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FSI Macro

Click HERE for the full earnings daily in PDF format. 8 companies are reporting this week. Of the 6 companies that have reported so far (1% of the S&P 500), 67% are beating earnings estimates by a median of 12%. On the top line, 67% are beating by an average of 6%.

COVID-19 UPDATE: COVID-19 cases could be rolling over hard and hospitalizations down. Energy 2021 FOMO could be akin to 2020 Tesla FOMO given many institutions ZERO weighting

Click HERE to access the FSInsight COVID-19 Daily Chartbook. We are shifting to a 4-day a week publication schedule: MondayTuesdayWednesdaySKIP THURSDAYFriday STRATEGY: Energy 2021 FOMO akin to 2020 TSLA FOMO could be happening... It might be too early to call the COVID-19 rollover DECISIVELY happening, but the signs sure seem to be there:- 7D delta in cases accelerating to downside and -46,499 on Thursday- net hospitalizations have turned negative and the incremental hospitalization rate is negative for the first time since September- daily vaccinations hit >900,000 Wednesday and the ratio of vaccinations/cases is >3.5X which is goodSo, even as the US in the midst of winter, it seems like COVID-19 case trends have improved considerably.  But the holiday distortions could still be in effect (making 7D delta look better than it should be).  However, hospitalizations turning down is a very good sign.- down 7D delta is good.  and accelerating! Source: COVID-19 Tracking and Fundstrat  - net hospitalizations turning negative, the first time since Sept! Source: COVID Tracking Project and Fundstrat2020 so far, the start of rotation out of FANG into Energy + FinancialsThe S&P 500 is up 1% in the first two weeks in 2021, essentially a flat market.  But this flat YTD belies a dramatic bifurcation in sector performance. YTD:- Energy            +18%- Financials         +7%- Comm Services -4%- FANG                -5% Source: BloombergInstitutions likely ZERO weight in both Energy and Basic MaterialsOver the past decade, institutional investors have concentrated their holdings in more liquid stocks, a function of both:- big funds gained share = requires larger position size- divergent market liquidity = requires larger position sizeAs a consequence, smaller stocks and smaller sectors have become less relevant.  Take a look at the chart below.  Energy is now the smallest sector in the S&P 500 with a 2.5% weight.  The troubles with this sector are well-known but Energy's weighting is tiny:- GOOG, AAPL, AMZN, FB and other stocks individually have a weighting greater than Energy- In the past 5 years, getting these stocks right have mattered more than getting the Energy call right- In fact, many institutions likely have a zero weighting (why bother) Source: BloombergBut as we wrote in our 2021 Outlook, the re-alignment of the supply/demand outlook for Energy is the most dramatic of any sector.  The new White House is likely to limit future supply growth.  Capital availability is limited as private equity unlikely to bailout the sector like they did in 2016.  And demand is set to recover as the global economy accelerates. FOMO scenario --> Energy in 2021 somewhat akin to Tesla in early 2020Early in 2020 (Feb 4, 2020), our clients might recall we wrote about how TSLA was likely to cause Russell 1000 Growth manager FOMO. At that time, we noted that the many Russell 1000 Growth managers had a zero weighting in TSLA but TSLA's early 2020 surge was causing fund manager underperformance.- and we posited that if Russell 1000 managers went to a benchmark weighting of 0.7% (from 0%), it would likely cause a parabolic surge- We see a similar set-up for Energy stocks in 2021 Source: FundstratThis is where the 2021 FOMO set up can take place.  - Energy stocks ~20% surge driving fund manager underperformance- Many institutional investors have ZERO weighting in Energy- Energy fundamentals could improve in 2021, reversing 4-years of misery- Energy stocks trade below replacement cost = P/B ~1.0 similar to FinancialsIf this happens, Energy stocks could go parabolic in 2021. Source: FundstratSector divergence in the first two weeks of 2020 was a good leading indicator of full year leadershipIn 2020, the sector divergence by mid-Jan 2020 proved to be a leading indicator of full year sector leadership.  As shown below, FANG and Technology led early in 2020.  While Energy and Materials were the worst.  - guess what sectors were the worst for 2020?- this could be a repeat in 2021 --> look at who is leading Source: Bloomberg Energy remains one of our top 3 sectors for 2021... Thus, we see a catch-up trade coming.  Energy remains one of our top 3 sectors for 2021 (others are Industrials and Discretionary).  But as we warned, Energy is the least consensus and most risky/tricky. - Energy is 2.5% of the S&P 500 index- Anything above 2.5% of your portfolio is an overweight in Energy- Most institutions have ZERO weight, so there is upsideBelow is our trifecta stock lists (*) for Energy and Basic Materials (since copper up).  These are trifecta because it is OW by: DQM (quant by tireless Ken), Global Strategy (Rauscher) and Technicals (Sluymer). Energy (9 stocks):HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XECBasic Materials (11 stocks):LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON Source: Fundstrat and Bloomberg and FAMA (*) These 20 Energy+Material Trifecta stock ideas are the subset of the Epicenter Trifecta stock list we published on December 11th, 2020. To view the full list of stock idea, click here. Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile. ADDENDUM: We are attaching the stock lists for our 3 portfolios:We get several requests to give the updated list for our stock portfolios.  We are including the links here: - Granny Shots  -->       core stocks, based on 6 thematic/tactical portfolios- Trifecta epicenter  --> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)- Biden vs Trump  -->   based on correlation to either candidate odds Granny Shots:Full stock list here --> Click hereTickers: AAPL, AMZN, AXP, BF.B, CSCO, EBAY, GOOG, GRMN, GWW, INTC, KLAC, LEN, LOW, MNST, MSFT, MXIM, NVDA, OMC, PM, PYPL, QCOM, TSLA, XLNX Trifecta Epicenter (*):Full stock list here --> Click hereTickers: AN, GM, F, HOG, GRMN, LEG, TPX, PHM, TOL, NWL, HAS, MAT, PII, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, LB, CRI, VFC, GPC, BBY, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, SBNY, NYCB, MTG, AGNC, EVR, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, MMM, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XEC, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, STOR, HIW, CPT, UDR, KIM, NNN, VNO, JBGS, RYN Biden White House vs. Trump White House:Full stock list here --> Click here (*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile. POINT 1: Daily cases rolling over HARD (holiday seasonality still at play)... daily cases 215,833, -46,499 vs 7D agoThe latest COVID-19 daily cases came in at 215,833, down -46,499 vs 7D ago.  - After turning negative two days ago, the 7D delta in daily cases continues to fall.- Hard to tell how much is still holiday distortion. Source: COVID-19 Tracking Project  and FundstratThe 7D delta has turned negative for the past three days- although we need more days of negative 7D delta to affirm this trend reversal in daily cases, the negative 7D delta is a positive sign. Source: COVID-19 Tracking and Fundstrat  US hospitalization rolling over ... Below we show the aggregate patients who are currently hospitalized due to COVID. It certainly seems to be rolling over = good sign. Source: COVID Tracking Project and FundstratThe incremental hospitalization rate has actually turned negative.  So there are now more patients being discharged, than admitted.  This is a great sign given the vaccines are just starting to be pervasive. Source: COVID Tracking Project, FundstratAt the state level, the daily cases for almost all states are falling. Louisiana has the largest increase in daily cases vs. 7D ago. However, the increase is only +792. FL, TN and NY all see huge declines in daily cases - all of them have ~4,000+ fewer cases vs. 7D ago.  Source: COVID-19 Tracking and Fundstrat  Source: COVID-19 Tracking and Fundstrat   POINT 2: Pace of vaccinations reached >900k this week, and ratio vaccines/infections still >3.0The CDC vaccination tracker shows 792,709 vaccinations were administered across the US. And total10.6 million Americans have received a vaccination- a week ago, 5.6 million, so 2X in 1 week- while not quite reaching 1 million Thursday, the pace is really picking up Source: CDC and FundstratThe ratio of vaccinations/daily cases is still >3.0 and reached 3.9X this week.  In any case, this ratio indicates more people are getting vaccinated than getting infected.  So a higher number is better. Source: CDC and FundstratWeekly % of the population vaccinated by states... And as we close out this week, below are the states with the highest weekly vaccination rates. That is the percentage of the population that was vaccinated in the past week.  Utah was the highest at 3.2%. Source: CDC and FundstratPOINT 3: Great idea --> US companies offering employees incentive to get vaccinatedUSA Today has an insightful story of how companies are offering their employees bonuses/incentives to get the COVID-19.  So far, it looks like 3 companies are doing this, but we expect the list to grow in the coming weeks, particularly as vaccine supplies increase.  In this story, the companies are:- Instacart            $25 incentive- Dollar General   4 hours of pay- Trader Joe's      2 hours of pay /story/money/business/2021/01/14/covid-vaccine-dollar-general-instacart-pay-employees-getting-vaccine/4160708001/The companies are offering these incentives to make sure employees do not have to choose between working or getting vaccinated.  Thus, this payment is to cover the cost of taking the time to get this vaccine. The employees of these firms are essential workers and indeed are providing a critical function for the US economy.  And moreover, essential workers can be a focal point of spread -- thus, offering incentives is a great idea. Last week, we also noted that a hospital system in Texas was offering a large $500 payment to get the vaccine as well.  This again has the same rationale.

