A BIG Week Is Upon Us
Equities start the day higher as a BIG week is upon us. That’s right kids, this is the week William and Mary plays Virginia in football, can you imagine how crazy things are going to be down there? Wait…actually this is the week there’s a 30% chance the Fed does something they haven’t done in years, let’s talk about that instead! Tigthen…don’t tighten….hawkish…dovish…literally anything can happen so you’re lucky that I’m here for some good old fashioned predictions. 1) I don’t think they go this week. There’s two meetings left and things have gotten a bit iffy lately so Sep is off the table. 2) I do think they tighten in 2015 no matter what. The Fed has telegraphed it all year, it’s going to happen. 3) I don’t think it has to be Dec. Did you know there’s a meeting in October too? No one seems to talk about my favorite month as being in play but it is. 4) I do think Fear the Walking dead sucks, I had such high hopes. 5) I don’t think the Fed tightening will lead to some kind of calamity. 6) I do think they will provide insanely dovish guidance after the first hike to the tune of “we are doing this because conditions warrant it, but the next hike will require a St Louis arch to jump over”. 7) I don’t think Jay Cutler will ever beat the Packers again. I’m getting mad just thinking about it. 8) I do think the market is prepared for a tightening, they have guided us all year it won’t be some kind of shock when it happens. 9) I don’t think the market will recover its highs anytime soon and neither does MKM partners. This is a great link, give it a read. 10) I do think I’ll move on because 10 of these was way too much. Happy Monday everyone! Let’s get into it.
After the open nothing happened. In fact less than nothing happened and I’m afraid it’s going to be that way until Thursday. We have the Fed meeting later this week and the start of Rosh Hashanah so interest in equity trading ran super low. There was no economic data either so we can’t even make fun of people overreacting to statistical noise. A 10 point range most of the day (1949 – 1959) led to talk about football games and staring at this picture wondering where it is. Winners were BXLT, CHK, RIG, XRAY, and XLNX. Losers FSLR, COG, NUE, CF, and FMC. Honestly, it would take a herculean feat to make this morning sound interesting so I’m not even going to try. A forgettable 4 hours where even the most die-hard market addict would’ve fallen asleep. I will say this though: the market feels like it’s gone from “buy the dip” to “sell the rallies”. There is no love for stocks on downdrafts at all, it’s amazing how fast sentiment changed. Did the market really top out earlier this year? Aren’t tops supposed to be euphoric? Did that one strike you as being euphoric?
Nothing happened the rest of the day and we closed right where we were trading around lunch, 1,953, down 50bps. Let’s end with this awesome quote by Howard Marks. As you know, I’m a big fan of his approach to investing. He has his head screwed on right as it pertains to the big picture. Anyway, here is a link to his latest missive with the following thought: “The best way to get through a downdraft is to verify your thesis, tighten your seatbelt and hang on. If you sell just because there’s a downdraft (or an updraft), you’ll never get that twenty-year winner”. I mean yes, he is basically saying that you “buy and hold” through the bad times but with the caveat that you “verify your thesis”. Which is important right? If you entire thesis is based on low rates from the Fed…and they start tightening….then maybe it’s time for a new strategy. But if your thesis is that Disney is an incredibly well run company, executing on its business plan even in tough times (they bought Marvel during the 2008-2009 financial crisis), then why bother staring at it because China decided to throw its own crash party. Bob Iger probably isn’t sitting in his office saying “damn, the Shanghai Composite fell 40% from its high, cancel the Main St Electrical Parade until we get some clarity there”. Marks is right, investment returns have fat tails, the 20 year winner is what you are aiming for here. So circle the wagons, check your thoughts, and if necessary make adjustments but I imagine you’ll find that you don’t need that many.
Final Score: Dow -38bps, S&P500 -41bps, Nasdaq -34bps, Rus2k -37bps
- Succinct Summation of the Day’s events: Holy slow day Batman. Combo of Fed later this week plus a holiday put the market into “no one cares right now” mode.
- Bulls, Bears, and a third group that you should probably be in: “There's not enough attention paid to a third group: Optimists who regularly expect terrible things to occur. It seems counterintuitive, but if you look at history, it's by far the most rational stance. “
- Bloomberg points out that the IPO market is strugggglin: “It's been a tough 12 months for initial public offerings, both in terms of volume and performance. Of the 35 companies that went public with a valuation larger than $1 billion and started trading in the past year, 40 percent of them have now fallen below their IPO price.”
- This is why you invest….because the good years are better than the bad one’s. “there are many more positive years for US stocks (S&P500) than negative years, and the gains of the good years average out to a higher return than the losses of the bad ones.”
- Is it 2008 all over again? Cullen doesn’t think so…maybe 1998 though: “Now, I am certainly no soothsayer. I simply look at the world we have, assess probable outcomes and position myself accordingly. And when I look at the macro picture I see this environment as being one that looks a lot more like 1998 than 2008. And while that doesn’t mean we shouldn’t fear some downside in financial markets and the economy it also doesn’t mean we should be building bunkers and piling into gold.”
- There are people that make Wall St style comp….playing video games. “Take Lirik, who has nearly 900,000 followers. I set up a Twitch chat user account called “twitchnotify” that allowed me to see the amount of people who are subscribing to an account. By looking through the logs, I saw all of Lirik’s subscribers for March. He had around 6,000 subscribers. By adding up the numbers and applying the $3/$2 split from Twitch, we see that Lirik would be making $18,000 a month solely from subscribers. That adds up to $216,000 a year”
- This guy rode his mountain bike…down the side of a Dam…
- You know what strikes me about this Short Interest chart? That it doesn’t seem that high yet. Guess we have a ways to go on this indicator before it turns bullish
- One of the smartest bloggers out there thinks Sep is a GO for the Fed: “My view: Based on the FOMC's previous statement, and the likely revisions to the FOMC projections, and Fischer's views on inflation, it seems likely the FOMC will raise rates this week.”
- I wouldn’t mind if Baird opened an office there. Wonder how the internet is.
- I mean come on….really?
We’ll end tonight with a quick look at why I will never do this sport. I would definitely be the guy that would hang on too long
Have a good night.