Bull and Baird Blog - October 3, 2016

Equities start the day lower as the great month of October begins. Who else is as excited for October as I am? Anyone? My favorite movie character of all time might be Jack Skellington (with Capt Jack a close 2nd) and there isn’t a single argument that makes sense as to why Halloween isn’t the best holiday of them all. Wanna know if someone is still a child at heart? If they still feel joy deep down in their world weary adult soul? Watch how the act on Halloween, will tell you everything you need to know. We are also starting the last quarter of the year and the last earnings season so the clock is ticking down on all those managers who might be underperforming. Take a look at this chart from Citi and ponder the following question: What will become of those cash balances should we grind higher into year end? I’ll tell you what I think, I think they’ll be spent faster than my kids allowance at Toys R Us. This has been a very odd year to say the least. The first month and half basically scared everyone out of the pool. It’s like Jaws showed up to a kids pool party and starting rag dolling 5 year olds like a dog’s chew toy. Once everyone was scared out they were hesitant to come back and the market did what it always does, punish them for not believing. Really that’s been the main theme of 2016 right? If you dare step out of the party the door will lock behind you and all you’ll hear is your friends doing Fireball shots while listening to Flo Rida. Hasn’t the angst seemed exceptionally large this year? Is it just me?

After the open the market acted fairly weak for what seemed like a ho-hum day. A bit of economic data in the morning was all we had to go on and while ISM Manufacturing was a small beat, the market acted petulant and fussy. Have you been keeping your eye on the DJ Transport Index? If you are a regular reader I know you have but the rest of you need to have this one on your screen. This index will LEAD any improvement in Manufacturing data and it sure looks like it wants to make a new high to me! Henderson and Janus look like they are going to team up to create a new Superhero group, hopefully they get a 3 picture deal from Marvel. Who else feels like “asset manager consolidation” will be a popular term going forward, we sure do have a rapidly changing landscape don’t we? What else…Kim Kardashian got robbed in Paris and the entire thing smells fishy to me. Wait…so she was sitting in a giant hotel room…alone…and some random dude from the front desk walks a bunch of guys into her suite and says “have fun kids?” She has no security at all while sleeping alone abroad? Come on MAN. No camera footage? No panicked phone calls or texts to the world? Winners were CTSH, NWS, NFLX, NWSA, and CHK.  Losers  ASIX, RIG, TDC, CNC, and NEM. By lunch we were trading down half a percent in a fairly dull session. 

The rest of the day was meaningless grinding and we closed at 2,153 dow 0.30%. A no nothing go nowhere day where we talk about football, pumpkin carving, and what sector looks the best on charts (we ended up on Tech). There’s no real data tomorrow and earnings don’t meaningfully start until the middle of October so we could be set adrift on memory bliss for a while my friends. But have no fear I think we’re in good shape to round out the year. We might not be flying but we certainly aren’t dying. Stocks rise and stocks fall but at least we get to watch men chase a ball. You know what’s really hard? Trying to end a recap like a bard.

Final Score:  Dow -30bps, S&P500 -33bps, Nasdaq -21bps, Rus2k -47bps.

Volume was awful. Our desk was better to buy. Buying in Energy and REITs. Selling in Media and Consumer. Shorting in Health Care.

News Highlights:

  • Succinct Summation of the Day’s Events: traded lower the whole day but it didn’t feel serious at all, basically like skinning your knee. Hurts for a bit but no big deal.
  • Today’s Must read: The difference between a bubble and a cycle. “At a conference I attended a few years ago, Yale economist Robert Shiller said something amazing: The word “bubble” wasn’t even in the economic lexicon 25 years ago. Not in textbooks, not in papers, not in schools. But now we have bubbles everywhere.”
  • Bull markets are hard:  “But the harder type of market for many people to deal with is the bull market. Not because the bull market exposes you to a lot more stress or anything like that.  But because it’s during the bull market that we make the mistakes that make the bear market stressful”
  • Could we possibly see earnings GROWTH this quarter? Maybe, check out this awesome link: “Why am I expecting 3% – 4% SP 500 earnings growth this quarter? Well it has to do with the historical “upside surprise” each quarter for the SP 500”.
  • There is a different way to “play” a low return environment:   “If we are in a low return environment, there are two ways alchemists can get high returns: they can either pick stocks that do better than the market, or they can time the market, both difficult propositions and games that I personally have no desire to play. I can’t control the returns that the market will deliver, but by investing at a higher growth rate than my investments, I can stack the odds in my favor”.
  • Nice little graphic here showing Signs of a Top and Signs of a Bottom. But you know what? Most of the time we are nowhere near either so don’t obsess over it.
  • Look, don’t get angry at me, but I love that this happened to a Yankees fan.
  • Does active have a way to fight back against passive? Click here to find out!!!
  • The author of this blog thinks we need a new IPO Process: “In the year 2016 here is how a company should go public. The company, with the help of banks, brokers and the exchange should build a complete buy and sell order book. The IPO price and the opening trade should be one and the same. To help facilitate this, the float should be meaningful, requiring both a primary and secondary component to the IPO.”
  • Rocky Mountain high….
  • Yea I’m gonna go ahead and skip dinner. A coke sounds great
  • Like shooting fish 

Tonight I have an awesome GoPro video where a guy walks 1000 feet above certain death. Are we sick of these yet? Maybe… 

https://www.youtube.com/watch?v=PWmypzUI28Y&feature=youtu.be

Have a good night.