Slipping On A Banana Peel
Equities start the day higher as we continue to bounce down a hill like a cartoon character who slipped on a banana peel. Ugly Friday, down we go. Boring Monday, small bounce. Ugly Tuesday, down we go. Quiet Wednesday…will it rally? Look, we’ve all seen this kind of price action before, it was called the “taper tantrum”. It happened in the summer of 2013 remember? SPX dropped 6.5% as people realized that the stimulus lunch might end sooner than they thought. My graduate school even published a paper on it last year, go give it a read. Anyway, we’re going thru it again, the market is screaming and crying and acting like it hasn’t napped in a few days because jobs are plentiful, the dollar is ripping, and 0% interest rates may end this year. What can we do about that kind of a market? I think, for now, it’s just best to ignore it. We get a Fed meeting next week (in which they will likely drop their “patient” stance) so let’s see what Janet has to say before trying to sell a top. Speaking of top, how cosmically universally crazy would it be for Nasdaq 5000 to have once again been the peak? Is that even possible? What kind of a cruel joke would that be on every investor in the world? I refuse to believe that market Gods hate us that much. Outright refuse. And if I’m wrong I’m selling Nasdaq 5000 calls for the rest of my natural life.
After the open it felt exactly like Monday, a dull listless market that put in a feeble effort to rally. You know instrument couldn’t even be bothered to lift its head up? The Euro. In fact the Euro is starting to look like it failed phase 3 drug testing and wants to do a spot secondary to raise cash. Look at the 5 day move in this thing…did someone wrap an anchor around it? Yes, the US is ending its easy monetary policy while Europe is ramping its up…can we cut thru the nonsense and just find an equilibrium here? I’ll tell you what, I’m buying a double Gelato in Milan on Friday! Ok back to stocks: honestly not much happened in the morning, absent a tiny dip we spent most of the time between 2,044 and 2,048. zzzz central kids. The biggest losers were EMC (2 day euro type move), GME, WMB, and chicken stocks (names like TSN / PPC/ SAFM) because some rooster in Arkansas sneezed. Winners were DNR, DO, SNDK, and MYL as well as financials which caught a bounce after being crushed yesterday. You know when the best time to buy the Euro is going to be? When your Uncle Buck calls up and asks how he can short it. Please email me when that happens. By lunch we sat on unchanged.
The final hour saw a dip to the lows which is where we ended up closing. 2,040, down 0.2%. So yea, the market remains in some kind of mild correction in which its struggling to price its new world order. Volumes aren’t high though so it’s not like people are puking stocks daily. It’s an adjustment phase, we just gotta get thru it together. I’m off to see my clients across the pond but I promise to write again the minute I get back! Make sure you don’t sell this thing off at that Fed meeting next Wednesday ok? Yes, they are going to be a bit more hawkish!
Final Score: Dow -15bps, S&P500 -19bps, Nasdaq -20bps, Rus2k +61bps (good sign).
- Succinct Summation of the Day’s Events: imagine a super ball going down the stairs, that’s price action the past few days.
- Bearish chart of the day! Rolling 6yr returns make some people nervous.
- Rate Hikes are coming, deal with it: “Does it really matter if the first increase comes in June or September? No. The first move will probably be small. Probably a quarter of a point. A half a point at most. Interest rates could be around 1% to 1.25% by the end of 2015. That's not something any sane person should consider to be cripplingly high. And given how transparent the Fed has become under Yellen and her former boss Ben Bernanke, is it even possible for the Fed to surprise the market anymore? Every rate increase will probably be painfully telegraphed.”
- How many times did they fail building this? 3000?
- Apple is messing around trying to develop a working wristband. You know who is already succeeding with theirs? Disney: If you want to imagine how the world will look in just a few years, once our cell phones become the keepers of both our money and identity, skip Silicon Valley and book a ticket to Orlando. Go to Disney World. Then, reserve a meal at a restaurant called Be Our Guest, using the Disney World app to order your food in advance.
- I guess this is a decent view, I’d pay $500k for the house right now. I’ll even waive the inspection contingency.
- Ill settle for this one though with the fire pit.
- I’m no bond guy, but these kinds of stories about declining volume / liquidity are EVERYWHERE: On March 6, for example, 10-year Treasury yields rose the most in a month after a jobs report that was better than analysts expected. Trading volumes, though, were about 20 percent lower that day, “amplifying volatility,” Jim Vogel, an interest-rate strategist at FTN Financial wrote in a note last week. “For a big payroll day, volume was oddly subdued.”
- Factoid tweeted by Josh Brown: There are more US homeowners in their 80’s than in their 20’s or 30’s right now. - Joint Center of Housing Studies, Harvard University. That can’t last forever right? I mean there is no way these people will rent for decades?
- Speaking of structural changes, employment HAS undergone one: The percentage of elderly employment is hovering at its historic high -- now over double its low in the mid-1980s. This is a trend with multiple root causes, most notably longer lifespans, the decline in private sector pensions and frequent cases of insufficient financial planning. Another major cause, I would argue, is the often surprising discovery by many of the elderly that the "golden years of retirement" might be less personally satisfying than productive employment. Note that the growth acceleration began in the late 1990s, prior to the last two business cycle downturns (aka "recessions")
- Are these companies on the “best places to work” lists attractive investments? Actually, they might just be! Companies trying to decide whether it’s worthwhile to create a friendly workplace could do well to consider this: Companies that employees report to be a good place to work have significantly outperformed the S&P 500 over the past six years.
We’ll end tonight with Parkour fails. I love parkour videos, nothing says “im a bored millennial” like hurling yourself against a wall in some urban environment hoping to make a sweet hot YouTube vid that can be shared on Twitter. Ahhh kids these days.
Have a good night.