world, and that was before the President tossing responsibility for handling COVID back to the states in a conversation with Governors (sort of reversing his original pledge), while saying the Federal Government would be there to assist 'as needed'.
  • Today's CDC reduction of guidelines (to 5-days quarantine or isolation) is probably to satisfy pressure from the Airline industry particularly, however it will be welcomed, despite a few doctors warning about associated risks in what seems like a 'fits & starts' approach to emerging from COVID even before the current wave has crested (probably occurs in January).

Overall... 

Market action is an evolution of the late year pattern, and acceptable if not for sure impressing anyone greatly. The desire with tax-selling ending (aside the few who don't realize future sales will settle next year) should be increasing a bit of upside in smaller stocks, some of which has tried to start in recent days.

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for  more

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