Big Tech's De-platforming Binge Highlights The Need For Web 3.0

Following the U.S. Capital riot last week, Big Tech coordinated the de-platforming of President Trump. Twitter followed suit by suspending 70,000 accounts associated with the far-right QAnon conspiracy theory group. Parler, the social media platform billing itself as a “free-speech paradise” was the next target as Apple and Google banned the mobile app from their app stores and Amazon Web Services stopped hosting Parler’s website. Although the effort is arguably justified for several reasons, these actions raise questions about the state of “cancel culture” and the amount of unilateral power these centralized tech companies have accrued. If a sitting U.S. President can be de-platformed, does that mean everyone of us is also at risk of being cut off? Evidenced by Cambridge Analytica and other scandals, Big Tech has been exploited by malicious foreign actors to manipulate its users. Are the interests of Big Tech and its advertising-based business model aligned with those of its users? Source: Wired These are hard problems, and I have no doubt Jack Dorsey and other Big Tech leaders are well intentioned in their crusade to minimize harm and stop the spread of bad ideas. However, by censoring and de-platforming droves of its users, Big Tech is only enflaming them and causing further entrenchment in their previously held beliefs, as ill-advised as those beliefs may be. Excommunicating users is an extraordinarily consequential punishment that can be imposed with no due process by monopolies on a whim. Public discourse is a pillar of our democracy, and although misinformation and bad ideas may be propagated on these platforms, it is only through public discourse that we are able to explore a full diversity of ideas and discover what is true. Any intellectual pursuit carried out with rigor requires the exploration of a wide set of ideas and hypotheses, even though the majority of these ideas will be rejected as the investigator inches closer to the truth. The marketplace of ideas must be open for us to effectively separate good and bad ideas, and any centralized arbiters with outsized authority will inject their implicit and explicit biases to steer the conversation and alienate certain groups. Instead of cultivating “filter and preference bubbles” in which Big Tech’s AI algorithms foster the creation of personal echo chambers of ideas, Twitter’s algorithms should encourage a wider spectrum of debate. Rather than parrot the same idea leading to confirmation bias and a reinforcing of one’s original perspective, Twitter should display comments from individuals with opposing viewpoints and opinions. Flipping the business model incentive structure The incentive structure of the leading social media platforms is in conflict with the wellbeing of their users. Their ad-based business model relies on the monetization of attention, which is encapsulated in the phrase, “if you’re not paying for the product, you are the product.” By monetizing attention, Facebook and Twitter’s algorithms are implicitly programmed to push the buttons of their users, often tipping discourse towards outrage and dissonance. As is hardwired in our psychology, fear and outrage provokes an emotional response that maximally captures our attention. One recent study concluded that anger makes people more vulnerable to misinformation and more likely to be highly confident in the accuracy of their memories. However, the more confident subjects were, the less accurate were their memories. “Cancel culture” may also tip into our finances. As our activities and identities become further intertwined with the digital realm, our ability to engage in day-to-day business transactions and interact with basic financial products and services may be compromised if we fail to follow the status quo.   To address these issues, young Web 3.0 platforms are experimenting with different business models and incentive structures to empower their users instead of manipulate them. Crypto is enabling the Web 3.0 evolution, in which users can seize control of their data and demand privacy as they interact with new decentralized applications that have no ability to manipulate or censor the user.   By removing advertisers and precluding the brokering of user data, Web 3.0 platforms can implement more ethical standards for user behavior in the attention economy. Crypto Web 3.0 platforms may integrate a token that appreciates in value as users flock to the platform, further aligning the interests of developers, token holders, users, and other stakeholders. Users may be able to port their Facebook, Twitter, and Shopify data, tokenize it, and then fully destroy or port it over into a user-owned economy of decentralized applications (dApps). Users would have increased choice in new open platforms, and the emergence of legitimate dApps would limit mass censorship. The Big Tech platforms would still exist, but they would be largely defanged as the Web 3.0 ecosystem would serve as a powerful check-and-balance. Source: Twitter Privacy-focused crypto assets Horizen and Zcash caught a bid in the wake of the de-platforming uproar, appreciating 85% and 66%, respectively, since the events on Capitol Hill last week. Horizen is a Web 3.0 platform that gives users control of their online data with its blockchain cloud computing platform for financial services, peer-to-peer messaging, media, and third-party decentralized applications. Zcash is a fork of Bitcoin that implemented ZK-SNARK cryptography to provide enhanced privacy for its users. These assets and others stand to benefit greatly if Big Tech cannot clean up their act and the Web 3.0 thesis comes to fruition. Source: FSInsight, CoinMetrics As Web 3.0 platforms begin to challenge incumbents, Big Tech will need to disrupt themselves and introduce new business models to retain market share. However, advertisers and the attention economy produced over $533 billion in annual 2019 revenue for the FANG companies, so they are incentivized to cling on to their existing business models for as long as possible.

