The Dog Days Of Summer Drone On

Equities start the day higher as the dog days of summer drone on. I’m pretty sure the market has gone nowhere this week (it hasn’t, the past two days have had the smallest intraday range of the year) but that doesn’t change the fact that we are perilously close to new All Time Highs in the S&P. Are you excited? No? Well you should be because this train ain’t stopping for you to get on. The Russell 3000 has already made new highs, the Wilshire 5000 has made new highs, and this is all being done on relatively tame sentiment (AAII Bulls 36%, was 60% back in Jan). Earnings are nearly over and they were the best in 6 years…SIX. Not only that but the next two quarters are expected to have double digit EPS growth so it’s not even over. Hey…you know what all this earnings growth has done to the market? Brought down valuations. That’s right my friends, back to historical norms, so don’t @ me with your dumb CAPE nonsense. But Mike, what about all this Trump trade war / tariff nonsense, you told me it’s sitting on the market? Sure, it’s a thing, and I won’t try and minimize the potential impact of a policy mistake, but for now all it seems to be doing is putting a damper on bullish enthusiasm so I guess we can rate that as a good thing. Yep tweeps, the grind continues, and if it weren’t for Elon Musk this week would be a throwaway in market history. Elon Musk…man….I’ll tell you what…I actually love the guy. Now I’m not an analyst (we have a great one in TSLA) so I’m not making a call on his company, but I think Elon Musk is the kind of person we see rarely in history, the kind of genius maniac who shakes a pizza box or drinks Mouton Rothschild with enchiladas because he wants to do things differently. Check out this piece by Morgan Housel because it’s spot on. “People love the visionary genius side of Musk, but want it to come without the side that operates in his distorted I-don’t-care-about-your-customs version of reality. But I don’t think those two things can’t be separated. They’re the risk-reward tradeoffs of the same personality trait.”

After the open we went absolutely nowhere fast, in fact if I can get 100 words out of this section it would be a miracle of creative writing. The market hasn’t gone anywhere since the open on Tuesday and today was no different. Alright winners and losers let’s go (if you’re one of the CEOs I have on this blog I hope you always read this section, it’s fun to write). CTL gained 13% but it’s been falling for 7 years so take it easy, FLS added 6% on earnings and the stock is dangerously close to breaking a ton of sideways,  MTCH +8% because Tinder is still red hot (I was young at the worst time), and WP soared 8.5% because Fintech is the future. The biggest losers were PRGO -10%, WBT -9%, TSLA -4.5% (back below the whole tweet thing), and ELF -37%. ELF Beauty…ever heard of this one? Eyes Lips and Face, also one of the best Christmas movies of all time. Maybe each segment was down 10%? Guys, the lip business sucks right now, maybe we focus on face instead. Meh, chart is a soup sandwich, maybe they need to use this stuff on their 8-K. By lunch we were still going nowhere.

The rest of the day…I mean come on you know what I’m going to say here. Look, it’s early August and people are trying to cram in those last second holidays. There’s no news and I think someone must’ve slapped the phone out of his hand because Musk hasn’t tweeted since the Tuesday thing. We closed at 2,854 down 15 bps with new all-time highs just a hair width away. A watched pot never boils people so go outside and hang with your friends, take your kids for ice cream, sit on a patio and eat burrata, walk barefoot thru the sand with your wife or husband or unicorn or whatever you love and after you do all that write my bosses and tell them I don’t suck.

Final Score:  Dow -29bps, S&P500 -14bps, Nasdaq +4bps, Rus2k +24bps  

News Highlights:

We’re going to end tonight with something I didn’t think possible.  I had heard whispers of this on the wind but never thought I’d live to see the day that someone shot-gunned a bottled beer.

