October Churns To Its Magnificent Conclusion
Equities start the day slightly lower as October churns to its magnificent conclusion. Apologies for a scattered recap distribution lately, travel plus a plague knocked me out. What is it about kids that they can give you something that feels like the energy has been drained from every cell in your body yet they bounce back from it in a day? Getting old stinks. I think my immune system is on strike. Earnings are nearly halfway done so let’s turn to @factset for a quick update: “the blended growth rate for Q3 S&P 500 EPS currently stands at (3.8%). This marks an improvement from the (5.1%) expected at the end of the quarter, but still points to the first back-to-back quarters of earnings declines since 2009.” Ok, well, that’s not so great is it? We knew earnings would be squishy due to energy but it appears other sectors are Stay Puft Marshellow man soft too. Josh put up this link (that credits BAML) showing top line weakness for everyone except tech. Strong dollar, soft global demand, too much candy corn, the excuses are exactly the one’s you’d expect. Is there any good news with respect to earnings? Lay it on us again fact of sets: “In the aggregate, companies are reporting earnings that are 5.2% above expectations, better than the one-year average of 4.8%.” As always people will say we are jumping over a broomstick (insanely lowered expectations) but isn’t beating expectations the secret sauce on Wall St? It typically is, so while this earnings season seems mediocre at least it isn’t Freddy Krueger ugly. Man, that movie messed me up as a kid. I remember sleeping on my sister’s floor for a week after seeing it. I mean who makes a movie about people getting killed in their sleep? Wack jobs.
After the open there was rush to unchanged where we sat for hours. Monday’s have consistently been the slowest days of the year and today was no different. But that’s good! We need it! October is up something stupid like 8% MTD so we need 3 or 4 days of sideways to settle things down. VRX had their big investor presentation today and I’m guessing in the category of things you never want to have to say as CEO “our company is not the next Enron” ranks just behind “I’m sorry our product hurt so many people”. Brutal. What else. The Cubs got swept, New Home Sales stunk, Tom Brady is still pretty good, Hot Dogs have funky stuff in them (I’ll still eat ‘em), I’m speaking at a conference on Wednesday (come see your boy), Eastman Kodak stock still exists and it’s still falling, and Pep Boys is being acquired because who can say no to those 3 big faces (no one in Europe will understand that). Did you know FB is within striking distance of GE in terms of market cap? I know that’s a random meaningless stat but you think Zuck and his crew figured they’d pass General freaking Electric one day? Thing was founded in 1892 by Thomas Edison for crying out loud. By lunch we were going nowhere debating the top 3 Halloween candies. Here they are 1) Reese’s Peanut Butter Cups 2) Snickers bite sized 3) Kit Kat. Coming in at #456 is Candy Corn, trailing 37yr old pennies by one slot.
The afternoon was as fun as watching 13hrs of Miffy cartoons with your 6 month old and when the bell rang we had gone nowhere. 2,071, down 0.2%. Like I said before, we’ll take it though. A few days of calm let’s everyone reassess where they are in preparation for the last 2 months of the year. The Fed is on Wednesday (they’ll do nothing) so lots of attention is being drawn to later this week. Chin up though friends, the market is actually up 0.6% on the year! Amazing given I heard talk of recessions and bear markets just a month ago. It ain’t over yet!
Final Score: Dow -13bps, S&P500 -19bps, Nasdaq +6bps, Rus2k -56bps.
- Succinct Summation of the Day’s Events: Weakness in Energy stocks / oil but other than that not much. Quiet Monday where market spent the day going sideways.
- Winners: LH, ENDP, PYPL, PCLN, ROP, and VFC
- Lossers: QRVO, CHK, RRC, CNX, NRG, KMI, SWKS
- Nice set of 15 charts that sum up our global macro picture. The first one is actually the best, I say we are definitely late stage.
- Speaking of late stage, when Sam Zell sells something it’s probably best to pay attention. Sam Zell has agreed to sell more than 23,000 apartments controlled by his real-estate company, Equity Residential, for $5.4 billion to Starwood Capital Group, the companies said.
- 5 Myths about the US Debt. Feel free to share this with your uncle…you know the one who talks politics at every family gathering. “One of the reasons the U.S. has been—and continues to be—a traditional safe haven for global investors is that investors know very well that the U.S. has nearly unlimited taxing power and a huge asset base. The federal government could—if needed—force liquidation of these assets to pay its entire stock of debt nearly 10 times over before defaulting. This is before even considering increasing taxes on the private sector.”
- We’re #21!!
- Barry likes his debates to be financial! “I find investing debates to be the most satisfying, as they are settled cleanly without much ambiguity. Save the complicated nuance for economic debates (see below). Either stocks are undervalued and will rise or they are expensive and will fall (eventually) -- or the market is fairly valued and won't move much in one direction or another. Gold goes higher or it doesn’t; it outperforms other assets or it doesn't. Is Valeant Pharmaceuticals a great value play or wildly expensive? You will get the only answer that matters, perhaps in the next few quarters.”
- I wonder what that mouthful of sand tasted like
- I wonder how un fun it is to try and tackle this guy
- I wonder if anyone can top this guy’s costumes
- I wonder what drugs this guy took
- I wonder how great it felt to drive away on that dude’s moped.
We’ll end tonight with 2 of the luckiest people on the planet. How is it possible they didn’t get hurt? Amazing.
Have a good night.