Bull and Baird Blog - May 23, 2016

Equities start the day lower as Indecision 2016 rolls on.  Actually it’s not even Indecision 2016, it’s more like Indecision 2015-2016 and potentially 2017-?  For a market that is literally going nowhere we sure do fret and worry and overanalyze a lot right?   Is it a bear market?  Is it a bull market?  Will the Fed hike in June?  Are there any dire wolves left?   All these questions circle around us like those little birds when bugs bunny gets knocked out but ultimately they’ve been for naught.  We stand here HOLDING THE DOOR against all the negativity thrown at us and while we do we can’t see all the good that’s out there.   Jobs are still being created, PMIs are still above 50, Leading indicators are still leading, people are still buying homes, and Summer is finally upon us.  But I guess that’s not enough?  Those things can’t stop the howling winds from blowing White Walkers up to our front door and making us worry about the future?  One day this stalemate will break, one day something will either push this market to new highs or usher in the next bear market.  Until then we sit here and try to come up with new ways to describe sideways price action.   Violently Unchanged.  Sharply nowhere.  Sound and Fury signifying nothing.  No one is winning right now which bears a remarkable resemblance to Westeros right?   Please, for the love of God, someone do something to break this stalemate!  I’d rather write about a roaring bear market than one that goes absolutely nowhere.

After the open we traded in a whopping 5 point range for the entire first half of the session.  That’s right kids, 5 points.   Flash PMI for May was treated with as much importance as a piece of used chewing gum and the only stock mover of note was MON who got an all cash offer from Bayer.  Summer Monday you say?   You betcha, in fact volumes ran about 30% below the 20day mavg.  So what can we talk about here?  I don’t know, maybe some fancy schmancy technical analysis?   We held 2,040 last week and all the chart gurus say that’s a good thing.  Ok, I believe them, I mean I don’t have some CMT thing after my name so that sounds good to me.  We’re stuck between the 50 and 200 day now so you have to figure whichever way it breaks will have a bit of momentum behind it.   What’s the next catalyst though, it has to be the Fed meeting and that isn’t until June 15.   Are we really going to tread water until then?  The answer is probably yes which means we need to hit google really quick.  Yep, this is you, and me, and everyone else.  Just no wind at all for weeks.  By lunch we sat on unchanged.  In fact the whole day felt unchanged.

The final hour brought a small selloff but it was ultimately meaningless.  This market has gone nowhere for two weeks now (hasn’t been up or down two days in a row over that time frame) and it feels like the only thing the market cares about is Fed speak.  Utilities led all losers today because that’s what you’d expect before a hike (I assume they’ll hit bonds next).  So here we sit and here we’ll stay until Janet and her crew update us in a few weeks’ time.  How good was that episode last night?  Just awesome, I wish the market had as much action as HBO on Sunday nights.  Final Score:  Dow -5bps, S&P500 -21bps, Nasdaq -8bps, Rus2k -8bps. 

Volume was awful.  Our desk was better to sell.   Buying in Semis and Retail.   Selling in Financials and REITs.  Shorting in Energy.  News Highlights:

  • Succinct Summation of the Day’s Events:  Unbelievably sideways with little to no price action at all.
  • So what usually happens after a market goes nowhere for this long?   Let’s find out!   “77% Of The Cases Ended With A Bear Market.  23% Of The Cases Were Followed By Big Gains”  NEVER TELL ME THE ODDS
  • The best Fed Watcher we have thinks a hike is coming…..soon:  “There is a rate hike likely in the near-ish future. There seems to be broad agreement that, at a minimum, the pace of activity remains sufficient to bring the Fed's goals - both maximum employment and price stability - closer into view. Close enough that most voters will soon think another rate hike is appropriate. The doves can't push it off forever.
  • It appears no one buys stock in their taxable accounts anymore.  What a breathtaking plunge
  • Investing in the Retail sector boils down to owning two stocks.  “In fact, HD and AMZN account for 46% of the entire group’s market cap”.  As an aside, why is AMZN covered by Tech analysts?  Isn’t it a retail stock?  We have this argument a lot on the desk.
  • Love this chart on “The Most Important Investors of all time”.  The author also wonders how much of it was just luck?   “Every single person on this list is incredibly smart. But they were also fortunate to be born when they were. I added 25 years to their hypothetical starting date to show the meat of their careers. The average 25-year total return on the S&P 500 was 1463%! I’m not suggesting these people had it easy or that they were merely lucky, but they did have the wind at their back.”
  • So I have clients in Switzerland and I guess I need to take them to Lauterbrunnen!
  • I’d pray here.  If I could get up those steps  (3 to 1 against)
  • Who’s gonna watch that TV, honestly?  The glare would be insane and you’d never be able to sit on those dumb couches and view it correctly. 
  • Josh has an interesting thought on how to build an advisory practice:  “The only way to build a scalable, sustainable and valuable investment advice practice is to demand that your advice is actually adhered to. Turning clients down who cannot accept that is a must. Running 100 different portfolios and playing games with people’s day to day desires is not doing anyone any favors.  This is not about being a snob, it’s about only taking on work where you’re adding value. Life is short, the days go by fast and your true clients deserve your undivided attention.  Having a clientele of “validators”, who listen to the parts of what you’re saying that appeal to them and discard the rest means that you are not actually an advisor. You’re an order-taker. Anyone can be an order-taker.”

We’ll end tonight with a fantastic little dice trick.   Man if you could do this at a bar you’d be drinking free forever!

https://www.youtube.com/watch?v=4idzBXCxvUw

Have a good night.