All Anyone Cares About Is Bitcoin
Equities start the day unchanged because all anyone cares about is Bitcoin. I debated turning the recap into an all Bitcoin/Litecoin/Antoncoin jam but I’m not sure I have enough experience in bubbles to accurately portray the stuff I’m seeing. Dad/Mom/Sister asking about it? Sure, absolutely. Dentist/Doctor/Veterinarian? About a month ago. Plumber/Geologist/lady who arranges fresh flowers at the market? Probably this week. The stock market has been so boring for so long that we literally had to create a new asset class to trade. You have to love human ingenuity right? The best part of this whole crypto thing is that Wall St was dead last to the game. Zero presence in trading, marketing, research heck anything! Has that ever happened before? Ever? Anyway, we’ll talk more about whatevercoins later because right now we need to talk about the next 10 days. 10 days to trade your way into stock market history. Up 18.4% as of this morning (27% in the NDQ) because of this (h/t JPM). Did you click that link? Please do then come back. That my friends is why the stock market is rallying. It’s not the Fed, the Fed’s balance sheet, Janet Yellen, some insidious illuminati, or anything that garbage peddlers throw at you on TWTR. It’s global macro growth, it’s global earnings growth, and it’s a breakout after YEARS of sideways markets. I mean aren’t you glad you opened this email now? Hey, did you know today is the 30th anniversary of the movie Wall St? What a glorious piece of cinema, that guy from Platoon managed to play the role of 1) Equity Trader 2) Investment Banker 3) M&A advisor 4) Chef and 5) Real Estate Speculator all in one place! Here are the top “Trading” movies of all time: Trading Places. Wall St. Boiler Room. Wolf of Wall St. The Big Short. That’s it, nothing else qualifies.
After the open we made new highs on….tada….absolutely no news whatsoever. Look, it’s Mid Dec, half of people are dialed out and the other half are trying to figure out how to open a Coinbase acct. Wall to Wall Bitcoin coverage on @CNBC got me like whatever so let’s talk stocks. Energy led the way with oil up 1%. You know it’s boring when Energy stocks are the leaders. CTL was the biggest gainer (up 8%) but it’s had a worse year than Kevin Spacey. We made new all-time highs before lunch and if you think SPX closes below 2,700 this year you crazy. Up 20% on Dec 31 just feels right to me. Losers were SCG, ULTA, ALXN, FL, and TPR. Hey…..remember when retail stocks used to dominate the losers list like Michael Jordan playing a 3rd grade pickup team? I do, those were good times. Then someone launched the EMTY ETF (a play on the decline of retail) and literally marked the bottom for the sector. Can’t make stuff like this up people, Macys is up 31% since this genius idea hit the tape and Kohl’s is up 21%. Why does irony have to be so thick in what we do? Is it this thick in other industries? By lunch we sat on 2,657 up 0.2%.
The rest of the day was a bit of snore but we closed on the highs! 2,659 up 0.32%. Another victory for the Resistance against the First Order! Volumes were down about 12% vs a 30day avg and if you don’t think that’s gonna get worse as the month drags on then I have a coin to sell you. Tell you what, I have a knack for writing these things on the absolute deadest days and skipping the one’s with true fireworks. Conclusion? Write more. The Fed meets on Wednesday to raise the rate on your HELOC and that’s really the LAST catalyst we have (it’s fully priced in). After that it’s Mariah Carey, Star Wars, Egg Nogg, and overflowing recycling containers. Christmas….it’s the MOST WONDERFUL TIME…..FOR A BEER.
Final Score: Dow +23bps, S&P500 +32bps, Nasdaq +51bps, Rus2k -12bps (odd)
I have two amazing links to end on tonight because I’ve been saving them up for a month
The first is a 1 minute movie. I love 1 minute movies because I have the attention span of a gnat. This one is exceptional
The second is a rock and roll Millennial version of the best Christmas song ever: The Little Drummer Boy. Watch this whole thing…trust me.
Have a good night
One of the greatest weeks of the year….Thanksgiving!
