One Day We...
Equities start the day slightly lower as we continue to act like this (credit to one of my favorite follows @ivanthek for inspiration here). Honestly, there is no better picture to describe the current state of price action than that one I just posted. One day we obsess about Greece, the next we don’t. One day we obsess about margin debt, the next we don’t. One day we rally 1% because we felt like it, the next we sell off. One day we are putting kids on a boat, the next we are a white walker (that episode was top 3 all time). Deer in headlights, that’s what’s going on right now. Trade up to 2,120, stop and stare, then run away. Trade down to 2,100, stop and stare, then run away. Absolutely no conviction to go higher and no conviction to go lower so here we sit. Is that a bad thing? I guess it depends on who you are and what your role in the market is. Do PM’s want a sideways year where we close +/- single digit %? I would think so, that’s a prime opportunity to outperform. Do brokers want a sideways year with no volatility? That’s an easy one to answer. Do investors want a sideways year? Maybe, maybe not. A market that trades straight up can be dangerous to navigate so a year of treading water might be good to blow off some froth. Yet we hate to lose a year of performance in our lives because little Kate’s college tuition is getting stupid. We closed at 2,110 on Feb 20 and we closed at 2,111 on June 1…embrace the grind my friends because it appears to want to stick around for awhile! I mean we had something crazy like $130B in stock buybacks in April and that wasn’t enough for new highs? What’s it gonna take he
After the open we rallied most of the morning because Vehicle sales were good and Sepp Blatter resigned. What do you think is higher…the average number of goals in a FIFA game or the % of Americans who know who Sepp Blatter is? Wow…that’s gotta be close right? I’m not sure I could even make a market on that it’s so tight. Vehicle sales beat expectations and you know what, they are on pace for their best year since 2001. Jobs, cars, hotel rooms, housing…man if we are on the verge of a recession I must be misreading the tea leaves. Fixed income had another one of those “lets smack bonds around” type sessions with 10yr UST hitting 2.26% and German bunds up 17bps to 0.71% (worst day in years). I know that doesn’t mean much in the grand scheme of things but stocks have tended to perform well this year when fixed income hits the skids. When that “lowflation” trade has a bad day we usually have a good one. PVH was the big winner today, up 8% off earnings. Calvin Klein and Tommy Hilfiger? Yep, must be time to break out the pink collared shirts for summer. Other notable gains from FCX, ZION, ESV, and NE. Losers were IRM, CMS, DAL, CNP, and ANTM. Not a lot of rhyme or reason to the move this morning, I guess just wandering around happy that we weren’t bonds.
The final hour saw us trade back to unchanged and sit there. Onwards my friends! Onwards to more sideways! I guess we shouldn’t be surprised given that there is an ECB meeting tomorrow but once again the market went nowhere on nothing. I wish I had more for you but what can you say about $SPX down 2 points? I mean at least Transports closed higher? That’s a good thing right?
Final Score: Dow -16bps, S&P500 -10bps, Nasdaq -13bps, Rus2k +17bps.
News Highlights:
- Succinct Summation of the Day’s Events: More aimless price action in front of ECB meeting. Bonds had a terrible day. Stocks had an unchanged day. Vehicle sales rocked.
- What if you bought TODAY and it was the high. Well that would suck, but guess what, if your time frame is long enough it tends to work itself out. Check this great article by @awealthofcs.
- If you are an EA investor this is a must read. Interesting to see how they clawed their way back from “most hated company in America”: Most important, though, customers seem to like EA again -- at least for now. In 2014, the company was knocked out of competition for the worst company in America during the first round of voting
- Are investors leaving foreign funds to come back here? Honestly I doubt it, but this article tries to make the case. …that seems to be shifting once again as domestic markets have begun outpacing their international brethren. In the chart below, we can see the ratio between EFA and SPY (the SPDR S&P 500 ETF). When the black line is rising we know that EFA (international markets) is rising more (or falling less) than SPY which indicates outperformance. Over the last several days we’ve seen this ratio break its rising trend line and began making lower highs and lower lows.
- If you own or invest in UK property markets do you really want to see stories in the WSJ accompanied by fireworks? With these kind of quotes? Even looking at some of the riskier so-called mezzanine debt, “there are some steamy LTVs flying around,” but worries here still remain minimal, as “it’s provided by specialists who know what they’re doing,” Mr. Newsom said.
- Josh seems kind of incredulous here right? “The M&A boom just gives us one more reason. “If I sell now, chances are the buyer of my shares is either the CFO of the company executing a buyback or an activist who is about to push the stock into a buyer’s embrace.” There’s a very 2006-2007ish quality to the desperation to participate. For those of you who weren’t there – the gist of every investment thesis was that such-and-such company is a no-brainer candidate for an LBO and that even if the stock went down, the value of the real estate on the company’s books would more than make up for it.”
- The 50 Best Restaurants in the world…hit one up if you like sea foam appetizers and 1.5oz of snail poop that costs more than an iPhone.
- Why do COST hot dogs cost $1.50? Because they lure you in with tasty treats so you can buy 14lbs of nutmeg. “By maintaining bargain prices on hot dogs, rotisserie chickens, milk, and such, Costco exponentially increases foot traffic in stores. It also helps shoppers justify the cost of their annual memberships. And, while the hungry shopper is swinging by for a quick, cheap bite or because it’s 5 p.m. and he needs to grab a $4.99 chicken for the family dinner that night, he just might be tempted on the spur of the moment into buying a new TV, or grass seed, or vitamins, or a coffee maker, or any number of other items lining Costco’s aisles.
- Have you seen one of these before? I haven’t.
- Did you know the tallest sand dune in Europe is in France? I didn’t.
- And the award for Worlds most uncomfortable bathroom goes to! Hey honey, move the ladder over here, I need to get out of my rocky basin.
- Here, let’s get all beared up and talk about private company bubbles, that seems to be the rage nowadays: Overall, private valuations are about as high now as during the dot-com bubble, according to research firm Sand Hill Econometrics. One reason valuations are so lofty: In an era when generating outsize returns has been extremely difficult, big investors who previously would have tended to take a position in a company on its IPO are instead jumping into late private-funding rounds
We’ll end tonight with some seriously cool bike tricks. I’d love to know how a hobby like this gets started, or what the medical bills look like over time.
Have a good night.