July Bull and Baird Blog

July 23, 2013

Equities start the day higher as they have for, I don’t know, all of July. Quite the month we’re putting together here right? The S&P is up around 5% MTD yet no single day has added more than 0.5% to the total. I’m going to invent a new term here are you ready? This market has Infant Walk Syndrome. Remember when your baby took those first few steps? How he wandered a bit, finally got moving forward, fell, stayed committed, wandered a few more steps and ultimately reached his goal? That’s the tape right now. We take these baby steps, fall on random news that is meaningless, get up, dust ourselves off, and keep inching forward. Wanna know the best part of this analogy? Earnings were supposed to be the staircase in our path but they appear to have had zero effect on us. I mean I’ve seen more whiffs than a 1st grade baseball game yet we’ve shrugged them off and continued to march. In fact, brace yourselves, this is the strongest bull market since the end of WWII. Can you believe that? And don’t let anyone tell you it’s all “Fed printing.” If we close Q3 around 1700 the market will be up 113% from the Mar 09 lows. But guess what? Over the same time frame earnings will have grown 140%. That my friends is the real deal Holyfield.

After the open we had an initial selloff driven by a weaker Richmond Fed print. Who knows with these regional indices though, they flip flop more than a MLB baseball player (on Braun, say it ain’t so you cheater. At least the Cubs never had…wait forget it). The market bottomed around 11am ET and proceeded to slowly march back towards unchanged. We keep seeing this same price action day in and day out. In fact in the last 13, count ‘em 13 sessions, the S&P has only closed below its open one time. I’m starting to run out of platitudes here. Lots of earnings today, in fact this week features over 800 of your favorite companies telling the investment world to buzz off and let them do their job (can you imagine if a CEO said that? I’d feature his or her picture in my Hall of Fame). Earnings winners included MTG, WEN (mmm cheeseburgers), BTU, TXN, and LXK. Earnings losers were WAT, ITW, NFLX, R, and PENN. The biggest winner today was FIRE, a cyber security company which was…..umm…...on fire after agreeing to be acquired by CSCO for $76 a share. Cyber security huh? Yea, can’t imagine we’d need any of that with so much hacking going on in the world (why does this stuff seem like such a no brainer after the buyout?) By lunch we sat on 1,694, sharply unchanged. Whew, that was a close one, we were down a whole 3 pts this morning. Thank God we fought off that nightmare.

The rest of the day saw nothing incremental at all. Sideways a bit, a retest of the morning lows, and a close at 1,692 down a whole 20bps. Chalk today up as another session in which we ignored mediocre earnings and tepid economic data. Why are we ignoring them? Here I’ll put it in equation form for all the stat freaks out there: equity flows > earnings > eco data > gut feelings > doom sayers > top callers > recap writers. I really do think inflows are having a dramatic effect on price action, what else could explain the endless strength? (I think the flows are justified too, and not just because my career revolves around stocks. Really. No I’m being serious, the US economy is better than people think) Final Score: Dow +14bps, S&P500 -19bps, Nasdaq -78bps, Rus2k -11bps.

News Highlights:

·     · After hrs earnings movers: VMW +10%, EA +3%, ILMN +4%, JNPR -6%, PNRA -4%.
·Random thought of the day: Someone really needs to introduce Anthony Weiner to Snapchat. Carlos Danger? Really?
· It’s hard to know what the main takeaway is here. On the one hand BAC is saying its institutional clients are selling. On the other hand they say their PWM clients are buying. “…and on a 4 week average basis, outflows by institutional clients are the largest in our data history”. Shouldn’t this worry me? I don’t know. I guess we should expect some rotation into stocks given the puke in bonds?
· One could say the “housing rental market” is a bit crowded in Phoenix. Wow.
· Someone got arrested in Australia for trying to drive like this. I’m speechless. I’m hoping he was in the Outback, dying of thirst, and this was the only solution to avoid being eaten by a giant snake.
· I’m going to go ahead and place this next to the chart of “rise in college tuition” as data sets that make me the most angry. Someone out there will be richer than Bill Gates if they can find a way to bring transparency to U.S. health care costs. Can’t social media do this? Can’t we create a big aggregator that allows people to shop for simple stuff like X-rays? Am I being too idealistic?
· Ok, if this is hotel I’m going to go ahead and crown it as having the best view in the world (Lake Misurina Italy)
· The octopus won (these are incredible)
· Random question of the day: If the baby had been a girl, would she have displaced Harry in the line of succession too?
· Bizarre story of the day: SEC busts alleged Bitcoin Ponzi scheme. Oh is that right? Wait...it was headed up by a guy whose username is Pirateat40? Ok people, two things. One: never invest with anyone who runs with the name Pirate, especially if he likes Jimmy Buffett. And two: isn’t this whole bitcoin thing ALREADY A PONZI SCHEME?

I have two final links tonight since the news highlights were a bit short. The first is a 10 min video for you adrenaline junkies out there. Lots of great sports close-ups in slow motion, stuff you’ll never do. The second is a fail video, stuff we all do.

Crazy sports stuff

People hurting themselves

Have a good night.