Equities start the day lower on one of the greatest weeks of the year….Thanksgiving! Yep, that’s right everyone, I’m back. I mean if you’re gonna start writing again why not write during a week when no one opens email and all they care about is whether the gravy is homemade. Where did I go? Well, I decided to take a job working PR for celebrities in L.A. because I wanted to be in the bigtime. How did that work out? Yea…ummmmm….looks like writing market blogs and giving speeches is the better career choice. I come back to you now at the turn of the tide, we have all of 27 settlement days left in the year for so much to happen. 27. Talk about the shot clock winding down. You know how many legislative days are left in the year? 15. 15 days for the most dysfunctional body since the UN to reform a tax code that’s something stupid like 18,000 pages long. Good luck everyone, I hope your bull thesis doesn’t revolve around a bunch of people who literally don’t care about you. Anyway, last week featured a 1.1% selloff driven by high yield jitters and curve flattening that, if you read Fintwit or blogs or the media, felt like the crash of ’87. We’ve gone up for so long that literally anything that MIGHT be a reason to sell is given Titanic coverage. Curve flattening? Sure, I get it, it’s a very reliable recession indicator, but we have a long way to go until this thing hits zero. I’ll get worried when 1) the curve flattens to zero 2) weekly claims starts rising 3) auto sales keel over 4) new home sales decline and 5) Let’s enjoy our holiday week, make real stuffing and real mashed potatoes, then come back and reassess whether Santa get us to +20% on the year. Ho Ho Ho, who wouldn’t want that?
After the open we got a nice, slow, grinding higher market that threatened to make mincemeat out of recently turned Bears. Volumes a whopping 19% below a 30 day average and if you think it’s going to get any busier later this week you’re nuts. Get your trading in now because Wednesday and Friday are going to be dire. Only one data point in Leading Index (check my news highlights for more there) and no Fed speak so I guess we have to talk movers and shakers? SQ ripped 2.5% after saying they may allow Bitcoin trading in their app. I really should write a Bitcoin speech, especially now that it’s trading around $8200. Is there a single reliable expert on Bitcoin in the world? Probably not, so there’s room for me to jump in and make waves! CAVM rose 10% as rival Marvell said they’d buy them for $6B. How many chipmakers are going to be left by the end of the decade, 3? Other winners DLPH, WYNN, AMAT, and MU. Losers were INCY, CAH, PDCO, MCK, and GE because it was open for trading. Has there been a bigger fall from grace than GE over the past year? This one will put to test my theory about “Great American Companies” not going quietly into that good night (WMT, MCD other examples). Lotta things for them to fix but I’m sure super smart people are looking at it daily. Anyway, by lunch we were trading on the highs, 2,582, up a rocking 16bps. Hey, dear reader, I need you to weigh in here: when it is appropriate to cook just a turkey breast and not the whole turkey? Is that “mailing it in” or a proper use of capital market efficiency? (dark meat sucks)
The rest of the day was quiet except for the last 30 mins when it was announced ATT may face an anti-trust lawsuit over its TWX acquisition. Hmmm….super “business friendly” right? (honestly, is this all over CNN? Please tell me it’s not). The tape got hit for a little but most of that was just a knee jerk reaction to a giant M&A deal being threatened. We closed at 2,582 up 13bps, which isn’t bad for a slow Monday. Look, there’s always going to be reasons to sell the market, whether they be indicators or something having a “4 standard deviation move” or someone yelling “SELL” but in the end all you can do is have a plan and stick to it. High Yield got you down? Hindenburg Omens making you nervous? Please,…. turn off the media and spend more time with the family. Final Score: Dow +31bps, S&P500 +13bps, Nasdaq +12bps, Rus2k +71bps.
Volume was low. Our desk was better to buy. News Highlights:
- Succinct Summation of the Day’s Events: Holiday week kicked off with a “I shouldn’t have sold because I worried about High Yield and Curve flatteners” rally. They do sound like fancy reasons to sell though right?
- So many chart crimes in here, I think I’ve actually done the first one way too many times. “I’m expecting this to resolve in an explosive fashion, one way or the other.” Technical analysis on economic charts. Just don’t.
