Bull and Baird Blog - March 18, 2014

Equities start the day higher as Putin decides to annex Crimea. This all reminds me of the heady days of Sputnik and Yuri Gargarin when the world trembled at the sound of Russian rockets, now we are trembling again at the sound of pen strokes (I love that movie so much, I could watch it monthly). Other than our friend Vladimir chomping up land like Pac Man there isn’t much news, and we continue to see choppy trading driven by all kinds of concerns. Inflation, China, EM, Taper, blah blah blah, these are all the same worries we’ve had forever just packed in a Spring container. According to a recent survey by Barclays, 36% of investors polled believer weaker China and EM growth is the most important risk to financial markets over the next 12 months, followed by Geopolitical risks (23%). You know what last quarter’s survey cited as the main risk? Fed policy withdrawal. If these are people’s primary worries I think we’re ok here. All of these risks are well known and talked about endlessly. I wonder, when was the last time a consensus worry ended a bull market? Has it ever? You wanna know what scares me the most? That IPO story about how all these new issues make zero profits.That’s the kind of stuff that makes me pause, that keeps me up at night. Stories like that inform us not only about the sentiment of investors but of those who are “cashing in”. So as you ponder all these worries look for the one’s that aren’t endlessly debated, because those are the ones that are way more important than Putin trying to get a statue in Red Square.

 

After the open we saw a continuation of yesterday’s rally based on….actually, to be honest, I don’t even know. For some reason the market decided to bounce on Monday and today it just kept going. Less tension in Ukraine? Maybe. Economic data? It’s been decent. Dip buyers? Not really, volume was horrible yesterday and it was bad again today. I guess the market just isn’t ready to give up no matter how many people are calling “top”. By lunch we sat on 1,872, up 0.75% as a 2 day rally spread its wings. Winners were $MSFT (who is releasing Office for iPad soon. *Ahem* Nintendo…please take note of what is going on here), $X, $SNDK, $HPQ, and $CBG. Losers were $GME ($WMT wants a piece of the used game action), $NDAQ, $KORS, and $TJX.

 

The final hour brought nothing crisp or refreshing and we closed right where we were at lunch, 1,872 which is only a stone’s throw from the all-time high. So seriously, what’s up with this market? I’ll tell you this much, it’s been a long time since I’ve seen a tape chase its tail as much as this one is. One day we are all bulled up making new highs, the next some tiny event happens and everyone’s knees shake. So while that kind of price action is confusing it’s usually not the kind of stuff you see at a top. Dangerous articles and low quality IPOs are only a sign of the top, not clear cut signals. We need that aura of inevitability that only comes when people ignore stuff like Crimea, not react to it. We just aren’t there yet, and I think we see 1900 before 1800 (said this on twitter two days ago..#timestamped!).

Final Score: Dow +55bps, S&P500 +72bps, Nasdaq +120bps, Rus2k +141bps (nice).


News Highlights:

  •  After hrs movers (410pm ET): ORCL -5%, ADBE +2%
  • What exactly is the end game here? “About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a telephone survey of 1,000 workers and 501 retirees from the non-profit Employee Benefit Research Institute and Greenwald and Associates.”
  • Hey, at least you guys have awesome restaurants and culture right? “New York is the worst state in the country to be a taxpayer, according to a ranking released by WalletHub.com. The Empire State ranked 51st (including Washington, D.C.) with an average annual state and local tax burden of $9718, which is 40 percent higher than the national average, according to WalletHub.”
  • What exactly moves the price of gold? No, it’s not manipulators. Kid Dynamite tells us who right here. “These charts clearly show that one of these classes of traders is driving/making price – highly correlated with price – and that one of these categories of traders is acting as a counterparty: taking price. I’ll leave it up to you to figure out which is which.”
  • This is a display in a French supermarket. Gotta say, I’m actually proud of that. USA!
  • My main man on housing starts: “I don't blame all of the recent weakness on the weather (probably just a small factor) - there are also higher mortgage rates, higher prices and probably supply constraints in some areas. But I still think fundamentals support a higher level of starts, and I expect starts to pick up solidly again this year.”
  • Great article on High Freq trading from Matt Levine: So, if you ban co-location, high-frequency traders will move their servers out of the exchange and into the buildingacross the street, where they willstill be closer than your servers, assuming you even have servers. If you stop providing extra bandwidth and fast cables to high-frequency traders inside exchanges, they'll still have fast internet connections and fast cablesoutsidethe exchanges
  • Cleveland may not be good at sports but they appear to have amazing technology! Wow, what a show!

We’ll end tonight with another sweet GoPro video. This time it’s strapped to Superman!

 

https://www.youtube.com/watch?v=H0Ib9SwC7EI


Have a good night