Ford (F): A Flagship ‘Epicenter’ Stock With EV Upside and Great Management

In a world where Elon Musk is building electric cars and spaceships and launching his cars into space with his spaceships, Ford may seem like your father's grand-fathers, and you can't say this for many companies, but maybe even great-grandfather's stock. We think this sentiment couldn't be further from reality. Aside from ample idiosyncratic tailwinds, which we will discuss further below, we also believe that Ford is bringing to fruition the fate we have predicted for so many ‘Epicenter' stocks; booming post-pandemic demand for their products, significantly better operating leverage, and thus earnings per share, and the type or do-or-die cuts and restructuring that only true crises can engender. Ford has an exciting lineup of new models, credible plans to expand internationally, has made impressive and tangible strides in innovation, and its prodigious lending arm, Ford Credit, just had its best year in well over a decade. The last point: Ford’s massive financial services subsidiary has been the lynchpin in bearish arguments for why the company would falter. In what will likely be a very hot post-pandemic economy with a steepening yield curve, this supposed albatross will likely create significant upside that is not predicted by historically informed forecasts. Everybody knows the dated narrative still pervasive among some investors; the Big Three of the American auto industry are uncompetitive, saddled with expensive legacy costs and dilapidated factories, and late to the party on electric vehicles. The narrative almost has a 'Fall of Rome' quality to it—Of course, once Rome stopped paying off the Visigoths (Or the UAW in Detroit’s case), it fell. Investors who lump Ford into this narrative would have been wrong for decades now. If you examine Ford’s financial statements closely, you'll see that their worst quarter of the pandemic was fortuitously hedged by a $3.5 billion gain from investments in AI and self-driving technology. Does that sound like a management team that has allocated capital poorly? Last quarter, the company reported that it had organic margin expansion via rising prices because of unexpectedly healthy demand. Its new products are in even higher demand than existing ones. Thus, this trend will likely only accelerate as the pandemic recedes, and Ford's primary consumers have their balance sheets bolstered with robust stimulus. This suggests that historically informed forecasts for demand are likely too low. Source: Trefis, Thinkorswim As you can see, with slightly more optimistic assumptions than those which are informed by historical data, the implied valuation is significantly augmented. New Product Lineup: BEVs (Battery Electric Vehicles) Are Great Alone, But Better with ICE (Internal Combustion Engines) Our Head of Research, Tom Lee, got his start as a wireless analyst in the 1990s, and he has said that he sees multiple parallels between electric vehicles now and wireless in the nascency of his career. So, we undoubtedly have faith in electric vehicles’ eventual dominance. That doesn’t mean there isn’t exuberance in some names. With Ford, you get a two for one. Not only are you getting exposure to the multiple-expanding, very 'growthy' electric vehicle market; you are also getting a flagship 'Epicenter' stock that is poised to outperform the market because of a once in a lifetime cost reset. This, coupled with the impressive and trustworthy management, which the current products reflect, makes us think that Ford still has much upside even though it is near new highs for the year. The pace of EV’s gains in market-share will eventually be heightened by multiple secular tailwinds. Right now, there are still many obstacles to achieving the type of full-scale ICE substitution that some valuations would suggest; one of them is the power grid's inability to support such a reality currently. The point is that particularly in the domestic American market, which is by far Ford's largest, demand for old-fashioned gas burners will remain foreseeably intact. Even if you’re worried about that trend in the future, Ford seems to be on top of it. The all-electric Mustang Mach-E just won the award for Best SUV of 2021, and the F-150 simultaneously won for Best Truck, the first time two of the three awards have gone to the same brand since 2014. The new lineup of Ford Broncos is already saturated with pre-orders, and post-COVID-19 consumer trends actually appear to work in Ford’s favor. It will be poised to grow its base business in ICE in size and profitability while also being a major player in the shift to all-electric (including the all-electric F-150). This goldilocks zone that Ford occupies means reaping great margins from very in-demand and high-margin ICE models while also being exposed to EV’s ascent.  Ford can do better than many people think in the EV world for a few reasons. Firstly, Ford still qualifies for the $7,500 tax credit that TSLA has long-since outgrown. This will have a measurable effect on a product subject to very elastic demand, particularly when the quality is now confirmed to be about equivalent to chief competitors (and is already profitable for the company). The other thing is that many Americans still don’t want to buy an electric vehicle. We think Ford’s bet that they can entice consumers to give electric a chance using flagship brands and high-quality vehicles while also taking the company to have recurring revenue streams from software and AI is exactly what the company should be doing. This should positively affect Ford's multiple over the coming years. Source: Company reports. Valuations for auto manufacturers are notoriously discounted due to the ever-present risk of fickle consumer attention to brands and products. Ford has suffered as much from this over the years as any automaker. Still, it’s the impeccable management team and steady, transparent strategy seems to show that leadership is ahead of the curve and has the re-invigoration of one of America's most treasured brands well-in-hand. Exciting Management at Ford We are fans of the record and energy that Ford’s new CEO, Jim Farley, brings to the table. Farley, whose first cousin is the late, great Chris Farley from SNL, is an absolute car fanatic whose first conversation with Bill Ford upon exploring his potential ascent to the top job was telling the company’s patriarch that a condition of him accepting was that he is not prevented from his dangerous hobby of racing cars. He may understand the relationship between vehicle and consumers better than anyone in Detroit since Lee Iacocca. Jim Farley may not build spaceships, but nobody in the world knows how to sell cars better. In fact, some of Toyota's most impressive inroads against the American automakers were at his direction; he led the formation of Toyota's luxury brand, Lexus, and led marketing efforts on some of their best-selling vehicles.  Betting against Jim Farley and Ford's most exciting lineup in years seems unwise to us. Farley is the guy who can finally make Ford shine. A Toyota man running Ford, we like the sound of that. The Bottom Line Ford is one of our ‘Trifecta’ Epicenter stock picks, meaning that all three of our research departments recommend it. We see it benefitting from the same forces that attract us to 'Epicenter' and multiple idiosyncratic factors unique to Ford. The company’s valuation risk is significantly less than all-EV companies and we think its Price/Cashflow and Price/Book indicate that the stock is still a bargain even at new highs. Source: Morningstar Where We Could Be Wrong Ford recently had to shut down production in some factories due to a shortage of microchips. Shortages in other components and rising commodity prices could hurt margins. However, our thesis's largest risk is still the unpredictable path of COVID-19. Since production has already been shut down for significant periods this year, further delays in production or the failure of the demand to continue recovering because of adverse healthcare outcomes are primary risks. Disclosures This research is for the clients of FS Insight only. For additional information, please contact your sales representative or FS Insight at /. Conflicts of Interest This research contains the views, opinions and recommendations of FS Insight. At the time of publication of this report, FS Insight does not know of, or have reason to know of any material conflicts of interest. General Disclosures FS Insight is an independent research company and is not a registered investment advisor and is not acting as a broker dealer under any federal or state securities laws. FS Insight is a member of IRC Securities’ Research Prime Services Platform. IRC Securities is a FINRA registered broker-dealer that is focused on supporting the independent research industry. 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All pricing is as of the market close for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, risk tolerance, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies. The recipient of this report must make its own independent decision regarding any securities or financial instruments mentioned herein. 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COVID-19 UPDATE: Alternative 'big data' shows stronger global boom vs consensus = OW Energy + Materials.

