Bull and Baird Blog - March 15, 2016

Equities start the day lower as the Ides of March descend upon us. Like Caesar I feel like I’ve been stabbed a million times by mistaken calls, rushing to judgment, and just plain poor timing. Here we sit, with the S&P at 2,019, defying all the recession/bear market calls made over the past two months and yet no one seems to be winning. If you look around the blogosphere or Twitter you will be hard pressed to find someone who pounded the table on the lows, someone who said “guys, it isn’t that bad, why are we selling everything like its 2008 all over again?” Time and again the market reminds us of a very powerful lesson, one that even the most seasoned veteran takes decades to learn: invest out of consensus. Imagine taking a stand in February because 1)  everyone was bearish 2)  everyone was calling for recession 3) everyone thought the Fed wouldn’t raise rates in 2016 4) everyone was underweight energy 5) everyone was buying puts  and 6) everyone was raising cash. It would’ve been hard, no doubt, I’m not trying to say it was obvious on Feb 12 that the low was near, but those are the times when the scales are tipped entirely in one direction, those are the times when smart money strikes. Right now they are calling Feb 12 the “Jamie Dimon low” and they should, he deserves that credit. The CEO of JPM made a stand, spent his own money to buy his own stock because being out of consensus is what good investors do. Instead of doing that I made a bear market call that looks ridiculous in retrospect, so now I sit here stabbing myself over and over again making sure I remember that fateful day. Anyway, let’s see what happened on a random Tuesday in March.

After the open we traded lower on the heels of a mediocre Retail Sales report. It wasn’t so much the current report but the previous one which got ratcheted lower. Does anyone else think that economic data should be on a 1 month lag? What’s the point in telling us that Whirlpool sold 0.4% more trash compactors in January and then in February telling us “oh wait, actually it was 0.1%, sorry, this whole stats thing is hard.”  Whatever, after we got moved on from the Retail Sales report, we spent the rest of the morning talking about VRX. Now I’m no biotech investor and I really haven’t been following this stock at all but I do know that this chart is brutal. Wow. I’m going to assume that in the annals of being a CEO one of the last things you want to have to say on a conference call is “I don’t know exactly when we are going to file our 10k but April is a good guess” (they get penalized after Mar 16).  Valeant will be one of those case studies in business school where the professor says “see, you can’t just copy Hedge Funds and expect to outperform, you have to do your own homework”. Other losers:  FCX, MNK, LUK (brutal read thru on JEF earnings), TWTR, and ENDP. Winners were EQT, SRCL, AAPL, and MJN because babies are born every minute people, they need those liquefied peas. By lunch we were grinding higher even with 1) oil down  2) credit wider 3) Transports lower and 4) the potential for another night of listening to Trump talk about steak and water. Unbelievable this market, it’s a complete 180 from a month ago. 

The final hour brought nothing, in fact today was a bit of a bore fest. A 10 point S&P range because the Fed decision is tomorrow. Will they raise rates? I doubt it, financial conditions have tightened enough for them to take a month off so don’t expect much action. Speaking of action, if you are bearish on the market this is about the best downside catalyst will find. Buybacks have been one of the major drivers of price action so their absence is usually felt in the short term. Well my friends, another day is done, another goat rodeo is in the books. Let’s meet back here tomorrow so we can talk about “measured pace” and “no set path” and “will rise when we deem appropriate” and “jesus can anyone make that sound interesting to an ordinary person”.   

News Highlights:

  • Succinct Summation of the Day’s Events: Basically a whole lot of talking about the Valeant train wreck with a bit of macro data. Quiet because the Fed decision is tmmrw.
  • YOU NEED A GOOD PARTNER TO TRADE EQUITIESComputer-driven American stock markets have become so complex that at any moment in time more than 800 different pricing possibilities are being offered to trading firms across 12 official exchanges, according to new research attempting to explain the tangled system.
  • Another reason why the market keeps going up: Everyone is selling
  • The first picture in here is just….speechless
  • Look how long Growth has been beating value. Does this chart show a potential trend change? Maybe, but I think you’d need to see a bigger down move
  • Two things strike me looking at this chart. 1) it’s insane what you got from cash in 2006  2) the stuff that trawls along the bottom almost never stays there for long. This is where you look for outperformance over the medium to long term.
  • If this is what bars are going to look like in the future, I’m out.
  • Cooperman is saying the bottom is in. Smart guy too
  • I wonder what OSHA thinks about this
  • Awesome room, stupid rug
  • Cadbury egg brownies are real people….and I have the recipe
  • You know, stuff like this makes me mad. Come on, do we really have to invent some kind of new age mgmt system? “After four years, Medium is giving up on Holacracy, the avant-garde management system it used as an alternative to the traditional office hierarchy.  Just a year ago, the blogging platform was all in on Holacracy. The company invested thousands of dollars in consultants and HolacracyOne's proprietary software, Glass Frog. The employees spoke the language of a post-hierarchy organization. There were no managers or bosses or job titles; people "energized" roles within "circles." Teams held regimented "tactical" and "governance" meetings run by annointed facilitators”. I wonder how I get to be an anointed facilitator here…hmmm.  Maybe if I can just bribe all the PWM people they will elect me as Baird’s first!
  • Interesting little chart here from the WSJ showing where you fall in the income spectrum.  

Tonight we are going to end with a bike trick video. These, along with skiing and fails, are some of my favorite ending links. This one is particularly interesting because it features a guy jumping from the handlebars of a moving bike onto a skateboard. Whoa.

https://www.youtube.com/watch?v=m8_ovAttiQU

Have a good night