Much Ado About Nothing
Equities start the day lower as half the world is on holiday. What better day to make my triumphant return to writing then Columbus Day, where our bond brethren get to sleep in, and Canadian Thanksgiving when all 42 Canadians who trade stocks are out. By the way, do we still like Columbus? Where are we at on that? Anyway, if you are new to the recap welcome to my homebrewed creation that tries to take a light hearted look at markets. “Edu-tainment” is the goal here, if you want serious boring macro / micro commentary there’s lots of places to get it, here at the recap we talk stocks, jocks, economic data, pop culture, and we’re not afraid to make fun of analysts who say “great quarter guys” when a stock is down 25% pre mkt. So let’s catch up real quick shall we? It’s October, people get scared of October, but like my boy @ritholtz says “you shouldn’t be”. The worry du jour is interest rates, which are spiking faster than my heartrate after a 64oz prime rib. Should you be worried about that? Well, again, probably not. That being said, stocks aren’t particularly fond of how rapidly rates are rising and that’s an important distinction from the outright level of rates. So sure, the market is spooked, toss in Italy quaking (happens every single year, I’m not kidding) and China losing a trade war and that’s the current witches brew. Earnings start this week so let’s hope good ole fashioned fundamentals push the toxic cocktail out of our reach. Hey, did I mention I’m on Twitter? I’ve spent the last few months trying to grow my presence there so I could push my recap to a few thousand more people (if you are on this email distribution, you are one of 3,100!! How about that?). Would you kindly head on over and give me a follow? @bullandbaird (anyone ever play Bioshock? You’d get that reference if you did)
After the open we got our third rocky day in a row as all kinds of cross currents swamped the boat. Everyone is pointing to higher yields as scaring the stock market but you know what sectors outperformed today? Real Estate, Utilities, and Consumer Staples. So riddle me this Batman, why would those sectors do well if the market was deathly afraid of higher rates? Those are defensive sectors so the risk sleuth in me thinks today’s selloff was more about Italy contagion fears than anything else (Europe had a god awful session. Italy -2.4%, Spain -1.3%, UK -1.1%). But if people are selling stocks on Italy worries I have a message for them…Italy worries HAPPEN EVERY SINGLE YEAR. Ok, there, I feel better. Everything Tech / big winner / high valuation / momentum got crushed. To wit: $TTWO was down 2.8% today. Nobody is selling a video game maker because they are worried about higher mortgage rates in Muncie Indiana, they are selling stocks like TTWO, AMZN, MA, NFLX, etc because those are the big winners and big winners get chucked first when it’s risk off. As I mentioned before defensive names led the way but we also saw gains in DIS, WFC, CHK, and RRC. By lunch we sat on 2,872, down 0.45%, hoping this level would hold.
Which it did…thankfully. We closed at 2,884, down 0.03% as the market tries to come to grips with a host of late cycle worries. Now look, just because the 10year is at 3.23% and mortgage rates are near 5% doesn’t mean the bull market is over (read my earlier article). A lot of smart people I follow think the cycle has oomph left in it and I’m inclined to agree with them. When we hit 2,935 a few days ago the market was over-loved and over-believed. The spike in rates + random macro stuff was enough to cause people to hit the sell button. That’s it, nothing more. If you were to ask me what my view on the market was I’d bet we finish the year closer to 3k. Hang in there, things get rocky from time to time, nothing goes straight up. Final Score: Dow +15bps, S&P500 -4bps, Nasdaq -67bps, Rus2k -16bps.
Volume was high. News Highlights:
- Succinct Summation of the Day’s Events: Stocks are trying to find a near term bottom, worries include higher rates, Italy, China, and the Brewers winning the World Series. We held support again so people currently don’t fear the reaper. (cue up a cowbell).
- You know what the best selling luxury car in America is? a $TSLA Model 3
- Michael Santoli summarizes where we are: “The point being, there's an opportunity for the bears here, but there's a chance they're close to having inflicted about as much damage as they can for now”.
- 10 Common Investing Mistakes. #2 is my favorite: Investors behave as if the price we paid for a security somehow should be factored into how we view the investment going forward. “I think the most dangerous words in investing are “I’ll sell when I get back to even.” Anchoring to your purchase price is dangerous because most stocks are losers. Most stocks won’t be sold at a profit or even at a breakeven price. There is nothing wrong with taking a small loss, but big losses are hard to recover from financially and emotionally”.
- Galloway goes sentimental on us (and it’s awesome): Love received is comforting, love reciprocated is rewarding, and love given completely is eternal. You are immortal. Our role, our job as agents of the species, is to love someone unconditionally. It’s the secret sauce cementing the survival of homo sapiens. And to ensure we continue to enlist in this act, it’s also the most rewarding. To love someone completely is the ultimate accomplishment. It says to the universe you matter, you are an agent of survival, evolution, and life. You are still just a blink of an eye, but the blink matters.
- In a MILLION years would you ever buy this camera? Who at FB thought this was a good idea to launch right now? Facebook Inc. wants you to buy its new video chat devices for your home, complete with cameras that track movemen. This HAS to be one of the most tone deaf tech launches of all time.
- Chorizo Quesadillas for the next big Chicago Bears game? Don’t mind if I do!
- I mean come on, how much adrenaline do you need in your life? Racing thru a yellow light is enough for me
- Looks like a great place to sleep…if you’ve lost your mind
- Check out this traditional Russian Dance. Apparently they are doing it on their toes so they look like they are floating! Very cool
- This is an interesting question you might pose to yourself: Would you invest in a mutual fund if the Portfolio Manager had no skin in the game? “Half of the 15,000 mutual funds in the US are run by portfolio managers who don’t invest any personal monies into their products.”
We’ll end tonight with a fun loving, light hearted look at people falling over. That’s right, a good ole fashioned Fail video.
Have a good night