https://www.youtube.com/watch?v=9cyxFrZbi7s&feature=youtu.be

Have a good night 

$AAPL Hits 1 Trillion Valuation

Equities start the day lower because we couldn’t possibly go more than 3 or 4 days without Trade War bluster.  China vowed that it won’t back down after Trump’s latest threats and that was enough to crush futures for 50bps.  If you are looking for things that are sitting on the tape like Grimace on a pile of cheeseburgers then trade war talk is your jam.  Earnings could be the best in history, Tom Cruise could make Top Gun 2 and 3, TSLA could come out and say “we’re going to make $100B next year while re-inventing the entire electrical grid”, Taco Bell could offer liquid cheese intravenously, FDX and UPS could say “the economy is in a golden age and we need 20k more workers to keep up with demand” yet if Trump and China were going at it on Twitter, S&P futures would be lower.  I’m so tired of it, make it stop.  Speaking of TSLA, they reported earnings last night and Elon Musk struck a much more amicable tone which the market loved (was up 11% after the bell).  What is it about TSLA?  Why do so many people lose their minds over this thing?    JCP and Sears can sit there and rot for decades, causing huge urban blight, yet Bears say TSLA is going bankrupt this year.   Here’s a hot take:  Bulls read the headlines, Bears read the balance sheet, and Pragmatists watch the trading range.   This stock has gone nowhere for 2 years, everybody relax, have a cream soda (can you name the movie?).   Hopefully we can get thru today without too much damage because the setup is there for new highs.  379 companies have reported with 10% top line growth and 25% bottom line growth….that’s just fantastic.

 

After the open we watched every single tick of $AAPL waiting for it to hit $207.05, the magic level where it would be worth $1 trillion.  I mean if we had to measure the dead weight economic loss of thousands of people in finance watching every print of Apple stock it would’ve competed with England’s World Cup matches.   At 11:48am ET 5,636 shares traded at 207.05 and one of the greatest stories in HISTORY opened a new chapter.  This is a company that was started in a garage on April 1, 1976, in the great state of California, in the most dynamic nation on the planet, from SCRATCH, and hit a valuation of $1 trillion on Aug 2, 2018.  You live in remarkable times my friend, in your pocket is the knowledge of the world, the ability to never get lost, an entire library of every movie ever made, countless videos and pictures of your life, and your spouse texting you “WHY DON’T YOU ANSWER THE PHONE” nonstop.  What’s the true value of an iPhone?  $5k?  more?  TSLA punished shorts to the tune of 16% and I’d be in dereliction of duty if I didn’t point out that my guy Ben Kallo is really good in this name.  Other winners CF, SONO (IPO today), PKI, REGN, and ZTS.  Losers were APRN, a company that IPO’d last year at $10 and is now trading  sub $2, TRIP -11%, WLTW -8%, UNM -7%, and Brookstone, one of the last great mall stores who filed for Chapter 11.   Where am I going to get my Newtown Cradle desk toy and foot massagers now?   Sigh.   By lunch we had actually forgotten about Trade War bluster and sat well off the lows, 2,824 +0.40%. 

 

We actually rallied the rest of the day with fan favorites like FB, AMZN, NFLX, and AAPL leading the way.  We went out on the highs 2,828, up 0.53% with the notion of Growth ----> Value dying after only 3 sessions.  Just an absolutely incredible rally off the lows, today was an A+ from a price action perspective.  It’s possible that the overnight low due to trade bluster was the last gasp of that particular catalyst mattering but I guess only time will tell.   I have a pet theory that “Trade war” risks are asymmetric to the upside and maybe, just maybe, I was proven right.   Final Score:  Dow -3bps, S&P500 +49bps, Nasdaq +124bps, Rusk2k +77bps   

Volume was average.  News Highlights:

 

I’m going to end tonight on a video near and dear to my heart.   When the guy says “I want to ride a park bench in the shade” I absolutely die laughing.   Disney Dad y’all

 

 https://www.youtube.com/watch?v=kLCid7b5uyY

 

 

 

Have a good night

 

