Bull and Baird Blog - March 22, 2016

Equities start the day lower as another senseless attack rocks our world. Once again we wake up to the faces of terrorized civilians whose lives are forever changed by the hand of cruel savages. Once again we are reminded that there are countless things to be afraid of as we try to chart a course through this thing called life. But you know what? Screw that, screw being afraid. I choose to live life by looking at the bright side, by embracing family and friends even with the knowledge that there are evil people lurking in the shadows.  Live, love, travel, smile, because that’s why you are here. Why spend your precious time listening to doomsayers and embracing their negativity? Why let it affect your life and your goals? One of my favorite writers spent this morning pointing out all the misery you could’ve feasted on over the past few decades and how it’s EXACTLY the same right now. Honestly, click that link, read it and them come back here because it is SO worth your time (if you can’t because your work blocks financial links for some unknown reason *cough* send it to your personal email and read it there). Worries about sluggish growth, worries about GAAP vs Non GAAP, worries about China, worries about the Fed, worries about Share buy backs, these are not NEW, they’ve been around for decades. So while you troll that “the market is a bubble blog” and while you read CNN and cancel those plans to travel thru Europe remember one thing: optimism about life, optimism about mankind, optimism about the future should be your default setting. Why? Because humanity perseveres in the face of adversity. Always. 

After the open the market had multiple reasons to sell off yet didn’t. Usually a global terror event like theis gives sellers a reason to step on the gas but those that did burned out their engine. Europe, which was down all day, ended in the green. Our market spent the first 1.5 hrs in the red but nothing could stop the grind higher and by lunch we were tasting green (no idea but I like how it sounds). Can we take a moment to talk AAPL? It’s been awhile since I’ve chatted about one of my two favorite companies (the other being DIS) so let me address their announcement yesterday. The potentates at the top of Apple’s pyramid have decided that when it comes to consumer electronics innovation, the freaking size of the screen is all we care about. We have small phones? Make bigger one’s. Wait we have big phones now? Make smaller one’s. What are the AD GENIUSES that came up with this strategy? Guys, for crying out loud, you have more screens than a Buffalo Wild Wings, stop screwing with the size. How about batteries that last long enough for my kid to surf Cartoon Network for more than 4 hours? How about waterproofing these things so a rainstorm doesn’t cost me $700? How about re-designing iTunes because it’s the worst program since Flappy Bird. Honestly, you got the range of sizes covered, MOVE ON. My patience for Apple is running thin, it might be time to find another favorite company (DIS stays). Alright, what did well today: ENDP, SPLS, WDC, SHW, and CERN. What didn’t:  RIG, RCL, PCLN, CCL, and TRIP.  

The rest of the day was a slow fade to end just shy of positive numbers. 2,049, down 0.09%. Price action the last two days has been just what we need to digest the big move off the lows. We open, trade sideways, move higher after lunch, then settle into the close.  Are we overbought?  Sure.  Are people starting be less bearish?  Sure. Have the recession calls mostly ended? Sure. The story remains the same though.  Rally to the highs, people get optimistic, data isn’t good enough and we roll over. Crash to the lows, people get bearish, data isn’t bad enough and we rally. But there’s no reason to call bubble. There’s no reason to say “our economy is due for a melt down”. I don’t remember who said it but I had a link recently with this quote “owning stocks is a bet on the ingenuity of humans”. That’s right, they are. They rise and fall over the short to medium term but in the long term you are a fool to bet against the human spirit.  

News Highlights: 

  • Succinct Summation of the Day’s Events:   horrible awful tragedy abroad, market shrugged it off for most of the session.   Felt a bit worn out by the end though, closed a dash lower.
  • Look how many names are above their 50 day MAVG, this is nuts:    “The percentage of stocks in the S&P 500 trading above their 50-day moving averages hit 93.44% yesterday.  Readings this high have only been registered on 0.5% of all trading days since 1990.”
  • I like Doug Kass because it’s always interesting to hear the ultra bearish case, but I’m not so sure on this one:  “At the very best, I think stocks are overvalued. But at the very worse, I believe a new and debilitating crisis looms ahead”.
  • 7 Deadly Investing Sins.  I like the first one the best:  “Loss aversion” is the type of thinking that can be very dangerous for investors. The best course of action is to quickly identify problems, accept that investing contains a “risk of loss,” correct the issue and move on. As the age-old axiom goes: “Cut losers short and let winners run.”
  • Can you imagine that wave?
  • Come on, you were never going to land this
  • Banking…just really quiet right now"For 2016 year-to-date (as of 16 March), global M&A activity fell 63% by deal value compared to 4Q15, whereas global IPO activity fell 82% by deal value," according to EY's latest quarterly global IPO report.  Also, for what it’s worth, Deutsche Bank’s Finance Chief said the first two months of 2016 were “the worst start to a year for banks in general that he has seen in his banking career”
  • LPL says we might be seeing history“Should the S&P 500 close out the first quarter in the green, it would be just the second quarter since 1928 to be down more than 10% at one point and close higher. In fact, you have to go back to the fourth quarter of 1933 for the last time a quarter saw a reversal like this. Below are the largest quarterly reversals since 1928”
  • $55 to drive your OCD friend CRRRRAAAZZZYYY
  • One of the best technicians around is looking for a China SQUEEEZEEE.  “It’s been awfully lonely being a China bull over the past couple of months. All I keep hearing is how China is falling apart and slowing and all sorts of negative sentiment towards the country and its stock market. In the real world, however, where we are forced to live and where only price pays, we’ve seen emerging markets dominating for 2 months and I think the squeeze higher we’ve seen in China is just getting started.
  • This link got a lot of play on Finance Twitter today.  Is a “High Active share” portfolio the future of Active Management?  “At any given level of active share, the “potential” excess return skews more to the positive (dotted-line). More active portfolios have more potential for excess than less active portfolios. No one has perfect foresight, so nobody achieves alpha like this with any consistency. But these “best case scenarios” show the potential of being different–both good and bad.

 We’ll end tonight with being grateful.   A simple a video as any but one that I watch every now and then to remind me that life isn’t about stuff.

 https://www.youtube.com/watch?v=Eyfa1yR8tx0

 Have a good night