Bull and Baird Blog - September 6, 2016

Equities start the day higher as summer finally, officially comes to an end! Hoo boy, what a summer that was right? Olympics, Brexit, Pokemon Go, really awful movies (Suicide squad bummed me out so much), and a market that went absolutely NOWHERE. I haven’t written in ages and you know why? Because literally nothing has happened. We haven’t had a 1% move in SPX since July 8. Yep, you read that right, July 8. That’s 60 calendar days of a market that looks like the Bonneville salt flats. Guess what? August was the slowest volume month in 2 years. 24 months baby. So is this all a big deal? Should we be concerned about the fact that the market has been abandoned for nearly two months? I don’t think so because 1) it was summer, no one was even around to care  2) pausing after a breakout can’t be considered poor price action, digesting a move higher is always welcome 3) plenty of people have been calling top 4) neutrality seems to reign (AAII neutrals is still near 40%) and 5) the longer it stays here (especially as year-end approaches) the higher the probability that towels will be thrown in. I don’t see this summer lull as a negative and I don’t think sentiment / positioning is bearish either. The story of 2016 has been “we are due for a pullback because valuations are stretched”. That’s all the bears have anymore, that’s the one thing you can say day or night and make people think “hmmm, he sounds pretty smart about this stuff, maybe he’s right”. As people filter back to their desks today they are going to see a market that is not overbought and not over believed, where do you think markets like that usually go in the near term?

After the open it felt like summer never ended! Volume continued to be challenged and “unchanged” continued to act like a magnet. ISM Services missed badly (51.4 vs 54.9) and that caused a pretty steep selloff in the first hour of the day. But apparently “bad news is good news” again because things like ISM services whiffing makes people think the Fed is less likely to hike (only 25% for Sep now). Crude was up then down then flat then up because oil traders are partying like its 2011. I swear we get a “we are thinking of cutting production / reducing investment / freezing output” rumour every other day now. It reminds me of the heady days of 2011 when a Belgian or Dutch Finance minister could move every single market by hinting at backstopping European debt (which they ended up doing anyway…sigh…what a buying oppty that was). Today was the last trading day for EMC! Say goodbye the once great storage company as they fold into DELL.   CPHD got an offer from DHR and promptly rallied 51%! The company that sounds like a bug name could be joining the good people at Danaher in Washington DC. Other winners:  SE, EOG, MNK, AES.  Losers CNC, CMI, HES, QRVO, and DISCA. By lunch we were heading higher because, like I said, we basically want all economic data to miss from now on (why do we always have to come back to this?)

The rest of the day was grinding on the highs and a close around 2,186. No new highs, no new lows, just more of the same sideways trend (albeit with a close on the highs…) Now this recap loves a good prediction, there’s nothing better than going out on a ledge for absolutely no gain and potentially looking like a total idiot to an unlimited people (or 300, whatever). AAPL is set to introduce their new iPhone tomorrow and it looks like they are going to remove the headphone jack completely. Prediction: The unbridled outrage when the mass public finds out about it will make their decision to change the charging port look like a home run in comparison.  I for one think it’s the most anti-consumer thing the company has ever / will ever do.   It bums me out to no end because 1)  we don’t need the phone to be thinner.  Stop it.   2) Bluetooth headphones have a delay when you watch videos and generally suck  3)  no one wants a dongle.  I’m pre releasing my misery surrounding this event, ugh. Where hast thou magic gone Harry? 

Final Score:  Dow +25bps, S&P500 +30bps, Nasdaq +50bps, Rus2k +12bps.

News Highlights:

  • Succinct Summation of the Day’s Events: Weak ISM services made people think the Fed isn’t hiking near term so take ‘em up. If we got a strong data point tomorrow it will all reverse. Welcome to a no news market.
  • I have some listicles for you today! The first one is the 7 deadly sins of portfolio management. I’m partial to sin 3, think it’s very underrated.
  • The next one is the 10 Commandments of financial modeling. Whoa..I mean this kind of link is heavy stuff but you might get something out of here.
  • The last one is a list of money revelations from Ben Carlson’s 30s. #7 is the whole thing, I wish I learned that one in my 20s.
  • Canada:  Poutine and amazing highways
  • Vanity Fair has an amazing piece on the rise and fall of Theranos. I’m sure some VCs out there will regret this one the rest of their lives: “Money often comes with strings attached in Silicon Valley, but even by its byzantine terms, Holmes’s were unusual. She took the money on the condition that she would not divulge to investors how her technology actually worked, and that she had final say and control over every aspect of her company. This surreptitiousness scared off some investors. When Google Ventures, which focuses more than 40 percent of its investments on medical technology, tried to perform due diligence on Theranos to weigh an investment, Theranos never responded.”
  • GS did an intern survey (before the all went back to Brown and Stanford and Princeton) and while I’ll usually don’t make investment decisions based on the whims of millennials I would like to point out the graphic about “Housing”. Take a look and tell me the fact that we’ve underbuilt single family homes for so long doesn’t get you excited about the future.
  • Fascinating video of the habits of 1000 different Americans on any given day. Look at all the leisure!!
  • Here we sit…going nowhere…and Josh Brown made a story out of it! “And so, with the absence of powerful catalysts and incentives to take us strongly in one direction or the other, we sit tight. Volatility has been effectively squashed. We linger within one of the tightest trading ranges of all time. What’s it going to be? In which direction will the next strong wind blow?
  • Last two months be feeling like this

Tonight we’ll end with one of my all-time favorite kinds of videos:  People walking a slack line 2,000 feet above the ground.  

https://www.youtube.com/watch?v=ZIO8Xac7VyA#t=1m10s

Have a good night