Summer Is Over

Equities start the day higher as July, and by proxy your summer, comes to an end. That’s right, summer is over, all of our kids go back to school in August and there’s a college football game in 26 days. NFL training camp is in full swing, it’s getting dark at 810pm, and my grass stopped growing so pack up the swim gear and get those rakes out because Fall is upon you. Speaking of fall, how about this move in FANG the past few sessions? It’s like all of a sudden people decided that they’d had enough of Zuckerberg spying on them, two day shipping of stuff they don’t need, one or two good movies on the TV, and their browser tracking their every movement. The only one left, AAPL, reports after the bell so at this point it’s up to Tim Cook to stop the bleeding. It’s more than just FANG being sold though, we’re seeing a rotation from Growth towards Value. This from the fine people at Nomura: “The collective three-day move in U.S. “Value / Growth” has been the largest since October 2008--a 4.3 standard deviation event relative to the returns of the past 10 year period.” My pal Ross in London, who managed to work the word “multicollinearity” into his daily sales note (you’re my hero), points out that growth weakness is just a symptom of “all the big winners being puked out” so however we want to frame it people appear to be taking profits in their favorite high flyers. Now this isn’t necessarily a bad thing, rotation can be the life blood of bull markets, and if this money finds its way to sectors like Financials or Industrials I’ll feel good about the past few days. But there was bound to be pain associated with selloffs in FB, NFLX, AMZN, and GOOGL, they are over owned by the entire planet, and any rotation will not go gently into that good night. So, like when I tried Keto, let’s see whether this is the start of a trend of just a temporary blip.  

After the open we got a quick pop on the heels of this headline U.S., China Seek to restart talks to defuse Trade War. Honestly, to me, the risk from further trade war talk is asymmetric to the upside. We’ve seen nothing but negativity from both the US and China and the market hangs in there. Imagine what would happen if China caved or both countries came to some kind of amicable solution….I mean we got a 25bps rip off a RESTART of talks! Solid price action from Industrials today, especially Transports. FDX gained 2.5% and DE…John freaking Deere…rose 4.6% after reporting better than expected earnings. Other winners were ILMN, XYL, CMI, and KLAC. Losers were IPGP -25% (who knew a laser company could blow up), AMD -4.5%, UHS -2%, and CMG -7%. Can we talk about CMG for a second? Apparently someone got sick in an Ohio establishment and it got reported on iwaspoisoned.com. What in the heck is iwaspoisoned.com and how is it so powerful it can hit Chipotle for 7%? What’s to stop some nefarious hack from shorting a restaurant stock and flooding this website with complaints? BTW, it’s National Avocado day (here’s how to pick the best ones) so wander down to your local tex mex joint and enjoy the fruit of the alligator pear. By lunch we were sitting near the highs, 2821, up 0.66% while I wondered what the heck PNRA was doing with this thing. Is it also National Carb week? Can I get a side of bread with my bread bowl filled with pasta and bread? 

The rest of the day saw a small selloff when the WSJ reported that trade negotiations were going slow and we closed at 2,818 +0.56%. So look, July wasn’t all that bad, in fact it was pretty good even with the FANG selloff. Earnings have been solid, macro data was steady, trade tensions eased, and Transports closed at an all-time monthly high. In the midst of all this we are seeing articles like these from major Wall St firms:  Prepare for the biggest stock market selloff in Months says Morgan Stanley. I mean imagine what we’d be reading if none of those things happened!  Let’s clarify one thing before we end: I am not bearish right now. I do not think a meltdown is imminent nor do I think the economy is close to a recession. I think we continue to chug along for the next 12-18 months like we have been all along. Am I cautious from time to time? Sure, but so is everyone else, that doesn’t mean I’ve changed my overarching theme. 

Final Score:  Dow +42bps, S&P500 +48bps, Nasdaq +55bps, Rus2k +106bps

News Highlights:

Tonight’s final link is a quick hit featuring a woman, a man with eggs, a dog and an elevator.  I love everything about this thing, I feel like it’s a good analogy for my life.

https://www.youtube.com/watch?v=WOoPfauQpJ0&feature=youtu.be

Have a good night

 