Click HERE to access the FSInsight COVID-19 Daily Chartbook. We are shifting to a 4-day a week publication schedule: MondayTuesdayWednesdaySKIP THURSDAYFriday STRATEGY: China economy = boom now.  Energy stocks need to catch-up to Oil + CopperDaily COVID-19 cases are rolling over --> hopefully for real now that holidays are behind us... Daily COVID-19 cases fell -3,031 compared to 7D ago.  This is the first drop since December and coming during a potentially clean week -- a period that is not impacted by holiday closures/etc.  This is interesting and potentially positive, because it could be COVID-19 cases are finally rolling over in the US.- if cases are rolling over now, AND the vaccine works, we could see a sharp decline in US cases in the coming weeks- but we need to see multiple days, and hopefully weeks, of negative 7D delta to affirm this- so for now, it is a good thing, but a mere artifact, at the moment Source: COVID-19 Tracking and Fundstrat  Big data showing boomy conditions in 2021... Even as COVID-19 spreads rapidly around the world, the global economy is staging an impressive recovery.  The contemporaneous data shows this -- recent PMIs, etc -- and many forward looking indicators.  In fact, the steepening of the 30Y less 10Y is one of the strongest signals for continued strength.  Our clients recall that we have shown that since 1987, the 30Y less 10Y curve has led the ISM by 17 months, pointing to strengthening growth in 2021. Deep Macro, the big data macro intelligence firm, has alternative data that is also suggesting boomy conditions in 2021.  Deep Macro is one of our favorite independent economic providers, and is led by Jeff Young.  Their data shows that global manufacturing is on the upswing and this growth is accelerating.- yes, global GDP growth is accelerating, not peakingBelow is their datasets for NO (nitrogen oxide concentrations) and is showing YoY change. The regions for China and global are shown.- The China data shows a massive surge YoY, reaching >20% in November and continuing positive in Jan- Global NO is accelerating in January, and looks to surpass the November levels- If the global data is correct, GDP growth globally is gaining strength STRATEGY: Copper and Oil suggest a big catch-up trade in Energy ahead... Deep Macro data suggests that cyclical strength stronger than consensus expects.  In fact, Copper is up +27% since the start of 2020, and as many know the adage, Dr. Copper is smart and rises when economic growth is accelerating.  So the natural question is, what is the obvious trade?- Long Energy- Long CyclicalsThere could be a considerable catch up trade for Energy in 2021.  Look at Energy and Energy Services compared to Copper and Oil. Since the start of 2020:- Copper        +27% - Oil                  -5%- Energy          -38%- Oil Services  -39%Notice the gap?  Energy companies have SLASHED costs.  - operating leverage higher- EPS potential greater If there is a bull market starting in Energy, we may be in the earliest days.  Below is the price performance of Energy stocks in the various bull markets since WWII.  The current bull market is marked in light blue:- Bull runs seem to last 3 years or more- Typical gain is 5,000-7,500bp relative to S&P 500- So far, 2,500bp. - Could be early days? Source: Fundstrat and Bloomberg and FAMAEnergy remains one of our top 3 sectors for 2021... Thus, we see a catch-up trade coming.  Energy remains one of our top 3 sectors for 2021 (others are Industrials and Discretionary).  But as we warned, Energy is the least consensus and most risky/tricky. - Energy is 2.5% of the S&P 500 index- Anything above 2.5% of your portfolio is an overweight in Energy- Most institutions have ZERO weight, so there is upsideBelow is our trifecta stock lists (*) for Energy and Basic Materials (since copper up).  These are trifecta because it is OW by: DQM (quant by tireless Ken), Global Strategy (Rauscher) and Technicals (Sluymer). Energy (9 stocks):HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XECBasic Materials (11 stocks):LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON Source: Fundstrat and Bloomberg and FAMA (*) These 20 Energy+Material Trifecta stock ideas are the subset of the Epicenter Trifecta stock list we published on December 11th, 2020. To view the full list of stock idea, click here. Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile. ADDENDUM: We are attaching the stock lists for our 3 portfolios:We get several requests to give the updated list for our stock portfolios.  We are including the links here: - Granny Shots  -->       core stocks, based on 6 thematic/tactical portfolios- Trifecta epicenter  --> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)- Biden vs Trump  -->   based on correlation to either candidate odds Granny Shots:Full stock list here --> Click hereTickers: AAPL, AMZN, AXP, BF.B, CSCO, EBAY, GOOG, GRMN, GWW, INTC, KLAC, LEN, LOW, MNST, MSFT, MXIM, NVDA, OMC, PM, PYPL, QCOM, TSLA, XLNX Trifecta Epicenter (*):Full stock list here --> Click hereTickers: AN, GM, F, HOG, GRMN, LEG, TPX, PHM, TOL, NWL, HAS, MAT, PII, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, LB, CRI, VFC, GPC, BBY, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, SBNY, NYCB, MTG, AGNC, EVR, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, MMM, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XEC, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, STOR, HIW, CPT, UDR, KIM, NNN, VNO, JBGS, RYN Biden White House vs. Trump White House:Full stock list here --> Click here (*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile. POINT 1: Cases rolling over again (for REAL?)... daily cases 205,408, -3,031 vs 7D agoThe latest COVID-19 daily cases came in at 205,408, down -3,031 vs 7D ago.  - After being positive for two weeks, the 7D delta in daily cases finally turns negative today- as we wrote previously, the holiday effect was going to cause distortions for several weeks- and based on previous experience, it normally takes two full weeks before the underlying trends were visible- We were expecting mid-Jan is when we can start to get a better handle on trends. As we are gradually approaching mid-Jan, the trend starts to become more visible.- We expect the 7D delta in daily cases will continue to be choppy for a few days until Friday when the holiday data distortion should fade away. Source: COVID-19 Tracking Project  and FundstratThe 7D delta finally turned negative today- if you look at the chart closely, you will find the two days with the highest 7D delta are Jan 1st (7D following Christmas) and Jan 8th (7D following New Year's Day).- although 7D delta in cases is supposed to be impacted by the holiday distortion for another two or three days, the negative reading is a good sign Source: COVID-19 Tracking and Fundstrat  If one thing really worries me, it would be those epicenter states in Wave I and II still have the highest daily cases. Especially for the epicenters in Wave II, aka F-CAT (FL, CA, AZ, TX), they are all among the top 5 states with most daily cases today.- #1 CA 36,487- #2 TX 22,110- #3 NY 15,214!!!- #4 FL 14,896- #5 AZ 8,559  Source: COVID-19 Tracking and Fundstrat  Source: COVID-19 Tracking and Fundstrat  POINT 2: Vaccinations reach 8.9 million today. The pace slows due to several states without stats updateAccording to the CDC vaccination tracker, 330,054 more vaccinations were given today. This number is relatively low compared to the sharp surge in daily vaccines administered in the past few days. This is primarily because 10 states (AR, FL, IA, KY, MD, ME, NE, NY, VA and VT) did not update their stats on CDC website. However, we do not believe these states suddenly stop giving vaccines to their people. Instead, this is more likely a data issue and tomorrow there should be a catch-up update for these states. Hence, we still expect US to reach 1 million vaccines administered per day this week.- 8.9 million Americans have received a vaccination- a week ago, 4.3 million, so 2X in 1 week- we still believe the pace is ramping up sharply.- we expect US to reach 1 million per day this week Source: CDC and Fundstrat Source CDC and Fundstrat45 states have more than 2% of the population vaccinated... Below we have plotted the cumulative vaccination rate (% population vaccinated) by states and sorted high to low.  - so far, 45 states have more than 2% of the population vaccinated.- WV, SD, ND and AK are the states with the highest cumulative vaccination rate, >5%.- AZ, MS, GA and AL are falling behind with less than 2% of the population vaccinated. Thus, the good news is the US is now getting ahead of the curve on vaccinations. Source: CDC and FundstratWeekly % of the population vaccinated by countries... UAE has 6% of its population vaccinated every weekYesterday, we showed the implied weekly pace that state's population is getting vaccinated. and recall, this is based on:- reported vaccinations for the last 3 data points- converted to the weekly rate- calculated as % of the populationBelow we have used the same methodology and plotted the implied weekly vaccination pace for countries.- UAE: 6.2% of the population in UAE are getting vaccinated every week. And according to the table below, UAE also did a great job protecting its people from catching COVID. So far, only 9% of its population is ever infected.- Israel: current vaccination pace for Israel is 3.3% per week and 22% of its population are already vaccinated. More comments are below.- US: compared to other countries, US's pace is actually not bad especially as the vaccination pace in US is ramping up. If US could achieve 1 million doses per day by this week, then the implied weekly vaccination rate would increase to 2.2% (7 million doses / 323 million population), just below UAE and Israel. Source: Our World in Data, CDC, and FundstratIsrael's daily COVID cases development might be the most worth-tracking chart in the worldWe currently estimate about 23% of Israel's population infected COVID already (table below). As shown below, about 22% of Israel's population have been vaccinated. Hence, in 4-5 weeks (if Israel maintains the current vaccination rate), Israel should be able to reach the 60% infection + vaccination threshold. The level of 60% is widely viewed as the level to achieve herd immunity. Therefore, COVID vaccination development in Israel is worth watching. If the daily new cases in Israel start to slow down dramatically, it would be a roadmap for the world to end this pandemic. Source: Johns Hopkins, Our World in Data and FundstratBelow is the detail of the COVID vaccination progress by countries. The table is sorted by the implied weekly vaccination rate. And US is currently #5. Source: Our World in Data, CDC and FundstratPOINT 3: Capital storming turned into super-spreader event? Lawmakers are testing positive for COVID-19 Last week's takeover of the Capital shocked the world, even as financial markets ultimately shrugged its shoulders.  But the storming of the capital created multiple conditions to become a superspreader event:- thousands of people entered the Capital building, many of whom were not practicing mitigation measures- lawmakers were sequestered into crowded safe rooms, many shoulder to shoulder- many lawmakers and staff refused to use masks while in these roomsThe VOX is reporting that already 5 lawmakers have tested positive for COVID-19. Source: /2021/1/12/22227047/lawmakers-positive-coronavirus-capitol-lockdown-laturner-jayapal-coleman-schneiderThe list of those is below and is more Democrats than Republicans.  This could be an issue if those lawmakers are incapacitated in any upcoming votes. Source: /2021/1/12/22227047/lawmakers-positive-coronavirus-capitol-lockdown-laturner-jayapal-coleman-schneiderAnd if you are wondering how this happens.  As the abstract below notes, many refused masks.  Now I realize not everyone agrees that masks prevent spread.  But we can all agree that being in tight quarters raises the risk of transmission.- So ultimately, we can blame the protestors for creating this superspreader event- more cases might emerge in subsequent days Source: /2021/1/12/22227047/lawmakers-positive-coronavirus-capitol-lockdown-laturner-jayapal-coleman-schneider

