Bull and Baird Blog - July 24, 2014

Equities start the day higher as earnings pour forth like a cold draft beer (who’s thirsty now?). Earnings Earnings  Earnings, that’s the soup du jour as 260+ companies hit the tape (how bummed are junior research analysts right now). The biggest move overnight was FB, up a meaty 7% as I sat down in my imitation luxury space chair (is it just me or do these Aeron chairs hurt your back?). Doug Kass pointed this out on Twitter but would you believe Facebook’s market cap is larger than both DIS and GM combined? That doesn’t zuck right? Disney did $6B in PROFIT in FY 2013 and is currently smaller than Mark’s baby (did $1.4B in profit FY2013).  I mean have you walked around Disneyworld lately?  You got people buying $30 toys like they cure Hepatitis C. Hotels charge mortgage like rates and the lines for Small World are longer than the “Free Pizza” queue at my local college. Plus they are going to reboot Star Wars!   How exciting is that?  Well, anyway, who am I to complain about market valuations, maybe FB is going to be the larger than AAPL one day. S&P 2,000? Not yet, but hang tight. Earnings are fine and macro data feels like it has finally turned (Weekly claims hit its lowest level since 2006 this morning), so I think that magical 2 handle is imminent. 

After the open we spent most of the morning in “indecision” mode. Some good earnings, some bad earnings, some good eco data, some bad eco data (new home sales whiffed hard and flash PMI came up a bit short) which in the end caused us to drift around. After 30 minutes we were in negative territory. 1.5 hours later we had printed a new all-time high. So you got me. Besides FB the other big winners were UA +14%, which clearly protected their house, TSCO +6.5%, which I guess has plenty of tractors in supply, FLS +5.5%, must be serving a bunch of flow, and DPS +4.3% because Dr Pepper is awesome. Losers were DHI -11%, off that home sales #, TRIP -5%, because maybe people are using travel agents again, QCOM -6.5%, because China just isn’t there yet, and PCP -5.5%, because you ever seen what this stuff does to kids? (please tell me someone gets that reference).  Up and down we went and by lunch we sat on 1,989, up 0.13%. Not bad, just need one more round of clearly positive data to break higher.  Or maybe we need SPX skew to move lower and gamma to move higher. Or the other way around. Are there people that care about skew and gamma?

The afternoon saw chunky moves in a couple real estate dot coms!  Bloomberg reported that Zillow may be looking to acquire Trulia! How about them apples? Trulia popped 32% on the news and Zillow eeked out a 15% gain. Two companies that still don’t have this whole “profitability” thing down are potentially looking to join forces? And they each added billions in mkt cap on the news? Sure why not!  USA!  USA!  Ok ok, short interest is pretty high in both and their moves were probably short covering but still, don’t make Janet Yellen scold the tech sector again. We closed at 1,987, which unfortunately was flat on the day. Not enough good news for higher, not enough bad news for lower. Let’s call it a wash and go enjoy the sunshine. 

Final Score:  Dow -2bps, S&P500 +5bps, Nasdaq -8bps, Rus2k -18bps. 

News Highlights:

  • Succinct Summation of the Day’s Events:  Mixed Macro Data, Mixed earnings, Two real estate websites are circling each other, UA sells a lot of shoes, QCOM struggles, bad housing data hits DHI, market goes nowhere.
  • For all my PM’s out there: were you looking for an academic paper on CAPE valuations in 38 different stock markets?  Of course you were and you said to yourself “man I hope Mike links one of those tonight”.  Here you go.
  • Remember CYNK?  The penny stock that has no business whatsoever and made its owner a billionaire briefly?  Bloomberg wrote a good story on it  ( I think it reopens for trading this week).  “This is the listed address for Cynk Technology, a company with no assets, no revenue, and one employee, that for one hour in July had a market value of more than $6 billion”  Here is where I give you my sarcastic “markets are efficient” comment but you already know they aren’t.
  • Have you ever, in your life, seen a bedroom view this spectacular?
  • Time for some economic optimism! Check out this WaPo link on employment and this little nugget: “Here's the good news: in the past six months, unemployment has fallen much faster than expected, from 6.7 to 6.1 percent. And as you can see above, 88 percent of that has been due to declining long-term unemployment.”
  • And here are 7 charts showing why you have to feel good about the US Economy
  • Is that a beach? Like could I lay there, under those mountains, and frolic in the sand? When’s the last time you froliced? Did I spell that right?
  • Cullen Roche, one of my favorite bloggers, wrote a book. In it he gives us 6 Essential Principles we should all know.  I like this the best:  Money is not the same as “true wealth.” Money is the medium of exchange. It is the thing that gives us access to the show that is the economy. Mistaking money for wealth is like mistaking the theater ticket for the performance. The reality is that the ticket is the means to the end. For most of us true wealth includes things like shelter, food, water, security, companionship, family, and things that money may or may not give you access to
  • With the stock market near all-time highs have Bulls become….endangeredNormally, when the equity market is making new highs you expect to see bullish sentiment rise along with it. Not so in this bull market. In what has been a trademark of the last five years, investors with bad memories of the bear markets in 2000 and 2008 are determined not to make the same mistake again. Therefore, the higher equities go, the more nervous they become.  Dwell on that a bit and then come back and tell me about this “bubble”
  • Be ambitious in life
  • What a total cliff hanger (you’re gonna hate me)

We’ll end tonight with one of the coolest pranks I’ve ever seen.  My son is a huge comic book fan and when I showed him this video he flipped out.   Now he thinks there are real X-Men.   Mission accomplished.

http://youtu.be/63gI9VyoaAU

Have a good night.