September Bull and Baird Blog

September 18, 2013

Equities start the day flat as the Great Taper meeting arrives! I wish there was some kind of mascot to go along with this holiday because it feels like we need a face to this gong show. Oh well, so what does today mean to you? That’s the real question right? Well it means we get to find out if the Fed wants a reduction in LSAPs (fancy term right? that MBA is really paying off). Should they? Shouldn’t they? We’ve debated it endlessly, kind of like a big football game. Now it’s time for kickoff, time for the rubber to meet the road, the hard work to pay off, the puns to finally end. Ben Bernanke isn’t an evil man, this right here is evil but Ben isn’t. Whatever happens today I think he is doing his best to put us on the path to a normal world. A world where corporate profits and US economic growth determine the path of stock prices, not made up acronyms and fancy monetary programs. Will today be the first step off life support? Stay tuned to find out.

After the open, we saw a bit of weakness from the broader markets which, to be honest, surprised me. Has there ever been an event more priced than the Taper? Maybe Christmas? Did someone wake up this morning and say “holy cow, the Fed is going to reduce its extraordinary stimulus by an amount we’ve talked about for 2 months, I gotta to sell these stocks.” Housing Starts missed but I’ll let Bill tell you about that one. It was drop dead quiet as we waited for Bernanke to do his thing. In fact, let’s end this paragraph because the entire morning was spent waiting for 2 events: iOS 7 to be released and the Fed to tell us what the score is. So let’s move to discussing what actually happened.

At 2pm ET the Fed blew everyone outta the water and DIDN’T TAPER. Take that Wall St and stuff it in your consensus sock! Big Ben came out and said “asset purchases aren’t on a preset course” and the market ripped to a fresh all-time high. I haven’t been this excited to write a recap since, well, ever. I LOVE this move. I love it when stuff happens that no one expects. It reinforces the fact that fading the crowd is nearly always the right move. Most priced in event ever? Yes. Did it happen? No. What’s better than that? And I swear if anyone starts using Octaper I’m blocking them. So what exactly hit an all-time high? The Dow, the Dow Transports, the Rus2k, the S&P500, the Wilshire 5000, my use of commas, all that stuff. What isn’t far away? FDX. You gonna be bearish with FDX near its all-time high? Come on. So here’s my big takeaway for you, feel free to use it at cocktail parties and with your Dad who thinks talking markets is cool. We are in a muddle along world with an easy Fed, act accordingly. We add 150k-200k jobs a month. Our GDP is 2-3%. Housing continues to improve. The stock market is making new highs. Yellen is going to replace Bernanke and she is extremely competent. In other words, not a single thing has changed nor does it look like it’s going to change anytime soon. How many years of your investing life do you think you’ll see 20+% returns in the S&P? Not that many right? Why, in God’s name, fight it? There will be a time to Bearish, I promise. It’s just not right now.


Final Score: Dow +95bps, S&P500 +122bps, Nasdq +127bps, Rus2k +99bps.

 

News Highlights:

  • One big winner in ADBE, up 9%. Apparently they read the book “Death of a Salesman” and decided that sounds good (they are shifting to subscriptions). Other winners: NEM / DHI / AON / FDX
  • Couple losers: SCHW / WLP / ESRX / ETFC / CI. More 1% losers than yesterday even with a big rip. Odd.
  • How often do you see something like this in your career? PCLN is near its all-time “Nasdaq bubble” “it’s different this time” “they are getting cheap customers” high after nearly going to 0 (split adjusted price because they had to go 1 for 6 in 2003).
  • Speaking of charts, I’m begging you to click this link and look at the one’s in there. My God..its full of lines…
  • How many waivers do you think you need to sign to step foot on those?
  • Value congress summary…get your value congress summary right here! Plenty of ideas for you to chew on.
  • I absolutely love where babies sit on this chart.
  • Historical tidbit of the day: Here is how the convinced people London buses wouldn’t tip over
  • Want to see what the end of humanity looks like? Click here. It’s a 2 min animation of an asteroid flyby we recently had. Kinda makes PEG ratios feel dumb huh.
  • Some amazing photos in here, definitely click this link.

We’ll end tonight with a short, sweet, goofy link. Is it possible to eat an entire apple in one bite? Let’s find out.

 

http://youtu.be/QpP1hfEOO00

 

Have a good night.