May Bull and Baird Blog

May 3, 2013

Equities start the day higher as Nonfarm Payrolls decides to throw a keg party. Ka-Boom, Apr comes in +165k (looking for 140k) and the last two months get revised higher by 114k. Any quirky details in there? Manufacturing jobs were flat while restaurant and retail were up 57k combined but that’s just the nature of America I guess. Sell in May? Please...where those people at today? Futures screamed higher off the news and I got that 1,600 print I said would happen last week (let me take a tiny victory lap at least). Now look, I get the fact that there’s a lot of poor data out there, pretty much every Manufacturing data point is as bad as it gets. But on the flip side you have a continuing trend of positive employment data. Weekly Claims is highly correlated to the S&P500 and yesterday it hit its lowest level since January of 2008 (it’s a really good coincident indicator). While global manufacturing may be taking a digger, back home in the US of A some people are finding jobs and most of us are still going to Disney, buying hammers at Home Depot, and eating the occasional Big Mac while sipping on a SBUX latte. I maintain that the “out of consensus” view is long the market thru summer and I’m going to stick with that for now. Bill Gross said in a tweet yesterday that we should “sell risk assets”. That’s exactly the kind of talk we want to see, the more they hate it, the better I feel.

After the open we got more all-time highs than Colorado after last year’s elections. All of the following hit levels never seen before: The Dax, the DJIA, the S&P, my hatred for Spring, and stocks like ADP, ECL, TJX, SHW, COST, TEG, LTD, DIS, and JNJ. All time highs…that’s a long time right? All said there were roughly 80 stocks in the S&P500 that either touched a new high or were within 1% of it. The sharp move higher also reeked of a short squeeze (it rips then goes sideways) and my buddy over at Goldmans confirmed it (I’m bringing “Goldmans” to the States. All my London clients call it that and I like it). Their “most shorted” basket was heavily outperforming as everyone who sold on junky PMIs got stopped back in. Wanna hear the best part about the rally? I’ve been saving this…you ready? Can you feel that excitement? Neither can I. Anyway, the good stuff led: Cyclicals, Materials, Energy, Cons Disc, all the risky whiskey sectors. This wasn’t some “oh defensives led so it’s all fake and you should sell” type of event, this was the real deal Holyfield. By lunch we sat on 1,616, up 117 bps, which is fancy talk for 1.17%. I have no idea why only Wall St uses it. Actually let’s try this out in real life: Hey welcome to Toys R Us, today we are featuring a 2500 bps sale, make sure to come early. Dumb.

The final hour brought nothing new, in fact everything past the first 20 minutes of the day was completely sideways. Very typical of a breakout day though, you get the initial pop and then everyone looks around for someone else to make a move. Which never comes, so you sit there and stare at the screen. So there you have it ladies and gentlemen, new all time highs all over the place. I’ve said it before and I’ll say it again: there’s no reason to run around calling things a “bubble” or creating fancy charts to make people think this is a top. Those will happen when we least expect it, not when the blogosphere is screaming for it. Play the field in front of you, not the one you think exists based on some arcane theory or gut feeling. Consumption, the Fed, improving employment trends, housing, and a dash of disbelief. Mix these up and that’s why the market grinds higher. Now excuse me while I kiss the sky.. Final Score: Dow +96bps, S&P500 +105bps, Nasdaq +115bps, Rus2k +155bps.

News Highlights:

  • The difference between being a boss and being a leader. Simple, but has a lot of truth to it.
  • Great quote from Whitney Tilson on what he’s learned from Warren Buffet: "On the personal stuff, just the way he and Charlie talk about how they live their lives. And, the way they run Berkshire Hathaway. I remember them talking about 'How do you define success? How do you know when you're successful?' and Warren's comment was 'If the people who should love you, do love you.' That's always sort of stuck with me. And then Charlie takes the inverse of that and says, 'You don't want to be the guy who everybody shows up at his funeral just to make sure he's dead.'
  • Where all my bankers at? I love em so much. Excel jockeys, bustin 100hr weeks, living the life of CAPM and WACC. Man it sounds so glorious, like being a rock star. Hey, I found this link that might help you get a raise! Crazy shortcuts in Excel. By the way, if you use your mouse in Excel you are doing it wrong. Shape up you crazy work a holics.
  • All you had to do was look at your desk in 1995 and you would’ve been a zillionare.
  • New Zealand..wow.
  • Josh Brown (@reformedbroker) showing off why I love him: “Feel free to tell me why this is the top. Again. Tell me about the frothy sentiment and the Shiller ten-year CAPE and the supercycle and copper and margin debt and hyper-inflation and the next wave of foreclosures hitting the market and Cyprus banks and Carlton Banks and the rest of it”
  • One of my favorite actors ever, you gotta read his GQ article: “Downey remembers staring at an image of that stoic gleaming helmet, as he tried to work out what it would take to be the man inside it, when he was preparing for his Iron Man audition in 2006. It is easy to forget what a strange place Robert Downey's career was in back then, and not just because of the long trail of upheavals—the drugs, the guns, the arrests, the rehabs, the prison sentences—that could have destroyed it.”
  • Anton’s life tips #945: If you are gonna jump thru fire make sure your friend isn’t doing it too.
  • Nice list here of Finance people to follow on Twitter. Hope I make one of these someday..
We’ll end tonight with a look at the most frustrating of all games…golf. Some quality funny in this link, give it a ride.

http://youtu.be/6FMyblJkLSM

Have a good night.