December Bull and Baird Blog

December 9, 2013


Equities start the day slightly higher as snow pounds the US and I pound holiday treats (bread pudding with caramel? Ask me for the recipe…you need this). Since last we spoke the evil Dr Porkchop revealed his plans for world domination. Wait…that’s a different blog, sorry. I’m kind of rusty at this thing. Since last we spoke the market seems to have run out of momentum…much like Adele (did she drop off the planet?). Where did all the fresh highs go? I was hoping for 1,850 maybe 1,875 by year end! Come on people, don’t let me down here. Instead we are stuck in the low 1800’s because of two things 1) time running out – there may technically be 15 settlement days left, but I’d argue its really 10. This week and next are it for price action. 2) taper / economic data – Good jobs report last Friday reinforces that the fact that macro data is on the side of the bulls. You didn’t fall for that “taper” BS did you? Seriously, good economic data is just that....good. Don’t be fooled by all this “oh no, the Fed might purchase slightly less MBS securities than before I better sell these stocks” nonsense. The time to worry is when the Fed TIGHTENS…that’s the bear case. I’m also not in the “tapering is tightening” camp and neither should you be. Put your plane on autopilot and ride this thermal until year end, don’t let skyfalling Fedwatchers ruin your holiday. As an aside, I can’t believe I wrote my first December recap on the 9th…what is this world coming to? We need to finish this month strong, if I have to write about fruitcake and the merits of giving gift cards to your family then so be it.

After the open we saw sloppy and aimless price action, which is convenient because that perfectly describes my holiday gift giving style. Speaking of holiday gift giving, I guarantee you this is THE gift for children in 2013. If you don’t already have it get it…it’s all the rage. Wanna know the best part? You’ll be spending the entire New Year picking tiny rubber bands out of your carpet! Wheee!! So yea, the morning was quiet as the market hovered around unchanged. Take a look at this chart (was all over Twitter this morning from Monument Securities) and tell me we are in a bubble. Non US pension funds continue to be underweight equities and I’m supposed to run for the hills? Even the US based pension funds aren’t back to pre-crisis weightings. Could the market be stretched? Of course. Could we see a pullback? Certainly. Does that mean we are in a bubble? No. So to sum up: Things NOT in a bubble 1) SPX 2) Egg Nogg 3) Jay Cutler jersey sales 4) England to win the World Cup betting tickets. Things DEFINITELY in a bubble: 1) Bitcoin 2) Pappy Van Winkle 3) juice diets 4) organic hipster run fresh markets (seriously there are so many. How many stores do we need to buy kale from?). By lunch we sat on 1,809, up a couple points. Winners: Sysco (the one no one ever talks about that always seems to beat its rival), DVA, MU, COG, and DOW. Losers: EW, NFX, FSLR, ANF, and GHC.

1,809 at lunch, 1,809 at the close. That leaves, realistically, 9 days for the S&P to do something worth mentioning. Unfortunately next week’s FOMC meeting is the last possible catalyst and nothing will happen. Now I’m no fancy Ivy League PhD global bank strategist, I’m just a humble cynic sitting in the Midwest. But Anton don’t think Ben is going out like that. Anton thinks Ben will go gently into that good night. Anton thinks Janet needs some time behind the throttle before taking this spaceship into re-entry. Will Anton be right? We’ll see, but even if I’m wrong at least I got to end a recap speaking in third person. Jimmy would like that. Final Score: Dow -1bps, S&P500 +13bps, Nasdaq +30bps, Rus2k -25bps.

News Highlights:

  • Christmas carol of the day: Fairytale of New York. Underrated and awesome.
  • Breath is still advancing with price. No top yet.
  • I should probably take this “humility” quote to heart huh? If the history of bubbles teaches us anything, it's to be humble. Many gasped at Shiller and Fama sharing the Noble Prize, since the two hold what look like opposite beliefs. But the two economists have a common denominator: They both advocate humility. Fama doesn't think we can predict bubbles. Shiller thinks we can, but doesn't think we can ever know when they'll collapse. What we need, but I know we'll never get, is more of this type of thinking. I'm holding out for a humility bubble.
  • Hey make sure toss me a follow on Twitter (@bullandbaird). I try to be funny there too!
  • So on the flight home from Portland I read this 208 page paper from Bridgewater. Actually I ate really stale peanuts and watched Pitch Perfect, sorry. But hey give this paper a try anyway, I mean who doesn’t wanna know about 500 years of economic cycles?
  • All sorts of bullish / bearsh commentary here. Basically a holiday smorgasboard of data mining for your viewpoint! (the CAPE one makes me a bit nervous)
  • Struggling with this…a lot
  • My dream home
  • This year only 11 companies in the S&P500 have split their stock . Ouch. Can you say fresh lows for volume next year?
  • Want me to make you angry? I can do it, trust me. Here, take a quick tour thru this article and tell me you aren’t fuming mad . Two researchers in Philadelphia reached out to 20 local hospitals, asking them how much they would charge for electrocardiogram. In the phone calls, the researchers would say they were uninsured and planning to pay for the test themselves, asking how much that would cost. Three hospitals were able to provide that information. By way of contrast, 19 hospitals were able to respond to a query about how much it would cost to park at the hospital, even when some of those parking prices had a few variables. Why is this so hard? A simple test. A simple electrocardiogram that should be the same in every hospital in the nation and they can’t put a price on it. Our system is so messed up and neither party is working to fix it. This kind of thing is RIPE for social media to disrupt.

We’ll end tonight with another “People are awesome” video. I’ll admit it, I actually like these better than the fail one’s.

http://youtu.be/exOA_rGl1BY