COVID-19 UPDATE: Vaccinations reach 8.5 million, 2X vs week ago. CA woefully behind. Mondays have been the worst day of the week for the past two months.

Click HERE to access the FSInsight COVID-19 Daily Chartbook. We are shifting to a 4-day a week publication schedule:- Monday- Tuesday- Wednesday- SKIP THURSDAY- Friday STRATEGY: 6 of the past 7 Mondays, S&P 500 has been down... The CDC only provides vaccination data 5 days a week, so Monday reported figure is actually for 3 days worth.  So it can be lumpy if one is watching the reported daily figures.  Still, the pace of vaccinations in the US continues to surge. - 8.5 million Americans have received a vaccination- a week ago, 4.3 million, so 2X in 1 week- still, you can see the pace is really ramping up sharply.- we expect US to reach 1 million per day this week Source: CDC and FundstratUS vaccinating at 3X the rate of confirmed cases = getting ahead of the curve... We have plotted the vaccinations vs confirmed cases ratio and you can see this has ramped up to 3X currently.  - at 1 million per day, this would be ~5X- at 5X, the US is vaccinating faster than estimated infectionsThus, the good news is the US is now getting ahead of the curve on vaccinations. Source: CDC and FundstratWeekly % of the population vaccinated by states... Nebraska could reach 30% of the population by MarchAt the state level, we also calculated the weekly pace that the state's population is getting vaccinated.  This is based upon:- reported vaccinations for the last 3 data points- converted to the weekly rate- calculated as % of populationLeading the US are Nebraska and West Virginia.  At Nebraska's pace, 30% of the population will be vaccinated by early March.  Wow - CA is near the bottom, at only about 1% per week Source: CDC and Fundstrat But the slowness in rolling out the vaccine is also simple logistics.  Look at the tweet from Arizona below.  The state has over 50,000 available appointments, and 43,960 have registered.- the state has more openings (50,000) than actual appointments.- so like less than half of available inventory is spoken forYikes Source: TwitterDaily cases are flattening too, based upon 7D delta in daily cases.  There is some distortion due to the holiday periods, but by the end of this week, we should be fully clear of these distortions.  And while some states are still seeing gains, like CA and NY, many of the hardest hits states in Wave 3 (WI, IL, ID, ND, SD and UT) are seeing a slowdown. Source: COVID-19 Tracking and Fundstrat  Stocks do better Tuesday-Friday and just skip MondayWhile having CNBC in the background, Michael Santoli yesterday mentioned a stat that surprised me.  He said that the weekly low for S&P 500 has been made on Monday in each of the past 6 weeks.  I asked tireless Ken, our head of data science, to provide some context.- 6 of 7 past Mondays, S&P 500 is down - Tuesday, markets up 5 of last 7 weeks, avg gain is +0.5%- Every day except Monday has seen positive gains and high win-ratioSo, I guess this means stocks should be better now that Monday is behind us. Source: BloombergStill using the same rough roadmap for 2021COVID-19 is unpredictable and the renewed post-holiday surge in cases reminds us that the virus remains prevalent.  And the path of equity markets is equally unpredictable but our rough roadmap for 2021 remains as follows:- rally into Feb-April peaking at S&P 500 ~4,000- pullback towards 3,500 - rally into YE towards 4,300 Source: Bloomberg and Fundstrat 2021 Theme #5: Violence in America --> REZI not HONYesterday, we published a list of stocks that have exposure to Violence in America, either by providing security services, production of security equipment or have products in general demand.  Several pointed out that Honeywell has spun out its security unit, as Resideo Technologies.  The ticker is REZI.I should have known this, since my good friend Adam Segel, and stock picker extraordinaire, had talked about this name in late December.  I had no idea this was a HON spin-off.- REZI replaces HONIf you have other names, please send those thoughts my wayStocks that benefit from Violence in cities... We have put together a list of companies that are involved in some aspect of home or personal security.  This is an initial list and it will expand as we find additional ideas. - We are not recommending these stocks, but rather, bringing these stocks to your attention. Video Surveillance- Digital Ally (DGLY)- FLIR Systems (FLIR)- Iteris (ITI)- NAPCO Security (NSSC)- NXT-ID (NXTD)- Recon Technology (RCON)- Stanley Black &Decker (SWK)- Ubiquiti (UI)Home Security- ADT (ADT)- Alarm. com Holdings (ALRM) - Arlo Technologies (ARLO)- The Brinks Company (BCO)- Fortune Brands Home & Security (FBHS)- Resideo Technology (REZI) - Monitronics International (SCTY)- Vivint Smart Home (VVNT)Personal Security + Other- Axon Enterprises (AAXN)- Image Sensing Systems (ISNS)Drones- AeroVironment (AVAV)- Ambarella (AMBA)- Boeing (BA)- NVIDIA (NVDA)- Parrot (PAOTF)- Plymouth Rock Technologies (PLRTF) ADDENDUM: We are attaching the stock lists for our 3 portfolios:We get several requests to give the updated list for our stock portfolios.  We are including the links here: - Granny Shots  -->       core stocks, based on 6 thematic/tactical portfolios- Trifecta epicenter  --> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)- Biden vs Trump  -->   based on correlation to either candidate odds Granny Shots:Full stock list here --> Click hereTickers: AAPL, AMZN, AXP, BF.B, CSCO, EBAY, GOOG, GRMN, GWW, INTC, KLAC, LEN, LOW, MNST, MSFT, MXIM, NVDA, OMC, PM, PYPL, QCOM, TSLA, XLNX Trifecta Epicenter (*):Full stock list here --> Click hereTickers: AN, GM, F, HOG, GRMN, LEG, TPX, PHM, TOL, NWL, HAS, MAT, PII, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, LB, CRI, VFC, GPC, BBY, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, SBNY, NYCB, MTG, AGNC, EVR, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, MMM, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XEC, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, STOR, HIW, CPT, UDR, KIM, NNN, VNO, JBGS, RYN Biden White House vs. Trump White House:Full stock list here --> Click here (*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile. POINT 1: Daily cases at 195,669, +28,282 vs 7D ago --> still holiday distortionsThe latest COVID-19 daily cases came in at 195,669, up +28,282 vs 7D ago.  - 7D delta rose to ~70,000 last Friday, but don't forget 7 days before last Friday was New Year's Day- hence, as you can see, the holiday effect is going to cause distortions for several weeks- over Thanksgiving, it was not until a full two weeks after Thanksgiving that underlying trends were visible- this will be the case with current data, meaning mid-Jan is when we can start to get a better handle on trends Source: COVID-19 Tracking Project  and FundstratThe 7D delta has been positive since the Christmas weekend- because of holiday scheduled closures/etc, distortions in the data will be prevalent until mid-Jan- so I would look at trends with a grain of salt Source: COVID-19 Tracking and Fundstrat    Source: COVID-19 Tracking and Fundstrat  Source: COVID-19 Tracking and Fundstrat  POINT 2: Vaccinations reach 8.5 million, 2X vs week ago.  CA woefully behindThe CDC only provides vaccination data 5 days a week, so Monday reported figure is actually for 3 days worth.  So it can be lumpy if one is watching the reported daily figures.  Still, the pace of vaccinations in the US continues to surge.  - 8.5 million Americans have received a vaccination- a week ago, 4.3 million, so 2X in 1 week- still, you can see the pace is really ramping up sharply.- we expect US to reach 1 million per day this week Source: CDC and FundstratUS vaccinating at 3X the rate of confirmed cases = getting ahead of the curve... We have plotted the vaccinations vs confirmed cases ratio and you can see this has ramped up to 3X currently.  - at 1 million per day, this would be ~5X- at 5X, the US is vaccinating faster than estimated infectionsThus, the good news is the US is now getting ahead of the curve on vaccinations. Source: CDC and FundstratThe ratio of vaccinations to cases... At the state level, we also calculated the vaccination/case ratio and sorted from highest to lowest.  As shown below, ND and SD are among the best ratio.  Larger states like NY and CA are considerably lower:- NY is at 3.1X which is the national average- CA is at 1.7X, which is among the worst in the US (see below) Source: CDC and FundstratWeekly % of the population vaccinated by states... Nebraska could reach 30% of the population by MarchAt the state level, we also calculated the weekly pace that the state's population is getting vaccinated.  This is based upon:- reported vaccinations for the last 3 data points- converted to the weekly rate- calculated as % of populationLeading the US are Nebraska and West Virginia.  At Nebraska's pace, 30% of the population will be vaccinated by early March.  Wow - CA is near the bottom, at only about 1% per week Source: CDC and FundstratStill, and as we noted above, the ratio of vaccinations to cases is becoming more favorable, meaning the US is gaining traction against the vaccine.   Source: World in Data and FundstratPOINT 3: Personal security devices that are worth a look... We certainly hope that 2021 proves to be a less violent year than 2020.  But the NYC metro area, where our firm has our offices and where I am the most familiar, has certainly become more lawless compared to just even 12 months ago.  And I thought it would be useful to highlight 3 personal security products:- Flare --> personal safety bracelet that can send a silent distress signal with GPS and message- Micro StunGun --> cited by several home security websites- BMW flamethrower (only available in South Africa) --> to deter car jackersThe Flare was named by Time Magazine as one of the best inventions of 2020.  So this product has already received accolades.  This is a battery powered bracelet- pairs with a smartphone- can trigger a fake phone call to get rid of creeps- can send 911/GPS alert if one feels personal security is at risk- can be discreet or stealth alert such as a silent alarm- battery lasts 1-2 years, no need to charge every night (useful) Source: product has a variety of styles and finishes and price points.  And the price points look pretty reasonable at ~$125-ish per device.  - there is no monthly fee- seems like a decent insurance policy Source: second product is a micro stun gun by Vipertek and is a flashlight and stungun combination.  This is available from Amazon. com for $9.98.  Interestingly, this product was mentioned in multiple personal security websites and I don't know if this is because of sponsored placements.  But I thought I would highlight this. Source: /gp/product/B01F8MFGSA/ref=as_li_tl? ie=UTF8&camp=1789&creative=9325&creativeASIN=B01F8MFGSA&linkCode=as2&tag=safety_personal-safety-devices-20&linkId=77429492a4bc607d4a318efa6003b2cfThis has >1,980 reviews.  And I realize many reviews are fake on Amazon. com so we cannot always trust what customers say.  This one below surely seems to be one that is not a sponsored placement. Source: /gp/product/B01F8MFGSA/ref=as_li_tl? ie=UTF8&camp=1789&creative=9325&creativeASIN=B01F8MFGSA&linkCode=as2&tag=safety_personal-safety-devices-20&linkId=77429492a4bc607d4a318efa6003b2cf#customerReviewsThe last product is only available in South Africa.  And I am not sure it is still commercially available today. This is the story from a CNN article, published in 1998, or about 22 years ago. /WORLD/africa/9812/11/flame. thrower. car/This was developed to thwart car jackings in that nation.  Car jackings are still common today.  The product has a flammable gas, fired through 4 nozzles on each side.  And the driver, if threatened, can trigger the flame throwers.- as you can see, this is a strong deterrent to car jackings Source: CNNApparently, this is legal in that nation. Source: /en/research-and-analysis/blogs/stateline/2020/10/21/carjackings-delivery-vehicle-thefts-spike-during-pandemicThe surge in car jackings in the US is pretty surprising. In DC, it is up 117% YoY and in Louisville, KY, it is up 185%.  These are massive increases.

