Americans Continue To Find Jobs
Equities start the day lower as Americans continue to find jobs. Yep, once again we are in the awesome position of rooting for bad economic data if you are long the market. Wait…it’s not Friday…what are you talking about Michael? Well my friends Weekly /Continuing Claims was out this morning and both showed the same trend we’ve seen for years now: a strong labor market here in the US of A. In fact, Weekly unemployment claims is at its lowest level since April 2000! I think we can all agree that less people filing unemployment claims is universally a good thing. You know what else? Wages grew 2.6% in Q1 (YoY basis). Jobs and Wages…Wages and Jobs….are we nearing escape velocity? Honestly it’s hard to know because every time we thought we were, we weren’t. Fool me once…shame on….wait I just used this joke didn’t I. Anyway, futures sold off and 10yr yields have shot up 18bps since Tuesday (you want a real eye opener? Look at German Bund yields. Doubled in a few days! Doubled! I’m not a fixed income guy but do Sovereign bond yields double all that often? Ex a crisis?) Sentiment numbers come out on Thursday’s too and the AAII survey showed a measly 30% bulls, the 8th straight week where it’s been below its bull market avg of 38%. So let me get this straight: individuals aren’t all that bullish yet people are finding jobs and wages are ticking higher. Yep, the song remains the same.
After the open it was nothing but follow thru selling from yesterday. The same exact stuff was being pitched: Biotech / Regular Tech / Small caps and the same exact stuff was being bought: Energy (how odd is it to hear that lately) and all the currencies against the Dollar. King Dollar is having a bad few weeks right? So we wonder…has the “strong dollar” trend run out of steam? Maybe, maybe not. Steve Holt, our Head of London Sales, put together this awesome chart showing the Trade Weighted Dollar for the past few decades. This thing turns like an aircraft carrier, slowly, but when the trend changes it’s usually meaningful and sticks with us for a long time. As Davinci said: “simplicity is the ultimate sophistication”. It looks like the primary trend has changed, there may be dips/pullbacks but the trend is dollar strength. AAPL ended up getting smacked today, I mean when you report a blowout record quarter you gotta expect your stock to fall 6.5% over the next few sessions (I get it, it was an insanely crowded trade. Had to poke fun). Other losers: HAR, VAR, ZMH, ADSK, CRM (wait...you were just up huge!!), and YELP (at one point Yelp had a $6B mkt cap. now its 3). Winners, like I said earlier, were once again Energy names: DO / CHK / CNX / RIG / NE…names I’ve spoken of almost daily for the past few weeks. Ugly ugly all morning long, but I’d like to point out that the end of the month has been bad for equities for awhile now. Mar 31, Feb 27, Jan 30, Dec 30, Nov 28….all down days for SPX. Weird right?
The last few hours were pain mixed with agony and we closed at 2,085, down 1%. Here is what I think is happening my friends, lend me your ears for one final minute. I think we are seeing some kind of Great Unwind. Now when I say “Great Unwind” I don’t mean some all arcing permanent change to the way people are positioned. I just mean a reduction in what people were holding. Markets like to punish the most people they can at one time right? We can agree that usually happens? What are all the crowded trades? 1) Long USD / Treasuries 2) Long European Debt (Bunds for example) 3) Short Energy 4) Long Europe Indices (like DAX) 5) Long Biotech 6) Long SPX 7) Long AAPL 8) Short the Euro 9) long Domestically focused equities i.e. small caps I could keep going here but I think you get my point. All of those have reversed over the past few days, some in large ways. It’s late April and the market decided to see who was too far over their skis. I might be wrong about that but with so much going haywire right now it’s best explained with an unwind theory. People like to protect their profits, that is a thing right? Ok let’s talk more tmmrw, this is getting too long and I can hear the “delete” buttons being hit.
Final Score: Dow -108bps, S&P%00 -101bps, Nasdaq -164bps, Rus2k -215bps.
- Succinct Summation of the Day’s Events: Some decent economic data so market worries on Fed. Crowded trades continue to be unwound. Another failed breakout is confirmed
- After hrs movers (405pm ET): LNKD -20% GILD 1%
- GMO is out with their latest piece, definitely a must read. Here’s the money quote I think: “To remind you, we at GMO still believe that bubble territory for the S&P 500 is about 2250 on our traditional assumption that a two-sigma event, based on historical price data only, is a good definition of a bubble.3 (As we like to describe it, arbitrary but reasonable, for it fits the historical patterns nicely.)”
- Remember, we like to look for subtle changes “Lending to euro zone households and firms rose in March, showing a modest improvement after three years of decline, European Central Bank data showed on Wednesday.”
- I can honestly say, “Dadbod” is definitely a thing: The dadbod is a physique characterized by undefined muscles beneath a light layer of flab, usually topped off with a beer belly. "The dad bod says, 'I go to the gym occasionally, but I also drink heavily on the weekends and enjoy eating eight slices of pizza at a time,'" explains Mackenzie Pearson, a Clemson sophomore, at The Odyssey
- Great quote here for Financial Advisors: All this spells opportunity for advisors who make the creative planning for and solving of their clients’ financial issues their paramount concern. And even the creative geniuses among the planner population may find they contribute the greatest good in the most basic task of them all: keeping their clients from acting on emotional impulses — selling when markets fall or “buying returns.”
- You don’t need to eat Gluten Free. It’s a fad. Stop. For now, non-celiac gluten sensitivity remains a little-understood condition in need of scientific validation and objective diagnostic criteria. There may be some people who turn out to have stomach problems brought on by gluten or something else that lurks in grains. But even then, the available research suggests it’s only a tiny fraction of the population (between 0.63 percent and 6 percent) that has any sensitivity to these foods. (Remember: 33 percent of Americans say they want to avoid gluten.)
- Housel wrote an article on that “The Easy Money has been made” image. Go read it! “The reason you make money in stocks is because you're willing to hold assets where the future is unknown, bad things can happen, and outcomes are uncertain. There is never -- ever -- such thing as "easy money.”
- That’s gotta be one steep decline!
- New Water park ride? If so, I’m in!
- Who knew Wales was so gorgeous
We’ll end tonight with the luckiest guy in the world. How awesome is that guy’s story going to be to his boys? He’ll act like he was Superman right? I bet the embellishment will be off the charts. Actually, can you even embellish surviving that?
Have a good night.