Roaring Back

Equities start the day lower as I come roaring back to the recap. You know what else came roaring back? That’s right kids…my hatred for Cersei Lannister! What is it about her that makes me so mad? She is such an amazing actress, gotta give her credit for making people despise her. Anyway I’m back, Game of Thrones is back, and earnings are back! Pre open we heard from JPM and WFC, who appear to be chugging along (banks have been boring for awhile now), and JNJ, who warned on currency risks and didn’t get punished for them. I’m hoping earnings are enough to get us out of this Purgatory because even though the market traded above 2100 while I chased floaties in the ocean (never bring a floatie to the ocean) it still hasn’t broken out. The only thing breaking out right now is China and all the retail traders popping up like dandelions in summer swept field. Look at this chart! That ain’t a chart of throats slit in Westeros, that’s a chart of brand new Chinese stock trading accounts! Imagine you saw that here, imagine that’s a chart from ETrade or Schwab. There wouldn’t be a single post on Twitter or Business Insider that didn’t have the word “bubble” in it. To make this story even better the Shanghai Composite is up 100% in the past 12 months! So yes, please do continue to worry about every new high coupled with the fact that most individuals distrust the market. Makes sense.

After the open we drifted lower because Retail Sales missed again. This is the fourth miss in a row for retail sales and “weather” is starting to become a little trite as an excuse. If this series continues to drop it’s going to make defending the bull case much more difficult. We bottomed out an hour into the session and spent the rest of the morning rallying. Why a quick drop and then a rally? Because markets love to confuse the heck out of everyone that’s why! Retail Sales put a sour taste in everyone’s mouth and Europe was broadly lower so that’s probably the main reason for our morning malaise. WFC ended up down 0.7% as everyone worried about lending margins but JPM finished up 1.5% because their bond trading looked good. So there you go, investing in banks can be a wildly different experience! What else…energy led the way today as Crude rallied 3%. $53 a barrel…not bad. Winners: ESV, DO, RIG, RRC, HP. Hugely beaten down names rose 3-5%. Losers were NSC, WYNN, WFM, and KORS. What the heck? Did someone lose money to a casino, steal high end beets and kombucha for food, rob a train for money and park the cash in high end handbags? (I tried…gimme some love). By lunch we sat on 2,095 up a few points.

The afternoon featured a 1pt range! That’s right ladies and gentlemen, an index of 500 US stocks traded in a 1pt range for close to 2 hrs! The kind of excitement you haven’t seen since the greater Springfield Needle Threading competition of 1908. A very late surge pushed the index to 2,096 where it closed modestly higher on another quiet-ish day. Tomorrow we need to talk about the BAML Fund Manager survey and energy stocks. I love that survey, I think they do a great job on it. All the credit in the world to them for what I see as the best survey on the street. Why do we need to talk about Energy stocks?  If you’ve seen it already you know, otherwise tune back in on hump day for a chit chat.   

Final Score:  Dow +33bps, S&P500 +16bps, Nasdaq -22bps, Rus2k -2bps   

News Highlights:

• Succinct Summation of the Day’s Events: A few big earnings but not enough to goose us significant higher. Small rally on a fairly aimless day.
• After hrs earnings:  INTC and CSX both up about 3% as of 4:05pm ET
• Bonds…so hot right now: For the first time in more than a decade, large pension funds hold more bonds than stocks. Their increased appetite is fueling demand for highly rated debt issues, pushing up prices and driving down yields. That, in turn, could make it cheaper for companies to borrow money for years to come.
• Put this link on your wall, it’s a moment they’ll talk about in history books forever. Odd times my friends. At least one Spanish bank, Bankinter SA, the country’s seventh-largest lender by market value, has been paying some customers interest on mortgages by deducting that amount from the principal the borrower owes.
• 9 Lessons from the Great Depression. I like #6 a lot, and I think it’s the best way to approach your life and your investments. 
• Would you have the nerve to climb down there? No chance I would.
• The Economist weighed in on this Chinese stock market boom. It’s a balanced article, worth your time, but I loved this tidbit: For those with a cautious bent, there is no shortage of warning signs. Three are especially noteworthy. First, valuations are beginning to look stretched and, in some cases, plainly absurd. ChiNext, China’s small-cap board, has a trailing price-earnings (PE) ratio of 90, more than double that of internet stocks at the peak of America’s dot-com bubble in 2000. Second, leverage has soared over the course of the rally. Outstanding loans to stock investors reached a record 1.67 trillion yuan ($269 billion) as of April 13th, up some 300% from a year earlier. Finally, many of those rushing to snap up stocks are small-time day traders with little understanding of what they are buying. Chinese investors opened nearly 5m trading accounts in March, a stampede that has continued into April
• Have profit margins peaked? This one is important to watch: “In any event, profit margins may be peaking across the board, though they aren’t likely to tumble until the next recession. If they have peaked, then profits growth will be determined mostly by revenues growth, which is likely to be below 5% this year and next year.
• Honestly how mad would you be? Like Hulkbusting mad right?
• Not even sure how this is possible.
• Winter does indeed come every year. Let’s not panic JUST yet.
• You think they hand placed those rocks? Or just threw them in there. Seems like it would be a pain

I have two links to end on tonight so feel free to pick your poison

Since skiing season has officially come to an end (make sure to take back your kids rentals, I forgot) we need one last look at the goodness.

And the other ending link is a tree attacking a man. Have you ever seen a tree attack a man? Well now you have. Still better than that Marky Mark “Happening” movie where rhododendrons kill children and the protagonists try and outrun WIND. What a debacle that was.

Have a good night.