Bull and Baird Blog – January 3, 2017

Equities start the day higher as the untapped potential of a new year is upon you! A fresh start….what more can you ask for as you sit down at your desk on January 3rd? Before you lay two paths, the first is filled with bad habits and pessimism and too many donuts and bagels. The second contains exercise and optimism and writing more recaps and eating egg whites instead of cheese (egg whites suck, come on, just eat the whole darn thing). Choose wisely my friends because it’s nearly impossible to backtrack. So what should we take away from 2016? What’s the best “market related lesson” we can learn? Well, I’ve thought long and hard about this and the best thing I can come up with is: market predictions are stupid and you should never, ever listen to them. Honestly what’s the point of saying “well if X happens and Y happens then your stocks should do well?” If I gave you ALL OF THE FOLLOWING on January 1, 2016  1) Brexit  2) Donald Trump  3)  Deutsche Bank quivering 4) rates rising 5) a 12% selloff in the first month of the year 6) no Santa Claus rally 7) oil back above $50 8) Dollar at a 13yr high and 9)  Mariah Carey blowing up her live career would you have said “yea I’m thinking +10% sounds about right for the S&P.” No….freaking…chance. There is no reason to have a “year-end price target” on any index on the planet…none…period. The best we can do is look at the situation surrounding us and say “do I feel comfortable owning equities or not” and to me the answer is still yes. I will begin to squirm when unemployment makes its cycle low. I’ll fidget when auto sales turn over. I’ll jump out of my seat when the yield curve inverts. We just aren’t there yet, none of those things have happened. Do me a favor, head over to this link to find the questions you should be asking yourself right now. If you have a view on those you will have a framework to approaching investing in 2017, if not you are at the whims of fate.

After the open it looked like we might take a shot at Dow 20k but then everyone realized nothing is going on and we sold off. Seriously nothing is going on right now, there is no coherent thesis yet so we are basically coasting on last year’s fumes. Up 1% overnight because Europe had a few good data points? That’s not gonna cut it pal, we need some good old fashioned American meat and potatoes before chasing 23x earnings. XRX was the big winner today rising 16% after a few analyst upgrades. Do me a favor, ask a millennial what XRX makes and get back to me, I’d love to know what they say. Other winners were CTL, MPC, ENDP, and FIT. Speaking of FIT, have you seen the inside of a gym lately? You’d think they were holding Black Friday sales on TV’s or something, I mean come on people just because it’s Jan 3 doesn’t mean you have to wait in a 10 minute line for the salad bar and do the “spin” thing. Set some realistic goals like walking for 30 minutes or drinking more French Press coffee (literally the best way). Losers were mostly energy names as Crude fell $2 and Utilities as the “yield unwind” appears to be never ending. By lunch our cafeteria had run out of Romaine AND iceberg while the market sat on 2,247 up 0.4%.

We got a small rally in the afternoon when it was announced that the close had $1.2B worth of stock to buy so remember all that “pensions need to rebalance out of stocks and into bonds to start the month” thing? Yea…something else that was completely wrong. So let’s wrap up with a quick thought on consensus. I still hold to the notion that this bull market has room to run so what do all the big wig macro guys think? Well, a group of 15 strategists expect the S&P500 to finish the year at 2,356, a gain of 5%, the least optimistic they have been since 2005.  Now you know what I think about “year-end targets” but what intrigues me is that the bulk of Wall St thinks the upside is limited.  Yea…about consensus thinking….. 

Final Score:  Dow +60bps, S&P500 +85bps, Nasdaq +85bps, Rus2k +62bps.    

News Highlights:

  • Succinct Summation of the Day’s events: First day of the year, coasting on last year’s stories, we need new stories before going higher / lower.
  • Got this for Christmas and I must say, it’s a lot of fun. Even good indoors when its -30 out (which is basically always where I live). 
  • 25 pages a day…that’s a resolution we can all do together! “The solution I devised for myself is a simple one I wanted to share. It’s 25 pages a day. That’s it. Just commit to that, and then do it. What will 25 pages a day get you?  Let’s say that two days out of each month, you probably won’t have time to read. Plus Christmas. That gives you 340 days a year of solid reading time”. 
  • Learn to be wrong more: “T​ake a few moments t​his weekend​ to write down your estimates of where the Dow Jones Industrial Average, oil, gold, inflation, interest rates and other key financial indicators will be at the end of 2017. If you don’t know, admit it. Ask your financial advisers to do the same. Next Dec. 31, none of you will be able to say “I knew that would happen” unless that’s what the record shows. To be a good investor, you have to be right much of the time. To be a great investor, you have to recognize how often you may be wrong”.
  • Honestly, Switzerland is amazing.
  • Amazon….just eats everyone alive.
  • You wanna know why Disney fell from 122 to 87?  Here’s a good reason why! “The NFL assigns ESPN the worst wild card game in the worst time slot on the worst day possible and then decides whether or not it wants to take the $100 million each year. That is, ESPN doesn't even get to choose whether it wants to air the game or not. The NFL just says, "You're airing it, give us $100 million."
  • Sad end to an era that included Dan Akroyd and Eddie Murphy L “In their glory days, the New York commodities exchanges were a magnet for ambitious young men looking to make it rich, including many from working-class families, veteran traders recall. Fistfights sometimes broke out on the floor, and unlike at the elite banks, it didn’t take a college degree to get a trading jo”b.
  • Gym Rat 2k17
  • Honesty….live and breathe it:“Everyone is in sales whether they realize it or not. You may not sell shoes or insurance, but you sell something, and that something is usually “trust.”  The best way to build trust isn’t to convince people that you don’t make mistakes. It’s to convince them that you’ll be honest and corrective when you inevitably do”.
  • I need this floor in my basement.

Tonight we are going to end with a true American hero, who just so happens to be 2. Imagine how much this kid is going to show this video to his brother later in life.   Parents….bolt your kid stuff to the wall!!

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

Have a good night.