The Biggest Single Day of Earnings This Season

Equities start the day lower as 322 companies report earnings!!  Holy information Batman, that is an insane amount of data to weed thru, pity the analyst community and their insatiable thirst for truth.  I mean can you imagine what it’s like to be an analyst on a day like today?  They probably don’t sleep, shower, or eat, they have to pour over reams of data so they can hand off all the work to their juniors, they have to listen to endless conference calls for a chance to jump in and say “great quarter guys”, then they write dozens and dozens of notes that they email to a trader like me who then has to del…umm….delineate which one’s are important to send out to clients, then they have to do it all over again a day later.  Whew, what a job, thank god they have so many minions to help.   Yo, junior analyst out of some school that our bosses went to, fetch me a new discount rate because I doth have a thirst for a frosty DCF.  I love all our analysts, seniors and juniors, heck even the starry eyed interns I see at 630am saying to themselves “wait….I’d have to wake up at 530am to do this job?”, they are the beating heart of our World Class research product, gimme a hug you warriors of EBITDA.    FB blew itself apart last night after whiffing top line and lowering growth forecasts, dropping a cool 24%.  If my math is correct they wiped out $148B in mkt cap while I ate sushi and wondered whether that was the biggest overnight drop in dollar terms in history (it was).  Zuck the Great personally lost $16B in net worth while you yelled at your kids to stop searching Youtube for slime videos.  Wait that was me, sorry.  Look, I’m on a roll here, let’s see what happened today because I’ve had two large DNKN iced coffees and I’m feeling it.

 

After the open, owners of the 2X Facebook ETP (ticker symbol FB2) sat at their desks wondering why they bought such a dumb instrument.   I mean come on, do we really need stuff like this to exist?   Sigh.  FB itself spent most of the session down 18-20% on ridiculous volume and I guarantee you there are a bunch of PMs in London and NY that needed a drink after the bell.   That being said (pay attention here) the EQUAL WTD S&P ETF ($RSP) was positive the entire day.   The notion that “a few big stocks are leading us higher” is complete garbage, all of FANG was negative at lunch and that equal wtd ETF was still positive.  That’s breadth my friends, and not bad breadth like I have after gyros.  Ok enough FB, what else moved?  SVU must’ve really been a super value because it got taken out for $32.50 a share, pushing the stock up 65%.  SPOT gained 5% after earnings and if you’re looking for a stock that doesn’t care about trade wars this has to be one of them.  No one streaming Drake says to themselves “I hear NAFTA is falling apart, I gotta cancel this here music platform”.  Other winners AMD +13%, ARNC +11%, XLNX +10%, and UAA +5%.   Losers, and there we a ton of big ones, included NLSN -23%, MHK -16%, BIIB -11%, and F -6.5%.  The one that bothers me the most is that MHK, was supposed to be “housing is awesome” play and it blew up.  Yikes (we rate Outperform).   At the halfway point there were 5 stocks in the S&P that were down double digit percentages and 3 that were up double digits.   Just HUGE moves all over the place, today was absolutely bonkers, bonkers like letting your kid have the remote, or drinking a Bloody Mary at night, or thinking your plane might actually leave LaGuardia on time, or hoping to get smarter by engaging in political debates, or trying to slide down this hill.   By lunch we sat on 2,837 down 31bps.

 

The rest of the day brought nothing new and we closed roughly where we were at lunch, 2,837 down 0.3%.  Today was the biggest single day of earnings this season and by the close tmmrw more than half of the S&P will have reported.  The biggest takeaway I have is that the average stock in the S&P is doing fine.  If this was all about a few big stocks than FANG would’ve decimated the market today and it didn’t.  Let’s see what $AMZN has to say because that’s the next big company to report.  Final Score:  Dow +44bps, S&P500 -30bps, Nasdaq -101bps, Rus2k +60bps

 

Volume was off the charts stupidly high.  News Highlights:

  

I absolutely love this Fail video, it starts STRONG.   The girl on the slide, I mean we’ve all been there…

 

https://www.youtube.com/watch?v=9k8rdNEYH7s

 

Have a good night

Equities start the day flat, how about that?

