December Bull and Baird Blog

December 16, 2013


Equities start the day higher as Europe comes to the rescue. As I sat watching Tony Romo blow another game in December futures looked pretty bad. Check out this chart of overnight price action....wonky huh? What’s that big drop all about? I’m guessing someone went stop hunting in thin markets and promptly got crushed. Anyway, Europe came to the rescue with fantastic PMI readings and if you are looking for ideas in 2014 let’s remember that Europe is JUST recovering, you aren’t late to that game. So here we are in the final week of the year for market movement. Tuesday and Wednesday will feature breathless anticipation of Ben Bernake’s last meeting in which he may or may not taper. Let us recall that last week’s gruesome price action was the market changing its mind about what Ben will do. It went from “yea he might pull the trigger” to “now that he’s pulled the trigger when will he reload?” I still don’t think he’ll do it because of one thing…inflation. It’s just not there (you know, in things other than Medical Costs and Tuition. Because hey, tuition SHOULD go up every single year for no reason. Schools need those 28 deans, especially the guy who runs aquatics and student lounges). We may have improving economic activity, and we may be on the right path with jobs, but we just aren’t where they want inflation to be. Plus, can’t you just see this guy in his big leather chair, smoking a pipe, sipping on some Pappy saying to himself “these fools just don’t learn do they? In my entire tenure as Fed Chairman I’ve never leaned towards removing extraordinary measures and they think I’m going to do it at my last meeting? *chortle chortle*, snicker snicker”.

After the open I thought we were in for a monster day, with all the selling we saw last week I would’ve bet my Ugg slippers that we’d rip (don’t hate, they are comfy as heck). Unfortunately the high of the day was in after the first 10 minutes then we slowly slid lower thru lunch. Is there a more petulant song than “We Wish you a Merry Christmas” ?? Who would want a bunch of people camping out in your home demanding some random pudding? Here, take some Jell-o and go pound sand. And how can we ever forgive Paul McCartney for the Christmas tragedy he foisted on us with “Wonderful Christmastime”? You think he sat down one day and said “I’m a freaking Beatle, I could sing about a warm sack of kitty litter and people will worship me!” So yea, mostly sideways price action for the first half of the day, clearly everyone is waiting for the big show later this week. Winners: LSI, EXPE, MNST, TSO, AGN, and HLF (did an accounting selfie, say they are fine). Losers were ADBE, CCI, SWY, and DG. TWTR had a weird day, at one point it touched $60 which gave it a market cap around $33B! Let’s play one of my favorite games shall we? What other companies have the same market cap as our New Kid on the Block! You ready? Here we go: So there’s John Deere, employs 66k people, been around since, oh 1837, sells massive tractors to the world that are used to provide food so we don’t all die. What else…there’s General Dynamics, employs 32k people, been around since 1899, makes fighter planes and cool missiles. You know, modern day bows and arrows. Finally we have Kraft foods, employs 23k people, been around in various forms for decades, makes my daughters favorite food (mac) and other tasty treats like Chips Ahoy. So there you have it Twitter, you are in fine company now. But hey, I mean tweets are cool right? Those 2,300 people in San Fran are changing the world!! (I’ll admit that I love TWTR, couldn’t live without it. It’s easily the best source of breaking news for our profession)

The back half of the day brought nothing new, in fact for all intents and purposes we spent the entire session in a 5 point range. But we did close up on the day so we’ll take it (especially after that ugly week). The market has now positioned itself for a December taper, to wit the 10yr yield is almost exactly where it was the last time everyone predicted this nonsense. I stand by the notion that they will NOT taper and the market will have the same reaction it did then. And if I’m wrong? Then so be it, at least we’ll have moved on to a new phase in the market, one in which the Fed says “you’re on your own here kids”. Exciting times! I’ll take either outcome! Bring on the Figgie pudding! Final Score: Dow +63bps, S&P500 +63bps, Nasdaq +56bps, Rus2k +116bps

News Highlights:

  • Christmas Carol of the day: White is in the Winter Night by Enya.
  • Ok, I’m booking a trip to Australia next year, place looks WAY too fun
  • As you can see, it’s do or die time for Santa. It’s gotta happen this week or else we all got coal in our stockings.
  • Josh casually mentions that: “The pessimists have been absolutely routed this year, it’s becoming uncomfortable to watch. Their intellectual leaders are abandoning the cause or, worse,switching sides. None oftheir formulas or equationsare working, they’re just losing more people more money every month. Those who answer to clients have run out of excuses, they’re now lashing out at everyone else to make themselves feel better.” As an aside, one of the signs of a top is that the shorts “give up”. Not saying we are at one..just pointing that out.
  • Can you say Buyback fever? Look at the 30 DOW stocks, wow.
  • If there’s a company I could invest in today it would be Uber. I love everything about how they run their business. The fact that they charge NY’ers up to 8x their regular fares during “surge” periods makes my inner entrepreneur squeal with joy. Check out this article on why their pricing model is so slick.
  • I mean if you owned this kind of a car, wouldn’t you just get delivery?
  • If you could send one thing back in time it should be this article. “A trader who began the year with $1,000 in her brokerage account and put all of her money in each day’s best-performing equity in the S&P 500—day after day—for the 241 trading days so far this year would have $264 billion in her account today.” $1000 into 264 billion…..doesn’t that seem insane?
  • Things Michael should’ve invented #49
  • Games Michael should’ve invented #1
  • Hot new video game you should buy your kids!

We’ll end tonight with a great video passed to me by my old friend @jasonsissel. Amazing what people can do with a road bike…I can barely even ride one.

http://youtu.be/HhabgvIIXik

Have a good night.