Welcome Back Old Friend
Equities start the day lower as I restart an old friend. It’s been awhile since I wrote an evening recap and I sit here wondering why? I always had such fun writing about the market in off color ways, so the fact that I’ve left my recap on the sidelines the past few months makes no sense. If there’s one thing I’ve noticed about Wall St it’s that there’s still a dearth of entertaining authors who can convey both information and humour. Josh Brown is one, Barry Ritholtz is another, but they aim to cover a broader scope of topics than I do. Now I’m not saying I’m the funniest person in the world, or the only person trying to do something unique, I’m just saying that I promise to keep it light hearted. So let’s reboot this thing shall we? Let’s write about daily market news and poke fun at them. Seriousness abounds, you get it every millisecond of your life, I hereby promise to make you smile at least once a day. Anyway, where was I? What happened while I was gone? Did the market blow up? I’ve been labeled a perma bull before so was I wrong to like stocks for the past….oh I don’t know…3 years? Let’s goto the scoreboard: Nasdaq 5000. SPX 2115. Oh my. If I hadn’t written such a sappy intro I’d have space to marvel at those numbers. Let’s marvel at them in the next few paragraphs instead.
After the open it appeared my triumphant return to writing jinxed the market. Nothing but straight down kids…maybe I should go back to tweeting? No real news for the selloff so we’re going with the old fashioned “stocks do fall every now and then”. Let’s face it, the last meaningful declines were late Jan / early Feb…it’s been awhile. Let’s switch gears for a second and look at the move in Treasuries / yields lately. Utilites have been dropping for a month and yields on UST keep grinding higher. But why? I mean there’s the obvious “fed raising rates” thing but to me it smells like an unwind. The “lowflation / no flation / disinflation” trade has been insanely crowded, it was ripe for a turnaround. At one point we were talking about Nestle bonds with negative yields, how is that not a top sign in bonds? So keep your eyes on rates, I don’t think there’s a “great rotation” but it feels like some rotation. What moved today? Lots of energy winners on higher crude: RRC NBR DNR plus DISCK and DISCA because they have cool tickers or maybe someone is bringing back the discman, tough to say. Losers were STX, MU, AMAT all on negative comments. Hey I have a negative comment: that dress thing last week was so dumb. How can we all get distracted by such a non-event? I mean it was obviously blue. Anyway, by lunch we sat on 2,103, down 65bps, on a typical “the mkt needs a breather” type day.
The final hour saw a bit of dip buying but not enough to get us back to green. We closed at 2,107 down 45 bps in a ho-hum session. So back to that marveling thing: the story, as boring as this sounds, is STILL THE SAME. Muddle along US economy, companies buying their own stock like tickle me elmos, Europe regaining its footing, US consumers still spending, housing still recovering, rates still low, people waiting for dips, etc etc. How many times have we heard top in the past few years? Endlessly. News flash: it’s not a top when people call top. It’s a top when everything is too easy and there is no angst over pullbacks. Am I still bullish? Yep. Should I write more recaps? Yep. Are we sick of snow yet? Yep. Did one of our most powerful politicians use Gmail to solve the world’s problems? Yep. Should we end this right here? Yep.
Final Score: Dow -45bps, S&P500 -45bps, Nasdaq -56bps, Rus2k -63bps.
- Succinct Summation of the Day’s Events: Digestion day, no catalysts, sell off due to how far we’ve come past few weeks.
- Buybacks are becoming a HUGE part of daily volume: “Even with 10-year Treasury yields holding below 2.1 percent, economic growth trailing forecasts and earnings estimates deteriorating, the stock market snapped back last month as companies announced an average of more than $5 billion in buybacks each day. That’s enough to cover about 2 percent of the value of shares traded on U.S. exchanges, data compiled by Bloomberg show.” Just nuts right? The endless bid is these companies themselves!
- What’s the key to making money? Time. “Equity investors pursuing a buy-and-hold strategy might want to check out a fund that hasn't made an original stock market bet in 80 years.”
- Is the stock market overvalued? Most of the mumbo jumbo we use says “yes”. However, here is what our guy Doug Short reiterates: “As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for many years. But they can play a role in framing longer-term expectations of investment returns. At present market overvaluation continues to suggest a cautious long-term outlook and guarded expectations. However, at today's low annualized inflation rate and the extremely poor return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising”
- Most shorted stocks in the Rus1k for all your “squeezy” goodness: Top 10 are PPC / CLF / HLF / GME / GPRO / MYGN / SHLD / NSM / DDD / JCP
- Nice take on the LL saga here. Good solid read. “Now back to the first line of the post: this is what I love about this story: it’s a He Said/She Said story, but it should all be easily verifiable, objective stuff! It’s not a qualitative debate. We’re not talking about subjective definitions, we’re not talking about forecasts of what will happen to customer demand in the future: we’re talking about regulations that exist, and whether or not the testing is in compliance with the regulations. 60 Minutes and Drury and Larson claim that they tested the product and found off the chart violations. Lumber Liquidators claims that those test methods were inaccurate. Who is correct? I have no idea – but it shouldn’t be life’s greatest mystery to remedy this “debate”!
- Do you feel my pain here? Because this kills me.
- I guess he’s ok at Pop a Shot.
- If this isn’t what Heaven looks like I’m going to be so mad.
- Valuable Lessons from Warren Buffett’s letter. This one is true: We are our biggest enemy. The biggest mistakes we make in the investment world are often due to the fact that we try to make too many decisions. We are prone to mistakes because we are prone to be biased. When you understand your flaws you can prepare your portfolio against its biggest enemy – ourselves
- Nasdaq 5000 along with this video is enough to make me nervous.
We’ll end tonight with a look at brakes. I mean you gotta use them right? Especially in this situation?
Have a good night.