September Bull and Baird Blog

September 30, 2013

Equities start the day sharply lower as shutdown looms. I wish I could attach a music file to this recap because I’d have it play a really ominous sound like this when you opened it. Apparently our fantastic, highly competent leaders in Washington decided to watch the #BreakingBad finale instead of negotiating this weekend (can’t say I blame them) so here we sit on the precipice of the first gov’t shutdown in 17 years. Most of these things last a couple days, but the most recent one in 1996 lasted 21 so no one knows when it will end. That being said it will end, so if you are going to make a rash decision about owning stocks I’d probably look for a better reason than this. Say, remember when “taper” was a reason to sell stocks? Everyone spent all that time pondering when the Fed would lift stimulus and ring the bell for the top? Any chance they are going to do that in October now that politicians have decided to throw this little roadblock at us? Hmmm, probably not, and if they aren’t going to do it in October would they do it at Bernanke’s last ever meeting? The mind does wonder. So let’s sum up: Is a gov’t shutdown a good enough reason to sell stocks? Sure, for 1 or 2 days. Is it a good enough reason to reweight your entire portfolio and put it into cash? No. Was Walter White one of the best TV characters of all-time? Yes. Should you make crazy investment decisions if you are backed into a corner like he was? No.

After the open it was thin…thin like a supermodel coming off food poisoning (I guess that’s pretty thin). I haven’t seen a first hour like that in a LONG time; it felt like 5 people were trading the market. Stocks with $1 wide bid/offers and 500 shares traded, just a total strike. Chicago PMI beat but that fact was totally ignored. Hey Washington, nothing like making a great economic data point worthless, congrats on crushing the market! Why not start up a hedge fund, you guys have a knack for this short thing! We rallied off the lows as word came out Republicans were set to meet in the afternoon and by lunch we sat on 1,682, down 50bps. Not bad, overnight saw the market drop 1% so at least the morning wasn’t a total disaster. Couple winners of note: ISRG +2.3% and CMG +2.2%. CMG you say? Premium burritos? I coulda swore my boy Gundlach said it was a short and everyone thought Taco Bell was going to crush them under a Dorito shell piñata.


The afternoon saw us trade sideways as we watched the clowns in Washington do their thing. House: how about a CR where Obama has to sign up for Obamacare? Senate: try again. House: How about a CR where the medical device tax is repealed? Senate: try again. House: How about a CR where we put Iron Man in charge of the military? Senate: hmmm. (how awesome is RDJ? I love that guy). Back and forth they went and eventually we slid back to the lows, 1681, where we closed. Notable losers: FTR, JCP, IRM, CLF, and JCI. So what now? Where is this thing going? Well I’ll tell you, now we get to ignore every single piece of economic data, market commentary, and company report while we wait breathlessly for an American politician to say something meaningful. Sounds fun huh? Well it’s not, so let’s hope this is over soon. What an embarrassing way to end the 3rd Quarter.

Final Score: Dow -84bps, S&P500 -60bps, Nasdaq -37bps, Rus2k -4bps.


News Highlights:

  • Quote of the day: “When you buy a stock, you are not just buying a piece of business, you are buying the current expectations about the future of this business” Seems so obvious right? But in reality that’s probably a sentence every advisor should hammer into their heads. Company X is hot now but what’s priced in about their future? Great quote, love it.
  • Our politicians fiddle while this is happening. Anger rising: “The issue wasn’t poor demand for the curtains, pillows and other textiles being produced at the factory. Quite the opposite. The owner, the Airtex Design Group, had shifted an increasing amount of its production here from China because customers had been asking for more American-made goods. The issue was finding workers. “The sad truth is, we put ads in the paper and not many people show up,” said Mike Miller, Airtex’s chief executive.”
  • Seems appropriate for today
  • Bespoke looks at past Gov’t shutdowns. 2013 shows an eerie similarity to 1995, check it out.
  • iOS 7 got you down? Battery feel like it lasts a few hours? Click this link for some helpful tips
  • There isn’t a single person reading this who has ever, or will ever, do this. Just roll it into a ball, life doesn’t have to be this orderly (#firstworldanarchy)
  • The Atlantic brings us 10 Stealth Economic Trends that rule the world today. As always there’s gotta be a few trades in here (esp the solar one)
  • Real time PMI update: Yep, still growing in the US of A.
  • A poster for your child’s wall
  • You think AAPL will ever use this in ads? Probably not right? “Hey honey, go get my iPad, I’m sick of those barking dogs.”
  • Seems like WMT is really going for a new angle here huh?

We’ll end tonight with another crazy wingsuit video. Take a look at what Jeb Corliss calls “the hardest thing he’s ever done in his life” And this from a guy who flies 10 feet about the ground….

Have a good night.