COVID-19 UPDATE: First week of 2021 prove "violence in America" an important investment theme. US vaccinations now 3X daily cases = getting ahead of COVID

Click HERE to access the FSInsight COVID-19 Daily Chartbook. We are shifting to a 4-day a week publication schedule:- Monday- Tuesday- Wednesday- SKIP THURSDAY- FridaySTRATEGY: Week 1 of 2021 proves violence in America an important investment themeUS ramping up vaccinations sharply... pace to hit 1 million per day this week... The pace of vaccinations in the US continues to surge.  The statistics for 1/9 (Saturday) were not released, so we only have data through Friday.  But as shown below:- Friday vaccinations rose +25% vs Thu- Thursday vaccinations rose +31% vs WedSo you can see the pace is really ramping up sharply. Source: CDC and Fundstrat US vaccinating at 3X the rate of confirmed cases = getting ahead of the curve... We have plotted the vaccinations vs confirmed cases ratio and you can see this has ramped up to 3X currently.  - at 1 million per day, this would be ~5X- at 5X, the US is vaccinating faster than estimated infectionsThus, the good news is the US is now getting ahead of the curve on vaccinations. Source: CDC and Fundstrat The amount of vaccine in inventory far exceeds the pace of vaccinations administered.  As Dr. Scott Gottlieb points out, 47 million doses of vaccine have been administered and about 7 million dosed. That is 40 million sitting in inventory. Source: twitter. com And over the weekend, we got more good news as the Pfizer COVID-19 vaccine is shown to work against the new UK mutation.  Thus, the pace of vaccinations remains a key metric to watch. Source: CNN. com 2021 Investment theme #5 --> Personal Security in an increasingly violent USAIn late December (2020), we added a fifth investment theme for 2021  --> Violence in America. At the time, we reflected on the combination of lingering scars:- from nationwide protests and destruction from BLM- shock from COVID-19- loss of faith in Washington and law enforcement from 4 tumultuous years of policyViolent crime has been rising in the US over the past few years.  And we did not think this visible rise in US crime would necessarily recede quickly, even as the US economy seems set to stage a robust rebound in 2021. And the events of the past week in Washington, in my view, are symptomatic of a greater challenge facing America.  That Americans are taking action in their own hands outside of legal avenues, possibly because of the loss of faith in institutions. - it was almost vigilante-like, the storming of the Capital buildingBut is this something worse?  Is America becoming more violent?2020 homicide rates reversed 30-years of progress... According to data by @Crimealytics, Jeff Asher (a freelancer at fivethirtyeight. com), homicides in the US are up 37% in 2020.  That is simply a staggering surge.  In cities at the heart of the BLM protests, the rise is even greater:- Milwaukee     +95%- Minneapolis   +72%- New Orleans  +62% Source: twitter. com So 2020 was clearly a violent year in America.  In fact, Richard Rosenfeld, lead author of Pandemic, Social Unrest and Crime US Cities notes that 2020 homicide rate exceeds the rate of the late-1980s and 1990s.  This is simply astounding- 30 years of crime mitigation have been reversed in a single year- is it reasonable to expect 2021 to be any better? Source: /USA/Justice/2020/1214/2020-s-murder-increase-is-unprecedented.-But-is-it-a-blip#:~:text=This%20year%2C%2051%20cities%20across,this%20year%20over%20last%20year. Taking a step back, if the drivers of crime are the combination of: social dissatisfaction, loss of trust in institutions, and vigilante-like action, then I am not sure this is something that simply reverses if the US economy strengthens.  Moreover, I remember from my criminal justice class in my undergrad years (an elective), increases in criminal activity are difficult to reverse quickly because of the multiple negative feedback loops involved.  In other words, history would say 2020 surge in homicide is not a fluke but an unfortunate turning pointWe know that Americans will want to protect themselves from this increase in violence.  There are simple solutions and more complex:- simple --> more to suburbs/low crime areas --> deurbanization- create distance --> home security, car security, more to suburbs- create deterrence --> sentry products, home and personal security- create defense --> weapons, self-defense- create defense against cybercrime --> security software + Bitcoin Stocks that benefit from Violence in cities... We have put together a list of companies that are involved in some aspect of home or personal security.  This is an initial list and it will expand as we find additional ideas. - We are not recommending these stocks, but rather, bringing these stocks to your attention. Video Surveillance- Digital Ally (DGLY)- FLIR Systems (FLIR)- Iteris (ITI)- NAPCO Security (NSSC)- NXT-ID (NXTD)- Recon Technology (RCON)- Stanley Black &Decker (SWK)- Ubiquiti (UI)Home Security- ADT (ADT)- Alarm. com Holdings (ALRM) - Arlo Technologies (ARLO)- The Brinks Company (BCO)- Fortune Brands Home & Security (FBHS)- Honeywell (HON)- Monitronics International (SCTY)- Vivint Smart Home (VVNT)Personal Security + Other- Axon Enterprises (AAXN)- Image Sensing Systems (ISNS)Drones- AeroVironment (AVAV)- Ambarella (AMBA)- Boeing (BA)- NVIDIA (NVDA)- Parrot (PAOTF)- Plymouth Rock Technologies (PLRTF) ADDENDUM: We are attaching the stock lists for our 3 portfolios:We get several requests to give the updated list for our stock portfolios.  We are including the links here: - Granny Shots  -->       core stocks, based on 6 thematic/tactical portfolios- Trifecta epicenter  --> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)- Biden vs Trump  -->   based on correlation to either candidate odds Granny Shots:Full stock list here --> Click hereTickers: AAPL, AMZN, AXP, BF.B, CSCO, EBAY, GOOG, GRMN, GWW, INTC, KLAC, LEN, LOW, MNST, MSFT, MXIM, NVDA, OMC, PM, PYPL, QCOM, TSLA, XLNX Trifecta Epicenter (*):Full stock list here --> Click hereTickers: AN, GM, F, HOG, GRMN, LEG, TPX, PHM, TOL, NWL, HAS, MAT, PII, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, LB, CRI, VFC, GPC, BBY, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, SBNY, NYCB, MTG, AGNC, EVR, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, MMM, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XEC, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, STOR, HIW, CPT, UDR, KIM, NNN, VNO, JBGS, RYN Biden White House vs. Trump White House:Full stock list here --> Click here (*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile. POINT 1: Daily cases at 217,873, +9,026 vs 7D ago --> still holiday distortionsThe latest COVID-19 daily cases came in at 217,873, up +9,026 vs 7D ago.  - 7D delta rose to ~70,000 last Friday, but don't forget 7 days before last Friday was New Year's Day- hence, the holiday effect is going to cause distortions for several weeks- over Thanksgiving, it was not until a full two weeks after Thanksgiving that underlying trends were visible- this will be the case with current data, meaning mid-Jan is when we can start to get a better handle on trends Source: COVID-19 Tracking Project  and Fundstrat The 7D delta has been positive since the Christmas weekend- because of holiday scheduled closures/etc, distortions in the data will be prevalent until mid-Jan- so I would look at trends with a grain of salt Source: COVID-19 Tracking Project  and Fundstrat Source: COVID-19 Tracking Project  and Fundstrat Source: COVID-19 Tracking Project  and Fundstrat POINT 2: Vaccinations on pace to reach ~1 million Americans per day this weekThe pace of vaccinations is ramping up sharply, as we noted above.  And this increase suggests that vaccinations could reach that 1 million per day pace soon.   Source: CDC and Fundstrat And as we noted above, the ratio of vaccinations to cases is becoming more favorable, meaning the US is gaining traction against the vaccine.  The key is for the states/regions to get to that 60% level of combined infections + vaccinations.  Presumably, daily cases should slow as a region approaches this level.  As shown below, two states are closest:- North Dakota    53% (4% vaccinated + 49% infected)       - South Dakota   51% (4% vaccinated + 47% infected) Source: CDC and Fundstrat I guess the positive news is these 2 states do seem to be showing a pronounced downward trend in cases.  So is this evidence of approaching herd immunity?- maybe... I hope so! Source: Johns Hopkins and Fundstrat Source: World in Data and Fundstrat POINT 3: Positive surprise COVID-19, infection induced remission of Hodgkin LymphomaSometimes out of tragedy is created positive serendipity.  The article from BJH is one such story.   It is about a UK man who was admitted to the hospital with end stage Hodgins Lymphoma.  - this patient caught COVID-19 while afflicted with late-stage cancer and suddenly went into remission Source:  His prognosis was so poor, he was discharged to die at home, with no medicines or treatments given.  This was partially due to the fact he was also infected with COVID-19. Source:  Yet, 4 months later, he survived, and shockingly, it looks like he had a drastic reduction in the levels of tumors across his body (see scans above).  In fact, doctors hypothesized that COVID-19 triggered some type of anti-tumor response.- wow.- does this mean, COVID-19 could play some future role in battling cancer? That would be mind-twisting Source: 