- Don’t let politics hurt your investments please: “The bottom line is that corporate America is going to innovate and maximize profits regardless of whether there’s a Republican or a Democrat leading our government. While politicians are important we shouldn’t build portfolios based on our political biases. All that does is cloud our judgement and lead us to make irrational decisions driven by short-term political biases.”
- Leading indicators TLDR: Still ok
- Wait….wait….preppers are starting to buy Bitcoin instead of Gold? “Across the North American countryside, preppers like McElroy are storing more and more of their wealth in invisible wallets in cyberspace instead of stockpiling gold bars and coins in their bunkers and basement safes” So let me get this straight, after Mad Max Beyond Thunderdome happens these guys are going to log in to their crypto accounts and cash out their millions? With what internet / power / app exactly?
- Rule #1 in college, never trust your drunk buddies
- Good luck on resale pal
- This bird listens to Rage Against the Machine
- You want a new Thanksgiving side? How about truffled potato gratin? Oh my…
Tonight we’ll end with a look at why America is such a great country. We have people willing to test their limits in death defying dives to show the world how brave we are!
Have a great night
Markets Go Up, They Go Down, They Go Sideways, and Every Now and Then They Make Everyone Scared as Heck
Equities start the day lower on the 30th Anniversary of the Great Crash of 1987! We actually have four people on our trading desk who worked that fateful event so we spent the better part of the morning sitting around a campfire hearing tales of “phone calls” (lol a phone, how archaic) and how bid / offers were nonexistent. Apparently volume doubled that day to a whopping 600m shares (lol SPY does 35mm by itself on a random Tuesday) and no one went home, they just slept under their quotron (lol quotron). The 500 pt drop would only be 2.2% in this day and age and I’m sure there’s a bunch of people rooting for a SLIVER of that volatility to return to this market. Hey, what lesson should we have learned from the Crash of 87? You ready for some folksy wisdom here? Nothing. There is no lesson to be learned. Markets crash, that’s one of their features. We know that, on average, markets fall 20% every 3 to 5 years so don’t be surprised when something bad happens again. What about valuation? Everyone uses valuation nowadays to scare people and tell us how we should all be perma bears. @bySamro points out that on Black Monday CAPE was average. AVERAGE. Take that valuation mongers. Say….imagine you bought the DJIA the Friday before the crash, what a disaster right? I’m guessing by Monday’s close you were kicking your David Hasselhoff doll and refusing to watch any of the 5 channels you got on cable. But guess what, you’d be sitting on a 10 bagger right now. You hear me? A 10 bagger. Look, there’s no doubt that the events of Oct 19, 1987 were scary to those involved and to the country as a whole but here in the year of our Lord 2017 we know that our behavior in markets is far more important than anything else. Markets go up, they go down, they go sideways, and every now and then they make everyone scared as heck. That’s the price you pay for your equity risk premium because returns aren’t free my friends. How old was I in 1987? 14. What was I doing that day? Watching Top Gun for the 856th time.
After the open investors grappled with the great 90 min correction of October 2017, a vicious 0.5% drop as global tensions percolated. The fear was palpable my friends, like the Death Star peeking over the horizon. Catalonia, whispers of the ’87 crash, an overnight drop in the Hang Seng, $AAPL saying no one is buying the iPhone 8, the stories were stacked against ever present bulls. But something happened, a cheer rose from the crowd as the market inexorably moved higher. Down 40bps, down 30bps, the correction withered under relentless optimism about earnings growth and global PMIs. T shirts were printed, stories were told, badges of honor were earned. “I lived thru the S&P500 falling 5 points and I have the scars to prove it” was being whispered in hallways. Did you see ADBE today? It ripped 12% after they boosted guidance. Remember when everyone was up in arms about flash being excluded from the iPhone? Look what happened after that. Other winners were DHR, EVHC, ULTA, and MCK. Losers were UAL, GPC, HPE, and AAPL. Can we talk AAPL for a second because the same thing keeps happening year in and year out. AAPL does two things with their phones 1) they update the current one to be faster and 2) they completely rethink / redesign it. The iPhone 8 is the former and the iPhone X is the latter. You know what most people want? The redesigned one. So every time they do this the one that got a speed bump inevitably sees the following headline “iPhone meh falls on lower orders”. PEOPLE WANT THE NEW ONE, this shouldn’t be a surprise. Grrrr, now I’m angry. Also why does Boston Market still exist? You can buy a rotisserie chicken every five feet in my town and ex the Mac N Cheese their sides really aren’t that great. By lunch we say just shy of unchanged and I hope you enjoyed my correction story.
