April Bull and Baird Blog

April 15, 2013

Equities start the day lower as China’s GDP* whiffs and Gold implodes. Why the * for China GDP? Because if I could actually footnote this recap I’d enter “* - it’s whatever they want it to be”. Economists were looking for 8.0% but got 7.7%, which is fine I guess. Could it have been 5%? 9%? Who knows so let’s move on. Gold is the bigger story so allow me to ramble a bit about the lustrous metal. When I was a kid growing up in CT we used to drive to the bustling metropolis of Milford for a fine dining experience. In that town was a giant complex where they used to play a crazy sport called Jai-Alai. As we passed the IHOP on the way to Chili’s (yea we were killing it, so what) I used to wonder: what goes on in that building? What exactly is Jai Alai? (Right about now you are saying “get to the point or I’m outta here”) Well, Jai Alai is a fast paced nail biting endeavor full of random movements and streaky action, which is frankly a fantastic analogy for Gold investing. You’re playing a game in which things are flying around you at MACH speed and if events don’t go perfect you can take a serious amount of pain in places you don’t want. In this case people have been winging around Gold because…well…because it’s supposed to be an inflation hedge or its own asset class impervious to Central Bank printing or some kind of “I hate the Government so I’m putting my money into this” type of thing. But it has no earnings, it has no dividend, and its value is determined by what the crowd thinks it’s worth (which is kinda like bitcoins right? Aren’t they both mined too?). In the past two days it has fallen over $200 because, well, that’s just how things work. The vagaries of sentiment are the hardest thing to account for while playing this game and it appears to have soured on Gold. Let’s see how that affected the market shall we?

After the open it was a full on rout in stocks. Actually it was a full rout in commodities and that slammed risk all over the place including equities (bonds were up though and I’m assuming “great rotation” is officially finished). Gold was down $145, which the internet tells me is a 6 standard deviation move, so you just witnessed something that happens once ..oh….every 2 million years or so. That’s if you assume normal distribution of prices but at this point who assumes that anymore? These 2 million year events happen more than flight delays at Laguardia. Actually you know who this Gold selloff really hurts? The Lannnisters. I bet they are worried about keeping that Iron Throne now (I worked Jai Alai and GoT into a recap..that’s gotta be worth a few follows right?). The entire first half of the day was ugly wrapped in garbage and if you were a commodity related stock bids were scarce. I wouldn’t say the selloff felt disorderly though, just a lack of people willing to step into the breach so a vacuum pulled the market lower. Winners were few (S / LIFE / NFLX / C) and losers were plentiful (stuff like FCX / CLF / FLR / BTU / MAS). By lunch the S&P was down 1.5%, Gold was down 10%, Silver was down 11%, Oil was down 3%, and the odds of “sell in May” stories flooding your inbox was up 250%.

 The last hour saw a tragic event hit the newswires. Images of an explosion at the Boston Marathon added to our already ugly tone. Equities continued to plummet and closed at 1,552, down 2.3%. Just a brutal day all around, nothing redeeming whatsoever. Man….you’d think life would be easy right? Love your family, be a good friend, play well in the sandbox, make a child laugh, leave the Earth a better place than when you found it. Why do some people find that so hard to comprehend? It’s times like these when writing market commentary seems a bit pointless so I'll end this recap by offering my hopes and prayers to those affected by another senseless tragedy. Bless them and their families. Final Score: Dow -179bps, S&P500 -230bps, Nasdaq -207bps, Rus2k -378bps.