Equities start the day flat, how about that?   What’s up everyone, how you feeling…Good?  Great?  Awesome?   I’m feeling large and in charge, not only because of my weight but because of how good this market seems to be doing.   2,801 on Friday, which was the 4th consecutive defense of the dreaded 2.800 level, with breadth expanding and macro data staying firm.  Let’s go!!  You know I see a lot of people on $TWTR wondering why the market seems to be doing so well.  They say things like “but the tweets and the tariffs and the trade wars and the yield curve” blah blah blah.   Guess what, those things are waves crashing against the ship.   They look ominous and scary but ultimately die harmlessly against the U.S.S. America.   You know what you should be more concerned with other than the deadly effects of sugar on your body?  Our motor underneath the waves which, as of now, continues to chug along like a champ.   Check this quote from Bloomberg:  “It’s early, but the consistency of earnings beats have been nothing short of spectacular as of last week, 95% of the 86 companies in the S&P 500 that have reported results topped EPS expectations -- JPM points out that out of the results so far, the stock reaction to the beats is the best in two years while we’re also seeing the second best quarterly guidance outlook in five years (67% of companies have revised earnings forecasts higher).”  Earnings people…earnings…the thing that actually moves stock markets over the long run.  How about this chart from Ned Davis…analysts are actually RAISING forecasts which never happens.  Look, history will absorb and forget the tweets / policy mistakes / nonsense but earnings will always matter.  We get 171 S&P reports this week, 75 on  Thursday, so stay tuned to this channel for rigorous analysis of EPS, guidance, CEOs blaming random things for their miss, and why you should always use a pinch of salt in your coffee grounds.   Let’s see what happened today.

After the open we had a nice quiet summer Monday rally driven by Financial and tech.  Treasury yields were higher and the curve steepened to a I asked a fixed income buddy of mine why.  Here was his response:  “potential BoJ policy shift, Trump politicizing the Fed, and curve flattening trade unwinds from Hedge Funds”.    Oooookkkkkkkkk, let’s try and put that in layman’s terms shall we?   A central bank across the Pacific might be changing monetary policy, that one is easy enough.  Trump seems hellbent on bashing the Fed for raising interest rates.  Ok, I get that one too, hiking rates could slow economic growth and clearly a President wouldn’t want that.    Lastly there are people who bet on the shape of the interest rate curve and they are changing their minds.  Whatever, who the heck wants to do that, let’s talk about stocks because I’m about to fall asleep with this Fixed income nonsense.  Dear FI people at Baird:  #ZZZZ.  Banks like higher yields so yea, they led all names.  HAS gained 13% because I guess people just realized you can still buy toys even after Toys R Us went under.  Who knew?  All that being said the biggest single winner was LPNT, up 35% because apparently Apollo wanted to buy some rural Hospitals.   Losers were PETS -11% (are there any stocks with Pets in their name that do well?), PZZA -10% (yea..umm), HAL -8%, ITW -7% (this one bums me out, I don’t like to see industrial bellwethers struggle), and TSLA -3.3% because apparently the company might ask for money back from its suppliers (we rate Outperform).  By lunch we were near the highs, 2,806 up 15bps.  

The rest of the day saw a lot of sideways and a close near the highs, 2,807 +0.18%.   Look, like I said before, this is a huge week.  If we continue to see the kind of reports we saw to start the season I think new all-time highs are imminent.   But what if we don’t get them, what if we go sideways the rest of the year, would that be so bad?   Honestly, the market was up 20%+ in 2017 with very little volatility, isn’t it being a bit greedy to expect boffo returns in 2018?   Most of the smart people I follow think a flat year would be completely acceptable in the grand scheme of things so let’s have a bit of perspective.   As of today the S&P is up 5%, if someone said to me “the market won’t move from now until Dec 31, 5% is it for 2018” I’d say ”awesome, great, I’ll take it, can I start writing about travel and food and why Midnight Run is the best comedy movie ever made?”   Final Score:  Dow -5bps, S&P500 +18bps, Nasdaq +28bps, Rus2k +9bps 

Volume was low.   News Highlights:

 

We’ll end tonight on the craziest magic trick I’ve ever seen.  I don’t get how it works but I do know I’ve never seen Han Solo swear so that’s cool in and of itself.

https://www.youtube.com/watch?v=rB0wzy-xbwM

 

Have a good night