We spent the rest of the day fighting and clawing for green numbers and with 20 seconds left succeeded! Boom! 2,562, +0.95 pts. 0.04%. Victory! Today was great, as a History major I love hearing stories about the past, especially crazy things like 20% drops in the market. If you have anything cool to share hit that reply button and tell me, I’d love to hear your experience. Before we head out into another glorious fall night I want to point you to one thing: The S&P500 cumulative A/D line is at an all-time high. It continues to expand, not contract. You just don’t see breadth expanding at a market top, there are almost always divergences that manifest before weakness. To me the bull market is still intact.
- Succinct Summation of the Day’s Events: Anniversary of a giant crash, people were nervous about it, stocks traded higher the whole day. Very 2017-esque
- Remember, look at this every month: “As we can see, the LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession. The latest reading of this smoothed rate-of-change suggests no near-term recession risk. Here is a twelve month smoothed out version, which further eliminates the whipsaws”
- You stink at Halloween costumes, trust me. You’ve been going as a Pirate or a Traffic cone for years, stop. Hit this link and keep it simple stupid.
- Nice piece from Cullen, speaks a bit to the behavioral aspects of investing (i.e. thinking long term). “In the case of 1987 the stock market went through an extraordinary 10 month boom of 35% before Black Monday happened. But here’s the interesting thing – if you’d put $1,000 into the stock market on January 1, 1987 and told yourself you would not look at it for a year then you had an account balanced of $1,000.5 on January 1, 1988. 1987 sure was boring, huh?”
- How to invest at All Time Highs: This one is simple…I like it: From a psychological standpoint, there are few strategies that work better than dollar cost averaging into a diversified portfolio of assets. This isn’t a strategy you can brag about to your friends, but making investment contributions at periodic intervals regardless of price is one of the simplest ways to avoid making mistakes or over-thinking investment decisions.
- Josh spent some time with Bitcoin mavens, check out his thoughts here: “If you read the book Sapiens, then you recognize this as a religion – a story we all tell each other and agree upon. Religion is the adoption curve we ought to be thinking about. It’s almost perfect – as soon as someone gets in, they tell everyone and go out evangelizing. Then their friends get in and they start evangelizing.”
- Here are your returns if you bought on Black Monday and forgot you had an account
- Do me a favor, make this for your kids and report back
- Timberland crushing millennial spirits everywhere
- Rio looks nice, so does Japan
We’ll end tonight with a guy who must be a BLAST to go drinking with. Life of the party and just so happens to be able to play a saxophone without a saxophone.
Have a good night
Bulls on Parade
Equities start the day lower because they’ve gone up for a hundred days in a row. That might be a bit of an exaggeration, sorry, I am prone to that, actually they’ve only gone up 95 days in a row. Bulls on Parade my friends, cue up Rage Against the Machine because that’s the theme song of 2017. I have a couple charts for you to peruse in this here opening paragraph so let’s cut the B.S and get to some data. The first one comes from my extremely talented and impeccably dressed colleague Clare Hasler (make sure you click these because I don’t want you to miss the juicy Bloomberg graphics). Anyway, that was HGX, the Philadelphia Homebuilders Index, and as you just saw it made a new all-time high. That’s right, higher than the “let’s build a home in the middle of nowhere Florida and sell it for $750k” bubble we went thru. I don’t know about you but seeing homebuilders rip makes me even more bullish. Household formation is something we always need to be watching so make sure you put HGX on your radar. The second chart comes from @hayekandkeynes and it’s a lovely snapshot of Global Manufacturing PMIs. Hey, you know what you can add to your bull market thesis beside Trump and Tax Reform? Synchronized Global Growth. Such an awesome phrase right? Here’s my thesis: a growing global economy backed by low interest rates, expanding corporate earnings, and a one off chance of either tax reform or infrastructure spending from the world’s largest economy. Seems ok right? Oh and this bull market started in 2013, sorry it’s not 2009.
