Bull and Baird Blog - July 22, 2014

Equities start the day higher as my recap comes out of its long summer nap.  What did I miss?  Anything?  Who’s up?  Who’s down?  What’s in?  What’s out?   Let’s see what’s going on here so I can get a bit of clarity.   Are there still people calling top?  Bubble?  Definitely.   Does Yellen have our back?  Of course.  Have there been any major international incidents that draw the world’s attention and force a 1 or 2 day selloff of risk?   Yep.   Are US Gov’t bond yields still inexplicably low?  Check.  Are there pockets of consumer weakness that people point to and say “see!  Look how weak the consumer is”?  Roger.   Are stock market volumes still painfully low?  (this is the most rhetorical one of the bunch).  Have I set a record for most question marks used in a market recap?  God yes.  Ok ,well, it looks like I haven’t missed much.  We still have the biggest Cleopatra market ever (lots of Denial) and the only thing that’s going to change that is excessive exuberance, which I just don’t think we’ve seen yet.   Q2  earnings are actually off to a good start (15% of the S&P has reported and 73% beat revs, well above historical avgs) and once all these macro rumbles settle down (they already are) I think we see 2,000 in short order.  Stay with me here, this is not the time to let a few random world events shake your faith in the US market.  We are on the right course here Magellan, keep the sails unfurled.

After the open we continued to climb that wall of worry and just 2 hrs into the session printed a new intraday high of 1,986 (coincidentally the year I discovered Duran Duran).   We saw a couple macro data points which helped the affair:  CPI came in tame, proving once again that inflationistas are a bit early, and Existing Home Sales beat as inventories remain low.   Lots of single names to talk about so forget this macro mumbo-jumbo.  CMG ripped 11% proving that yes, there is such a thing as “gourmet burritos”.  These guys put up a 17% SSS comp!  I mean are you kidding?  1500+ stores, this far into their existence, and still rocking double digit comps.   If there’s an analyst on the street who has nailed Chipotle more than my guy  Tarantino please point me to them.   Ackman tried to talk down HLF today but honestly, is there a single person out there who cares anymore?   Can we put HLF to rest like arguments about soccer?  Feels so worn out (oh and the stock jumped 23% by the end of the day).   The biggest losers were NFLX and HOG, both of which fell on earnings.  Motorcycles and Movies?  What’s not to like about those?   This market is crazy.    By lunch we sat on 1,985, up 0.6%, threatening to break out into the grunge filled 90s.

The afternoon was a bit of a snore as we watched the mkt grind around on the highs.  Frankly unless you were into Burritos and Weight loss shakes you really didn’t get much out of today (what a combo right?).  We closed at 1,983, up 0.5%, and while that’s not a new all-time closing high we did get a new intraday high.  So we got that going for us…which is good.   Earnings really ramp up the next few days with 145 companies reporting tomorrow and 266 on Thursday.  2,000 by Friday?   A very distinct possibility (I said it would be last Friday on Twitter so I’m doubling down on this Friday).  

Volume was average.  Our desk was better to buy.  Buying in Tech and Ag.  Selling in Industrials and REITs.  Shorting in Tech.  News Highlights:

  • I’m going to create something new in the Recap called “succinct summation of the day” for all of you with the attention span of a gnat that just want a brief summary of the day before clicking on the last link.   So let’s try it out
  • Succinct Summation of the day:   Good earnings and macro data kept the tone positive.  Ackman spoke on HLF but the stock had the opposite reaction he hoped for.  Burrito sales are hotter than the sun.  Worries about recent global events continue to wane.  New all-time intraday high for $SPX.
  • GMO is out with a new letter, check it out here.   Jeremy had this to say for all you M&A bankers:  "If I were a potential deal maker I would be licking my lips at an economy that seems to have enough slack to keep going for a few years. Also, individuals and institutions did feel chastened by the crash of 2009 and many are just now picking up their courage. And as they look around they see dismayingly little in the way of attractive investments or yields. So, the returns promised from deal making are likely to appear, relatively at least, exceptional. I think it is likely (better than 50/50) that all previous deal records will be broken in the next year or two.”
  • If there is a single institutional investor that gets caught off guard by a China real estate meltdown…well I don’t know what to say.   In May, Guilford argued that it may already “be too late for the Chinese government to stop its housing bubble from popping.” The problem, she said, was that economic growth had become too closely tied to housing investment
  • Great article here by Paul La Monica giving us 5 reasons why the market won’t crash.  Pay particular attention to #1 and #2, they are the most impt things to watch.
  • $5000 stairway railing?  Check.   $20k floors?  Check.   Improvised home security?  Check.
  • Remember when Yellen told us that she’s worried about some tech valuations?   Yea, now you know why:   Carmelo Anthony of the NY Knicks is starting a Venture Capital Firm.  The New York-based firm will invest in early stage digital media, consumer internet and opportunistic technology startups.  Yep, how can he lose?  I mean tech startups all make money right?  You don’t even need a business model nowadays, just show a couple users and people will be hucking money at you.
  • Small Caps vs Large Caps…the rotation has a lot of people worried, including Josh Brown:  “The bigger concern to me, however, is not what to buy, big or small, but whether or not big can really hold up if small keeps tanking. It happened two months ago, but almost never before that. Are the watchers of market internals once again making a mountain of a molehill? Are our collective fingers too tightly gripping the tactical trigger given the length of the current bull?”

I have two end links for you so pick your poison!

The first is a new ride at Tivoli in Copenhagen.  I may have to ask my Danish clients about this because it looks beyond insane.   Zero chance I could do it

The second is the most interesting way I’ve ever seen a beer poured.   I’m not even sure how it’s possible.

Have a good night.