Mr. Toad’s Wild End Of March Ride

Equities start the day flat as we continue to reel from Mr Toad’s wild end of March ride. -2.5% this week as people talk about the following: 1) The US Economy is good…but not great. 2)  Biotech doesn’t just go up and to the right  3) Airline cockpits are going to have to change in a big way  4) college basketball is still really awesome and 5) The churn is on. Now when I say the churn is on what am I talking about? I mean this isn’t a butter recap and I’m pretty sure the Amish don’t read my stuff. Basically we’re at a point of indecision right now. Every time we rally money gets taken out of this thing….so it churns. The S&P has made no gains since November, it’s a whole load of up and down price action with nothing to show for it. So what gets us over that hump? How do we fight off these nagging worries about Valuation and Company earnings? It’s a good question and I’m not sure there will be a near term answer. Look at the economic data lately, it’s just blah (absent housing and jobs). Look at earnings growth, its blah. Look at the bond market, it’s still telling us “I’m worried about lowflation and tepid growth”. Now we’ve gotten past all this stuff in the past because the Fed was crazy easy and rate hike worries were nonexistent. But the mood has changed, that thought is being pushed aside and replaced with “man, I need to justify buying the highs instead of selling them now that Fed is shifting gears” so that’s why the churn has descended upon us. Will it stick around for awhile? I think until we get more Fed meetings the answer is yes. Which should make for markets as excited as this guy!

After the open I was hoping for another one of these days but alas poor investor, it did not come to pass. The first half of the day was spent between 2054 and 2060 and near lunch it was between 2056 and 2059. The 3rd look at GDP brought nothing new and Michigan Confidence was inline. Sideways Fridays are the best Fridays! Speaking of the best, one of our top tier analysts, Colin Sebastian, forwarded me a home listing in San Francisco because I’m always on the lookout for cool cities to live in. So I eagerly opened his email and found this absolute gem for the somewhat attractive price of $1.2mm USD! Now I know what you’re thinking, but that fence won’t be a costly repair. I bet I can get it cleaned up cheap. That shower though might require one or two trips to HD but we can make it work! It’s not irrecoverable! Anyway, there is definitely no bubble out West because when I see attractive housing like that I think “it’s game on in Silicon Valley!” Biotech bounced back today as well as Consumer Disc and Utilities. Winners were CCL, RCL, KRFT, SWKS, EA, and CAG. The losing side with mixed with names like RIG, WIN, FCX, TSLA, and QEP. By lunch we sat on 2,057, exactly unchanged. 

The weird thing about today was that most of the action came in the last 15 minutes. We heard from Yellen out West and from the WSJ that Intel may be looking at Altera. Yellen said “rate rise may be warranted this year” and “pace could speed up, slow down, pause, or reverse”. So basically the Fed continues to prep the market for a potential hike. As for the Intel thing….remember how people were selling semi stocks recently? Well guess what? That ended today! By the close we managed to eek out a small gain of 20bps and you know what? We’ll take it. The churn may be on but we need any gains we can get to hold these levels. Anyway, thanks for reading this week and have an awesome weekend. Next week we are going to talk about predictions vs reactions….which one is actually more important to you? Or which one should be?    

Final Score:   Dow +19bps S&P500 +24bps, Nasdaq +57bps, Rus2k +68bps  

News Highlights:

• Succinct Summation of the Day’s Events: Quiet day until the end. Inline economic data and hovering at support levels. Late day tech rally on a WSJ story.
• This is the trade right now:  “With net inflows for the week topping $6 billion, European equity funds tracked by the data firm set a weekly inflow record for the third time since mid-February. In Japan, meanwhile, funds tracked by the firm took in $2 billion during the week. Yet those inflows were offset by U.S. equity funds, which posted outflows of $8 billion”. So ask yourself this…is it the top if people are rotating OUT of US equities already?
• What else is being dumped? Companies with a large % of their sales abroad:  “According to an analysis by FactSet, shares of companies with more than 50% of their sales overseas are down an average of 1.8% this year through Thursday. By contrast, shares of firms with more than 50% of their sales in the U.S. have gained an average of 1.5%.  For the S&P 500 altogether, the average company stock is up 0.6%, FactSet says.”
• How are Hedge Funds positions for a rising rate environment? Long bonds? Short stocks? Nope, looks like just long the Dollar. “They are betting "long" that the U.S. dollar will continue to gain in value as the Fed tightens its monetary policy with a rate hike. At the same time, the funds are wagering "short" that countries in the euro zone, Japan and elsewhere will dilute the value of their currencies with fresh rounds of stimulus and low interest rates”
• I will admit… this chart is one of those that keeps me up at night. I just don’t get why core capex goes nowhere.
• I’d love to take a class here. I’d even pay crazy tuition!
• Things Michael should’ve invented? Maybe? I didn’t even know something like this existed. I wanna do some research on it.
• I feel you Kettle Chip person…I really do. I think you made the right call here.
• This is just really cool…so I dumped it in here on a slow Friday.
• Great quote by the Lama  here.
• Been awhile since I’ve had a crazy soccer goal in the recap. Is this one more the goalie’s fault than a really good shot?   

We’ll end tonight with a really dumb way to take the train. I mean what’s it cost to ride that thing..$5? Less? Come on man.

https://www.youtube.com/watch?v=qN6xuF9X6Y0

Have a good night.