After the open we got another “I can’t believe this thing keeps going up” morning rally. At this point the #1 thing I hear when talking to clients and traders has to be “we are so overdue for a pullback.” Are they right? Maybe. The 7 day RSI on SPX and RTY are both wildly overbought and the only reason the Nasdaq isn’t is because people are puking FAANG to buy everything else. We got another rock solid macro data point from ISM Services which printed a meaty 59.8, the fastest pace in 13 years. Here’s a few quotes from the survey: "General outlook looking up, with sales picking up. That will drive spend and investment." (Information) and "Positive business trends continue in second half. Business results above plan and higher year-to-year. Forecast above planned results for 2017." (Finance & Insurance). Looking good Billy Ray….feeling good Winthorp! Utilities did well led by ETR, AEP, and PEG (boooo who wants to talk about Utilities) but Consumer wasn’t far behind. Laggers were mainly Energy names because crude has more false breakouts than treasury yields. Seriously, wake me up when oil hits $60 and not before. By lunch we sat just north of unchanged, 2,537 up 0.10%.
The back half of the session brought nothing great and we closed roughly where we were at lunch, 2,537 up 0.10%. So Merrills is out saying their data shows roughly 54% of large cap managers are outperforming their benchmarks YTD and that 54% is the highest hit rate on record for this time of the year. So….I wonder…..will there be less of that juicy “chasing” we normally see in Q4? I mean if 50-60% of fund managers are ahead of their bogey won’t they all just play defense into the close? This kind of stat makes me less giddy about the final few months…bah. Will the Santa Claus rally bring me a new iPad because iOS 11 turned mine into molasses? Will MIFID decimate the research landscape? Did these guys ever forgive their friend? Why did Taylor Swift turn into such a jerk? So many things are swirling around in my head, someone help me make sense of them please.
Final Score: Dow +8bps, S&P500 +12bps, Nasdaq +4bps, Rus2k -28bps.
- Succinct Summation of the Day’s Events: Another great economic data point, more political nonsense, a new all-time high in stock markets.
- How about this stat: In 2013, if you were age 31-61 and had $274k in your retirement account (includes 401k, Keough, IRA) you had more saved than 90% of the American public (in just your retirement acct this isn’t net worth). More people need financial advisors period.
- Another look at PMIs. How about that Euro area!!
- Of all the market myths I hate “it doesn’t matter because there was no volume” is #1 on my list: Trading volume in the 1950s was about 3 million shares a day on the New York Stock Exchange. Over the past three months, the SPY ETF alone has traded an average of about 62 million shares a day. More investors turning over shares doesn’t have anything to do with the direction of the markets. In fact, investors tend to trade more when stocks are falling, because that’s when people panic.
- JPM had a nice little piece wondering what the next market crisis might look like. Check it out here And while the firm isn't sure exactly when the so-called Great Liquidity Crisis will strike, it figures that tensions will start to ratchet up in 2018, once the Federal Reserve starts to unwind its massive balance sheet.
- Hey mom, when I grow up I want to be a flag
- At what point do you decide that jumping between buildings is your thing?
- Goldman answers the question: Why does the market care so much about Tax Reform?
- Things you see at the bottom: freshly minted MBAs hate Wall St. At the University of Chicago Booth School of Business, Amazon took in more interns than either Bain & Co. or McKinsey & Co., which until recently were the school’s top hirers of interns, according to Madhav Rajan, dean of the Booth school
- Halloween is the best holiday, make it special for the kids. Cauldron Cupcakes!!
- Or just make Carmel Apple Crisp Cheesecake. THIS LOOKS AMAZING
We’ll end tonight with a close call. I didn’t see it the first time, and I doubt you will either, but make sure you watch the slo-mo replay. Wow.
