August Bull and Baird Blog

August 27, 2013

Equities start the day lower on some good old fashioned geopolitical tension. Remember that stuff? Someone does something bad in a place no American can find on a map then we lob a few million dollar cruise missiles at it and that’s supposed to solve something. Great. Anyway, let’s move on because bad people doing bad things in our world is not a good enough reason to sell stocks. As I trolled the web yesterday looking for some kind of explanation about what happened to Hannah Montana I ran across the following link on (don’t hate me). Bubble Watch: Ridiculous Stock Values Edition. That’s right, one of the classiest sites on the internet, Gawker, home to articles about high heels and what kind of dogs celebrities are buying is weighing in on stock market valuations. Isn’t that great? Here’s the quote: “The farther we get from the last economic collapse, the closer we get to the next economic collapse. But which bubble is next to pop? Student loans? Desert real estate? Today, we turn our untrained eye to the backbone of the U.S. stock market.” So why am I bringin this up? Other than to raise your ire? Because if you are bearish here, and think the top is in, you have to sleep with the knowledge that GAWKER is on your side. That if this truly was a bubble, and stocks have finally peaked for this cycle, then a website featuring hard hitting articles about otters called it. Yikes.

After the open it was all red all the time as safety was sought. Lots of bids in Treasuries, Oil, and Gold. Not so many in Equities and optimism. Actually wait, optimism did get one small boost from Consumer confidence, which came in 81.5 vs 79.0. So if we’re gonna crash it’s going to happen with consumers as confident as they’ve been in 4 years. Which is nice. The first half of the session saw the S&P make lower highs and lower lows as whoever was left at their desk this last week of summer decided to sell indiscriminately (maybe Gawker is running a hedge fund now?). What moved today? JCP of course, as Ackman dumped his stake last night. Can we stop talking about this now? He took a shot and brought in a new CEO to try and shake up a failing retailer, that’s it (Baird rates JCP neutral). Let’s talk about other retailers like Costco! I mean who doesn’t love buying 13lbs of nutmeg alongside a garden shed. God I love that place. Anyway, there were only 3 stocks in the S&P up over 1% (GT, CCI, and VTR) and only 30 stocks that ended positive. Losers were everywhere led by DFS, LNC, SEE, STI, and BLK. By lunch we sat on the low, 1,635, down 1.2%. Just an ugly morning driven by the drums of war.

The last few hours saw the market really get twerked and we closed on the lows, 1,630, down 1.6%. So apparently we are in correction mode, which is fine. How many times have you said to yourself “if I just got a pullback I’d do some buying.” Well, here’s your chance, make sure you have a shopping list sitting by your desk. Unless of course you subscribe to the Gawker school of top calling then I guess you continue to puke risk while Europe improves, US housing improves, US unemployment improves, and Consumer confidence sits near its highs. Will we pull back to 1,600? Probably, technicals say we are headed there. Are we going to pull back to 1,500? No. 1,550? No. Might I be wrong? Sure, I don’t have some crystal ball. But Syria isn’t going to change the fundamental investment thesis people have been operating under all year: that things continue to improve. We had a 7% correction in early May..did everyone throw in the towel then? Was it over when the Germans bombed Pearl Harbor?

Final Score: Dow -114bps, S&P500 -159bps, Nasdaq -202bps, Rus2k -241bps.

News Highlights:

  • With all this negativity swirling around let’s make sure we don’t lose sight of the big picture. The Future is bright: “It still appears economic growth will pickup over the next few years. With a combination of growth in the key housing sector, a significant amount of household deleveraging behind us, the end of the drag from state and local government layoffs (four years of austerity mostly over), some loosening of household credit, and the Fed staying accommodative (even if the Fed starts to taper, the Fed will remain accommodative).”
  • I hope my clients in Switzerland aren’t far from this place. Wonder if they have a Baird room rate.
  • Keeping with my news highlight optimism here are 20 charts showing things aren’t all doom and gloom. (take a quick gander thru this, it’s a good link)
  • Kids things Michael should’ve invented #98
  • What am I missing here? How is Larry Summers the front runner to replace Bernanke over what would be the first female Fed Chairman? A source from Team Obama told CNBC that Larry Summers will likely be named chairman of the Federal Reserve in a few weeks though he is "still being vetted" so it might take a little longer. Didn’t his investment strategy dramatically harm Harvard University? I don’t know, maybe he is the right man for the job, just not sure how he’s so far ahead of Yellen.
  • These are probably my favorite type of links. Life Pro Tips! I’m gonna try the apple juice one tonight.
  • Wait what?
  • I’ve got two sports related links to end on tonight because I’ve been feeling athletic lately. I mean I did just complete my first triathlon last weekend (drank beer, swam in a pool, ran to my car. Crushed it).
  • The first is 10 mins long, but you obviously don’t have to watch the whole thing. Do people really mountain bike down ski runs now? What if you lose your bike? Is the injury rate on this insanely high?
  • The second is an absolutely SICK shot from the US Open. Nadal…this is criminally good…

Have a good night.