Bull and Baird Blog - March 3, 2014

Equities start the day lower as Ukraine and Russia play out a Tom Clancy novel. If you had “I bet someone re-enacts the movie Red Dawn in the early part of 2014” in your “why I’m selling stock pool” then congratulations, you win! As for the other 100% of us we walked in to futures down 1% on something no one ever would’ve prepped for. But seriously, imagine if you sold stock every time a regional conflict popped up around the world, you’d almost never hold a thing. Like Syria last year the market will spend the next few days discounting this event and then go back to worrying about a frozen economy and calling everything a bubble. Speaking of Frozen, can you believe how badly John Travolta butchered Idina Menzel’s name last night? Come on John, you had like 15 words to speak all night, you couldn’t manage to pronounce the name of one of the greatest singers of this era? Adele Dazim? Really? (btw, some random twitter account popped up with that name and it had more followers than me after 4 mins. Sigh). So fresh all time highs are on hold here while we watch another Geopolitical ripple play out. Guess what, these kind of events happen ALL THE TIME, if your thesis for going neutral U.S. stocks revolves around a Crimean tussle you’re gonna have a bad time.
 
After the open we spent the first half of the day doing Crazy Ivan’s as headlines came fast and furious (2 movie quotes in the same sentence! I’m back baby!) Europe completely hoarked itself closing down 3% as the shadow of Putin stretched across the landscape. Oh did I mention Russia’s market fell 12% today (in dollar terms)? Nice work there guys. Back here in the US of A we actually got some macro data that wasn’t godawful. Feb PMI final came in 57.1 (looking for 56.7) and ISM Manufacturing rose to 53.2 from 51.3 last month. Not bad, I’m still of the opinion that weather is the primary cause of our slowdown, and once spring comes (to your part of the country at least, it’s never coming to mine) this whole angsty market we are experiencing will unwind. Not that many winners today, only LO, RAI, ISRG, and REGN made any decent headway. Losers were as plentiful as Oscar snubs (poor Leo) and the biggest one’s were DRI, CCL, IVZ, IPG, and AVP (only 1 loser down by more than 3% though…that was interesting). By lunch we sat exactly where we were after 1 minute of trading, 1,844, down a little less than 1%. Quiet though, crazy super quiet, when stuff like this happens most of the big clients sit back and watch instead of overreacting. Like they should right?
 
The final hour brought no resolution to this crisis and we closed right where we were at lunch 1,845. Off the lows but still a day in which there was no love for risk. So yea, this event will likely be with us for a few days / weeks so I want you to ask yourself one question: If you woke up tomorrow morning and heard that Putin withdrew from the disputed region which way do you think equities would react? I think it’s a slam dunk they would be higher, by a lot. Which means the market is only being restrained by this event, not having its course permanently altered. So you watch the headlines and pick your spots, which is my game plan for EVERY macro jitter. It’s no different than Syria or Cyprus or Turkey or I could go on and on. Might I be wrong about that? Sure but I’m taking a stand here, having an opinion, because being wishy washy helps no one.

Final Score: Dow -94bps, S&P500 -74bps, Nasdaq -75bps, Rusk -56bps.

 

News Highlights:

It’s that time of the year for Uncle Warren’s annual letter so here you go!
Yep, things are looking pretty expensive on the stock market front. But that doesn’t mean a crash is imminent, that’s important to understand. We could go on for awhile like this, mkts always overshoot. The main takeaway is that we need to lower our expectations for future returns (man that sounds so dry right?)
·Some say this speech, given by Marine General Jim Mattis, is one of the most inspirational ever. I love this quote: For the lads who prove Hemmingway was right when he said, “There was no one better to have beside you when the chips were down than a U.S. Marine.” For to Marines, love of liberty is not an empty phrase… Rather it’s displayed by blood, sweatand tears for the fallen.
·Ive heard lots of chatter that we are entering a new housing bubble. Is that right? Let’s check in with Cali: “Southern California home building is stuck at historic lows, one of many factors conspiring against middle-class buyers in a recovery marked by high prices and low supply. Despite explosive price gains last year, builders and their Wall Street financiers remain hesitant to make big bets on the rebound.”
·Where are Tiger Cubs investing right now? These names lead the way: FB / PCLN / LBTYA / GOOG / FOXA / CHTR / LBTYK / FLT / ENDP / AAPL / BIDU / V
·Anytime we have some kind of macro quake everyone rolls out this chart, so let’s give it another run! “How stocks react to Geopolitical Events
·I so wanna ski here. Looks amazing (Austria)
·I’m putting Mr. Metal Pants here up for Dad of the Year. Awesome suit.
·Buffett tells investors to get real about EBITDA. Ahh EBITDA, is there a better word to impress your non-finance friends with? It’s like instant wall st cred…BOOM.
·This is just a magnificent use of song lyrics


We’ll end tonight with a good old fail video. Before you watch it I’ll admit I have no idea what’s going on with the camel part. No idea at all.

http://www.youtube.com/watch?v=GiogfDxepNI

Have a good night.