Have a good night
It is REALLY Hard Not to be Deliriously Bullish Right Now
Equities start the day higher as another October is upon us. Long time readers know my opinion on this month and the holiday it features but if you’re new to this goat rodeo let me clue you in: Halloween is the best holiday we celebrate, everything else is a distant second. We’ll talk more about this as it approaches but if you disagree with me just know that you’re wrong. Ok where are we at to start the month? Up 13% in the Dow, 12.5% in the S&P, 21% in the Nasdaq, and 10% in the Russell 2000. To quote Keanu Reeves “WHOA”. Hey, have you ever heard of the Value Line Geometric Index? It’s not exactly a household name but I think we need to talk about it for a second. My fantastic colleague Steve Holt created this chart so click that link and let’s talk about being average (I’m so good at that). This index is equal weighted and based on a geometric average so the daily change is the closest to the median stock price change. Man, that’s a mouthful, what does it actually mean to those of us who slept thru stats class? The index measures the median stock price of companies listed on the American Stock Exchange, Nasdaq, NYSE, and Toronto Stock Exchange and it’s making a new high which means the median stock in the index is now making all-time highs. Median, down the middle, not the fancy high flyers who make $1000 phones and endless dongles (I love that word). Breadth….breadth….breadth. Say it with me. Bespoke also noted that the cumulative A/D line in 9 of the 11 sectors in the S&P saw new high in Sep with 6 of them in the last week. WHOA. It is REALLY hard not to be deliriously bullish right now, someone stop me before I make Fintwit history for signaling the top.
After the open we got a rager of an ISM Manufacturing print, 60.8, the highest number in over a decade. Hey, you know what ends bull markets? Recessions. Guess what doesn’t usually print in the 60s before a recession? That’s right, ISM Manufacturing. In fact, take a look at this chart from Goldman, ISM trends into the mid 40s before a recession. When ISM printed 61.4 in May of 2004 it took 3 more years and a 40% return in the S&P500 before the economy slipped into an abyss. Heck, you could even argue (and some have) that when ISM Manufacturing slipped to the mid 40s in late 2015 we HAD a bear market. 2nd oldest bull on record? Nope, I’ve moved into the camp that Barry occupies. Rotation is still the soup du jour, FANG got hit again as it appears people are still using them as a source of funds to buy other sectors like Energy and Financials. Look, that rotation is HEALTHY, I love to see it especially on days when the market rallies. Winners FLIR, GM, INTC, SITE, and C. Losers JWN, M, MGM, XRAY, and CMG. You gotta feel bad for JWN and CMG right? One whips around on headlines about a buyout being on/off and the other apparently makes really bad Queso. I mean how can you screw up Queso? Its liquefied cheese for crying out loud, that’s like screwing up chocolate and peanut butter. By lunch we were grinding higher, up 0.3% because that’s what stocks do in a raging bull market.
The rest of the day was more upside and a close at 2,529, up 0.39%. Good macro data, that’s the kind of stuff you want to see in a Bull market. Good earnings, that’s the kind of stuff you want to see in a bull market. We have both right now. The table is set for a 4th quarter rally and the only thing I worry about is sentiment. Markets don’t go up or down in a straight line, we should expect some kind of weakness as everyone chases these new highs but I truly believe it will be transitory (I could be a Fed governor!!). The entire world is firing on all cylinders and there are so many charts that look so good (small caps for example). This rally isn’t being driven my tax reform, it’s being driven by all the things I just mentioned. Make no mistake, we’re gonna get to eat our sundae, it’s gonna have hot fudge, sprinkles, and whip cream.Tax reform would be the cherry on top, nothing more. Final Score: Dow +69bps, S&P500 +39bps, Nasdaq +32bps, Rus2k +1.25% (SMALL CAPS)
I wanted to end on one single link because the events of the past 24 hours have devastated me. There are times when words comfort and times when words seem pointless. Right now words fail me because I cannot fathom why evil consistently rears its head in our world. I do know this…we can’t live our lives in fear. “Most things worth having live on the other side of fear”. My link to you is 5 minutes long and I implore you to watch it. Take 5 minutes out of your busy life, this one is worth it.
Have a good night.