Return To The Place That I Love
Equities start the day flat as I return to the place that I love…my desk at Baird! Can you believe that? A desk…in front of a computer…in the Midwest….not on a beach. Who wouldn’t love that? But seriously, I love markets, talking about markets and I love sending you a morsel to chew on everyday so let’s get back at it! I wandered thru a few European cities last week seeing clients and talking about how cheap everything seemed to me (USA USA) and inevitably the conversation centered on one thing: where is this stock market thing going? Or more importantly, is the US still the right place to be allocating money? I mean Draghi and the rest of the techno-crats are ramping up their Amex bill and the “buy Europe/sell US” trade will likely get a ton of play over the coming months but can you really ignore the “red white and blue grind higher market”? Here is what I want you to ask yourself and something we will talk about as the weeks go on. You ready? This is the creamy filling for today: Do new highs bring euphoria or skepticism? I asked this question to multiple people on my trip and you know how many of them said euphoria? None. ZERO. Zilch. Not a single sharp, globally focused market participant felt like new highs were bringing champagne poppin, big car buying, lever up happiness. Allow me to point you to 2 articles that touch on this topic. The first has the headline “Everyone Hates US Stocks” and the second is Robert Shiller arguing that “fear” is driving this market. Let’s talk more about this later but for now we need to see if anything actually happened on this fine Monday.
After the open we got a rip roaring sideways market jammed packed with tension the likes of which you haven’t seen since Barney debated between cookies and carrot sticks. I mean if your bag is a market that can’t decide between 2,110 and 2,113 then hold onto your tube rail because I’m about to break it down for you. New Home sales INLINE! Treasury Yields down 1-2bps! European markets +/- 0.2%! Can you feel the magic because Fantasyland ain’t got nothing on today (we’re talking DIS tmmrw, you gotta stay tuned). We did hear from Fed Vice Chairman Stanley Fischer who told the market “guys…seriously…calm your knickers. This hike thing isn’t gonna be a stair step. And you know what? We are going from ultra stimulative monetary policy to just regular stimulative monetary policy”. I guess I don’t understand why we continue to get these “taper tantrum” like we saw off that last jobs report (which turned out to be an incredible buy). Does this Fed strike you as one that is really eager to jack up rates? One that is ready to jam stocks down your throat and laugh at people who viewed them as doves? I don’t...maybe that’s just me. No stock moves today worth making fun of, couple winners in GNW, ATI, TIF, THC, and DRI. Losers were CELG, VRTX, REGN and rails like KSU, CSX, and UNP (maybe Thomas the Tank crashed and spilled 10k gallons of finger paint and I missed it?) By lunch we sat on 2,110 kinda going nowhere. You know what isn’t going nowhere? The Wilshire 5000, my favorite breadth measure. What turned over in 07 before the bubble was about to implode? The Wilshire 5000. Which it isn’t doing now.
The final hour saw a drift lower and close at 2,104, down 0.1%. Basically sideways the entire day and by the close the air leaked out because no one was paying attention. Dead day though, quiet, nothing to learn here. Let me finish with one final euphoria / skepticism thought. Markets only make crazy moves near tops and bottoms right? That’s nothing groundbreaking, you know this. But that’s why we are always looking out for the euphoria. For that change in sentiment as markets rally. Do you see it? I don’t, and no one else I talked to did. Which means we are just in the middle still, and the middle is what you will see for most of your investing life. So you continue to plug away, stick with your ideas and plans and ignore all the flapping mouths on Twitter and blogs. Would a top include a survey showing everyone rotating OUT of US Equities and into Europe? Come on man!
Final Score: Dow -6bps, S&P500 -17bps, Nasdaq -31bps, Rus2k -13bps.
- Succinct Summation of the Day’s Events: Sideways grind most of the day. Rather forgettable Monday with very little price action. We need an event to get things going!
- Looking at this Pyramid of Luxury…it’s hard to believe something like Gucci isn’t higher? Is that an accessible brand for most?
- If you dig on strange valuation metrics like CAPE, this is the article for you! If you don’t, I like the autho’rs takeaway: “We conclude with the question that all of this exists to answer: Is the market expensive? Yes, and returns are likely to be below the historical average, pulled down by a number of different mechanisms. Should the market be expensive? “Should” is not an appropriate word to use in markets. What matters is that there are secular, sustainable forces behind the market’s expensiveness–to name a few: low real interest rates, a lack of alternative investment opportunities (TINA), aggressive policymaker support, and improved market efficiency yielding a reduced equity risk premium (difference between equity returns and fixed income returns).”
- Months of supply is what matters in Existing Home Sales…and it’s still pretty low! ( I still think housing is an incredible tailwind for our market)
- Speaking of housing…foreclosures are at 2007 lows! Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 5.36% in February, down from 5.56% in January. The normal rate for delinquencies is around 4.5% to 5%. This is the lowest level of delinquencies since August 2007.
- Hey single guys and girls out there! Want 5 seconds of being a parent? Here you go. Enjoyed it right? Bet you can’t wait!
- Think this guy had any scratches?
- I was in lots of airports recently and caught a glimpse at what extinction looks like! Look at all these dinosaurs!
We’ll end tonight with one of those awesome “people screwing with other people who are asleep videos”. This time is all military people…who I’m sure actually NEED the sleep.
Have a good night.