April Bull and Baird Blog

April 12, 2013

Equities start the day lower as JPM and WFC pump out their earnings. Both were roughly in line and always insanely dense to pick thru (banks typically have more one timers than Wayne Gretzky), so let’s circle back to those later. I wanted to give you an update on something near and dear to me…this recap. I started writing it in early 2009 and since then it has evolved into quite the circus. The firm in which I toil away on a daily basis in return for U.S. currency has decided to take my writings public, launch it as a blog and promote it on Twitter. You’ll now be able to find me at bullandbaird.com as well as follow me @bullandbaird. Crazy right? When I first developed the concept I centered my thoughts on one phrase: Be imaginative. You probably get 500 daily emails talking about how capex affects operating income or how Gamma is moving the options market so if you want boring you already have heaping helpings of it. When I write I’m trying to convey daily moves or big themes in an imaginative way; data mixed with funny, stocks mixed with sarcasm, politics mixed with ire (deservedly so). I mean where else are you going to get market commentary as well as being able to marvel at genius inventions like this. Social media is the future of our industry. Information will not be contained to newspapers, research reports, or academic papers. It will be on Twitter and Blogs as well as Bloomberg and the WSJ. Baird, in its wisdom, is embracing that fact and I’m glad for it. So let’s have some fun while we navigate dangerous waters, let’s laugh at crazy moves and dissect macro insanity with style instead of zzzzzzzz’s. Charlie Chaplin said “A day without laugher is a day wasted.” I promise not to waste any of your days.

After the open we traded lower off a weaker than expected Retail Sales number, as well as a whiff from Michigan Confidence. You’d think with their hoops team in the Finals these Michiganders would be a bit more optimistic but I guess not. Gold seemed to be in a competition with Bitcoins on who could crash faster because it was down $80 at one point. The shiny stuff is breaking serious levels of support going back to 2011 (there’s also speculation around forced selling from Cyprus and what that would mean for future bailouts). Oil was also down big today but I always view that as a good sign. Maybe the great rotation is from Cmdtys to Bonds/Stocks? Hmmm. For the first half of the day basically everything on my screen was red except for bonds, so a risk-off Friday move (is there a more overused phrase on Wall St? I hate it, try to minimize its use). Why the early selloff? As Bespoke pointed out we are overbought. It happens, we’ve had a pretty good week. Winners: BBBY / NTAP / LEN / NVDA / CVC. Losers: HCBK / HRS / NEM / FLR / MTB. By lunch the market sat on 1,585, down 50bps, which was actually off the morning lows. Unfortunately it was slowly grinding to a halt as The Masters took over. Is there a more nappable major sporting event than the Masters? That little piano solo, wind thru the trees, Jim Nantz whispering in my ear about a crucial 4ft putt. My God, it’s 10x more effective than an Ambien mixed with a Bank of England trade deficit report.

The back 9 didn’t feature any dramatic shots like Tiger on the 16th and we closed at 1,588, down 32 bps. Huge selloff right? Massively overbought market and a couple tepid economic data points = one third of one percent. Still unbreakable...until it isn’t. We learned nothing Earth shattering today so instead of droning on I’ll wrap it up and let you get on with your weekend. If you’ve been with me since the start I hope you stick around and toss me a few retweets when you can. For anyone new to the recap welcome to the madness, I hope you enjoy your flight. Final Score: Dow flat, S&P500 -28bps, Nasdaq -9bps, Rus2k -43bps.

News Highlights: 

• Josh Brown wrote an article on Jeff Gundlach’s recent conference appearance? Talk about the definition of must read. Great quote here from the Pope: "There's a better chance Bernanke buys every Treasury bond in existence before he ever sells a single one" This is important, and you have to have a view on the duration of QE to play the game right now.
• Street Account gave their final update on Pre-Announcements going into earnings: “For the Q1 preannouncement season, the ratio of positive-to-negative preannouncements came in at 0.53-to-1.0. This marked an improvement from the week-ago level of 0.45-to-1.0, though it remained below the 0.67-to-1.0 ratio in Q4, the four-quarter-trailing average of 0.64-to-1.0 and the final 0.73-to-1.0 ratio seen in Q1 of 2012” Don’t see this as a crazy important data point but positive pre-announcements aren’t exactly booming to the tape.
• The Big Picture talks about sentiment and that crazy AAII Bulls reading we just saw (19.3%, lowest level since people thought capitalism had been destroyed and we were going to start bartering for our Cheerios): “Investors being this negative at the same time as markets hitting all time highs suggest to me that they are under-invested in equities and are frustrated they have missed the run up. The past history shown by Goepfert also suggests they will eventually acquiesce, and join the long side. If you want to use sentiment as Contrary Indicator, that capitulation will set up your top and reversal. We are not, however, anywhere close to that point.”
• Apparently The Edge from U2 spray painted the hills above Alesund Norway (from what I read this thing comes out every year during the thaw. Weird)
• Great interview here with Howard Marks featuring fantastic quotes like “I keep going back to what Charlie Munger said to me, which is none of this is easy, and anybody who thinks it is easy is stupid. It is just not easy. There are many layers to this, and you just have to think well. I can’t tell you how to think well. Some people get it, some people don’t.” and “”…anything which has gone down in price a lot is potentially a source of opportunity. But the question is, has it declined sufficiently relative to reality? If a stock was efficiently, fairly priced five years ago at X. Today the stock is down half, but in some sense reality is also down half — then the stock is only fairly priced, lower in price but not cheaper.” That 2nd quote is so very, very good isn’t it? Just a hard concept for people to grasp (including myself)
• My Moment of Zen for you today. Perspective is easily lost in life.

Now normally I end the recap with a funny. It puts a nice finishing touch on the day and supposedly forces my readers to get thru their dinner before having dessert (I’m sure 95% of people skip right here). Anyway, instead of closing tonight with someone falling on their face I’m going to attempt to make you cry. I’m guessing that a fair amount of you might starting cutting onions here because if this doesn’t touch you, I have no idea what would.


Have a good night.