Epicenter Off to Strong Start; Signs of Economic Recovery

Markets wrapped up their first full week of 2021 and after a sloppy stumble on Monday, the S&P 500 managed to recover and close up 1.2% for the week. There has already been a substantial bifurcation of sector performance. Energy is up 9.3% YTD. And of the Epicenter sectors, five out of five are up on a YTD basis. Equities seem to be telling us to expect a pretty vigorous economic recovery in coming months. And we can see this possibility, given the continued ramp in vaccinations and along with better seasonal weather (starting March), COVID-19 cases could turn down sharply. Nevertheless, COVID-19 is unpredictable and the renewed post-holiday surge in cases reminds us that the virus remains prevalent. Daily cases came in at 261,571 on Thursday, a new all-time high and up +41,113 vs one week ago. Keep in mind that the holiday effect is going to cause distortions for several weeks. Over Thanksgiving, it was not until a full two weeks later that underlying trends were visible. This will be the case with current data, meaning mid-Jan is when we can start to get a better handle on trends. On the vaccine front, the developments this week were clear: vaccinations are ramping up. Yesterday about 580,000 doses were administered in the US. This is an impressive daily rise of 31% and inches the US closer to achieving one million per day, at which point about 30% of citizens would be vaccinated by early April. The vaccines have proven effective in trials, but the real world test is whether infections slow after a region has vaccinated >30% or more of its residents.  The nation to watch is Israel.  As data below nearby shows, the % of citizens vaccinated is 17% (up from 6% a week ago) and is on course to hit 30% within 2 weeks. So, this is the real test. Cases in Israel should begin to slow dramatically in coming weeks. And if they do, we see a roadmap for the end of the pandemic. If cases do not slow, this is worrisome and could be an indication that the vaccine does not work. STRATEGY: Epicenter off to strong start to kick off the year There have been some gains posted by Energy stocks YTD, and the sector is the best performing so far, up ~9.3% YTD (short year so far). But take a look at the 10-year price history of Energy vs S&P 500 nearby. The surge in Energy stocks YTD is a mere blip. Even getting to parity with the start of 2020 levels means a +70% more in Energy stocks. And look at the decline over the past decade. Needless to say, if Energy proves to be a leader in 2021, this is just the beginning. Here are the nine stocks that we consider the Energy trifecta that are rated Overweight by each of the three macro teams: HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XEC. But the story does not end at Energy. Five out of five Epicenter stock sectors are in the green on a YTD basis and I continue to view this as a favorable place to deploy capital. That is not to mention that the current economic data has been robust and supportive of the rally in epicenter stocks. Both December ISMs (manufacturing and services) posted very solid beats for the month and are up versus November. In fact, I’d consider these levels to be arguably boomy. Source: FSInsight, Bloomberg Furthermore, investor sentiment remains cautious. The latest AAII Bulls less Bears survey, which is a reliable way to measure retail investor sentiment for older Americans, came in at 12.5 which is a middle of the road reading, and not really indicative of ebullience. And more importantly, expectations for future volatility, as measured by the VIX futures market remain stubbornly high over the next 9 months. As we wrote in our 2021 outlook, periods of high volatility tend to be followed by a collapse in volatility which is supportive for equity markets and suggests a rise in institutional investment. Bottom Line: Investors are not as bullish you may think. Equities seem to be telling us to expect a pretty vigorous economic recovery in coming months and I continue to favor Epicenter stocks. Figure: Way forward ➜ What changes after COVID-19Per FSInsight Figure: FSInsight Portfolio Strategy Summary - Relative to S&P 500** Performance is calculated since strategy introduction, 1/10/2019

Shelton Again Nominated; Consensus on Asset Purchases

President Trump reintroduced the recently rejected nomination of Judy Shelton in the United States Senate on January 4th, the first day of the new legislative session. Obviously, the subsequently occurring Capitol Riot has made the prospect of success about as near-zero as it can be, even though chances were slim prior to the tragic and unsettling event. Minutes were released from the December 15-16th Federal Reserve Open Market Committee (FOMC) meeting, and while they certainly showed that the body is wary of increasing headwinds due to the worsening healthcare situation, they also showed that most Fed governors remain firmly confident of a robust post-pandemic recovery. There was unanimous consensus, a rare thing in Washington indeed, about an ‘outcomes based’ approach to curtailing asset purchases. Essentially, the Fed went out of its way to tell the public that it will do all it can to avoid a repeat of the 2013 ‘taper tantrum’. This removes the prospect of what could otherwise be a nasty downside surprise. The minutes also showed only limited support amongst committee members for purchasing longer-dated US Treasuries as the Fed did in the wake of the 2008-2009 Global Financial Crisis. Senator Brown (D-OH) will become the new Chairman of the Senate Banking Committee after the dual Democratic victories in the Georgia Senate run-offs. We will keep you posted on how the Democratic control of the Senate could affect the relationship between fiscal and monetary authorities. There has been murmuring both inside and outside the Fed of revamping financial regulations. Expect one of the first targets of the Dems to be the recently stripped-down Community Reinvestment Act (CRA). Aside from this major change on the Fed’s most relevant congressional committee, some Federal Reserve members have openly spoken positively about what the prospects for more robust stimulus mean for monetary policy’s effectiveness. Despite the concern of short-term headwinds, a definite bullishness could be detected in the comments of some Fed Governors, like when Jeremy Bullard of St. Louis said this week that “The ingredients for higher inflation are in place, you have a powerful fiscal policy in place and perhaps more to come,” he said before also predicting that the economy is ‘poised to boom’ after the pandemic. Encouragingly, Richmond Fed President Barkin also said that he saw the recent rise of the 10-year yield above 1% as a positive. He said it represents positive inflation expectations from investors and not worrisome financial tightening. One of the things these minutes and recent comments from Fed Governors have confirmed is just how dovish the body has become. Loretta Mester, President of the Cleveland Fed, usually advocates for higher rates than the rest of her colleagues. Even she said that she would find 2.5% inflation acceptable. Charles Evans of the Federal Reserve Bank of Chicago said that he would be amenable to what would have been previously considered the astronomical figure of 3% inflation. Evans also importantly said that concerns about future asset bubbles should be addressed through supervision and regulation, not the agency’s dual mandate. Asset purchases continued at a pace of $40 billion a month for MBS and $80 billion a month for Treasuries. The benchmark yield on the 10 year is 1.13% up from last week 0.93% last week.

Chaotic Week With DC Change Ahead

On a personal note, last Sunday was the 50th anniversary of my taking the oath as a Congressional staffer when I became the legislative assistant for my hometown Congressman while finishing my senior year at American University. In 1971 there were large anti-Vietnam protests in DC and the Capitol was surrounded by armed troops. One day I was driving to work, and my car was surrounded by protesters and troops came to my rescue and escorted me up to Capitol Hill. Disruption and even violence are not new. The lack of preparation on Capitol Hill Wednesday was inexcusable. In my Monday note for Fundstrat, I wrote about the likelihood of trouble with those attending the rally on the National Mall, so I just don’t understand how the Capitol stood basically unprotected. A very troubling day for the USA. Georgia race: It’s hard to believe that the news of two Democratic wins in Georgia was all but overlooked by the invasion of the Capitol; it was an historic election which will change control of the Senate on Jan. 20th when Vice President Harris starts to preside. The 50/50 split will make passage of far-left progress legislation unlikely; the most important advantage of Senate control is setting the agenda. Chuck Schumer rather than Mitch McConnell will be deciding what bills come to the Senate floor. In the past few weeks it was Leader McConnell who blocked a vote on a clean $2000 stimulus bill, now Democrats will be making that decision. There have been 50/50 splits before, and it increases the leverage of each individual Senator in the Majority Party. One Democratic Senator siding with united Republicans can stop a bill, and there are a handful of moderate Democrats. What legislation will move? Everyone I talk to in DC believes that Covid relief will dominate the first 100 days of the Biden Administration. The Congress is likely to consider another round of individual stimulus checks though it may be less than $2,000. The amount is now the focus and the reality that it will pass guides the decision. Money for state and local government will be in the next round of Covid relief, and a higher weekly unemployment supplement is under review. While Covid is top of the agenda immigration is likely to be acted on early in the new Administration. Every Democrat I know believes that a serious shortcoming of the early Obama Administration was not acting on immigration. There are clearly at least 10 Republicans who support DACA and other immigration measures which should allow the issue to move without death by filibuster. Healthcare and the ACA may also be an early issue in the new Administration as a decision by the SCOTUS is likely at some point in the spring. There is a possibility the Court will rule against the ACA but give Congress a window to make needed changes. The Medicare Part D prescription drug programs are also are likely to see action aimed at lowering the price of drugs. The original Part D program passed under President G.W. Bush prohibited the government from using its purchasing power to negotiate drug prices; repealing the limitation is high on the list of ideas that are being discussed. 46th President: President Trump admitting last night that a new Administration will take over on January 20th removes one level of concern about the transition; and no one was surprised when the President announced that he would not attend the ceremony. Hopefully, officials will be better prepared with Capitol security on the big day. House Democrats seem committed to a second impeachment with a vote next week. It’s not clear if the Senate will take any action. Impeachment would require a Senate trial. Time seems to be on the side of the President to leave as scheduled at noon on Jan. 20th.

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