June Bull and Baird

June 16, 2014

Equities start the day lower as the world continues to struggle with two things: valuation and catalysts. Valuation is something we talk about from time to time but as the market churns inexorably higher the birds begin chirping about it daily. Is the market overvalued? Is it undervalued? Do we need a correction? All questions we struggle with that ultimately have no easy answer. We managed to touch 1,955 intraday but now sit at 1,936. Why? Because the Middle East reared its never ending head and caused oil to spike. Is the situation in Iraq a reason to sell stocks?  Of course not, but it causes oil to experience a Tyion Lanister type temporary insanity and that does affect the market. Lest we forget, there are two things that always cause stocks to quake: high oil prices and a tightening Fed. Right now we have one of those barking in our lap.  So what about catalysts? Other than the aforementioned sandstorm there really aren’t that many, and all you have to do is look at daily volume to see a market lulled into complacency. Can you believe Tywin died on a toilet? The most powerful man in Westeros laid low on the loo (I’ve been dying to use loo in a recap for as long as I can remember, thanks HBO). If you haven’t been watching GoT now is the time to catchup, it will easily go down as one of the greatest cultural events of our time.

After the open we saw a dramatic up and down session that ended squarely on unchanged. When I say dramatic I mean REALLY dramatic: a Portuguese guy headbutted a German, received some kind of red signal from the lead Umpire, got sent off with Das Boot, and by halftime it was 3-0 for the Fatherland.  Are you kidding me? That’s better than an earnings miss, a CFO leaving, and the IR person saying “yea, we’re not really sure what to do here”.  I’ll tell you what, I’m really getting into this soccer thing, if there’s a bigger World Cup poser fan I’d like to meet them.  Anyway, aimless price action this morning as the IMF lowered its growth forecasts which thankfully was offset by beats in Industrial Production and the NAHB housing index. We also saw three big M&A deals as MDT bid for COV, LVLT bid for TWTC, and SNDK bid for FIO. Not bad, that should keep a solid bid under the market as investors fight with not only deals, but endless buybacks. Here’s a question for you:  when the Germans play the Portuguese and the Ref is from a third country what language do they argue in? Can we get some kind of “mic’d up” World Cup game so we can hear what the field is like? That would be great thanks.

The afternoon brought 1 whole point of price action and we closed at 1,937, up 0.08%. 8 bps you say? This puppy MOVES, you gotta be involved here people. Winners COV, WMB, GT, FSLR, and SNDK. Losers VRTX, YHOO, KORS, ADT, and BTU. So the market is still sitting near its all-time high and this Middle East thing won’t be the end of it, of that I’m convinced.  Remember when Syria was a thing that spooked stocks? Yea. Oil is on my radar but not crazy enough to make me nervous…yet.  Tops are a process, maybe we are making one but no one can say for sure. I still think we see a 2nd half pickup and the S&P closes higher than where we are today. In the meantime we endure this low vol, low interest market and do our best to help clients make money. Go USA! Final Score: Dow +3bps, S&P500 +8bps, Nasdaq +12bps, Rus2k +36bps.

News Highlights:

Not much out there today so we’re skipping to the big finish.

Tonight we have some killer bowling shots from Dude Perfect. These guys make the best videos so check it out!

http://youtu.be/CACAmH4r1fw

Have a good night