The Boston Red Sox Win Another World Series
Equities start the day slightly lower as the Boston Red Sox win another World Series. If you are reading this in Boston, or you are a Boston Superfan, congrats, enjoy your victory parade (one of my best friends is a Boston fanatic, I have to live it daily. Can you imagine having someone talk to you on Bloomberg about Tom Brady day in and day out? Kill me. It’s like hearing about DCF analysis nonstop). That being said, you are now on a “no angst for a long time” program. You have decades of built up sports equity, the world will not allow you to retain your “it’s our time, we deserve it” mantra. That’s now reserved for my team, the Cubs, and if anyone is “due” it’s us. So what’s up in the market? Fed brought nothing new to the table yesterday so I’ll skip what you already know. Suffice it to say Bernanke will not be tapering in December, there’s no way he’s kicking off a glow stick rave with a new DJ coming to town. I found another chart you might like, run this one thru your wash cycle and let me know what you think. What’s so important about hedge funds selling stock? Because it’s a prime example of why the market continues to rip. The more people take off the table, the more pain a rally inflicts. At least that’s my take on it, I could be wrong. Maybe they are calling top and I’ll look back on this as a genius move. I just feel like this year, right now, taking chips off the table with 2 months to go is risking a giant miss. Anyway, let’s see how this monster mash acted today.
After the open we sold off on the best Chicago PMI print in 30 years (relative to expectations). 65.9 vs 55.0…wow! How about New Orders coming in at 74.3, the highest in over a decade! Man, Weiner circle must be absolutely killing it right now (if you don’t know what I’m talking about you need to visit Chicago with a native). Unfortunately we got no boost out of an amazing macro print, and when markets sell on good news, you know they are overbought. Actually, now that I think about it, are we transitioning to a “good news is bad news because taper” market? You know, forget I mentioned it, I’m so tired of talking like that. Markets do what they want to do for reasons none of us will ever understand. FB had an interesting day, let’s chat about it shall we? They crushed earnings last night, Zuck made about $3B in 30 mins, then they mentioned slowing teen usage and the thing came cratering in. Slowing teen usage eh? Maybe it’s because my Mom, Dad, Grandma, and Aunt Jessie are using the thing daily to show me pictures of award winning Zucchini and Shih Tzu dogs. I’m shocked teens don’t want to rage at that house party, SHOCKED. Anyway, people shook off that crazy reason to sell and it ended up on the day (+5%). Other winners EXPE (+17%, wow), HAR (+12%, double wow), MCHP (only + 7.5%, no wow for you) and PRGO (+7%, try harder next time). Losers AVP (-23%, I’ll give you a yikes), WTW (-19%, hey losses are supposed to be weight related here people), JDSU (-11%) and WDC (-5%). Whatever happened to wax lips? Does anyone remember getting these for Halloween? I haven’t seen them in years, and I bet my kids wouldn’t have a clue what to do if they saw some. Is that a good or bad thing? By lunch we sat on unchanged, 1,764, as the market meandered around.
The last hour saw us fade lower and close at 1,756, down 40bps. Why the fade? Again when good news gets sold it usually means we’ve run out of gas, which is ok. A pullback would be fine, we have plenty of dip buyers ready to pull the trigger. A 5% correction in early Nov would set us up perfectly for the rip into year end. So embrace it, don’t fear it. What would you do if we fell 5%? Would you have your buy list ready? I hope so. Earnings are almost over, 356 companies in the S&P have reported so catalysts are going to become scarce. I say bring on a few tricks before we get our treats, oh and welcome to the last two months of the year (there are only 40 settlement days left. Cue the Queen song…).
Final Score: Dow -47bps S&P500 -38bps, Nasdaq -23bps, Rus2k -48bps.
- If there are any CEOs or CFOs who read this take note, this is a great sentence from Felix Salmon at Reuters (he is talking about AAPL and Icahn): “Debt makes sense when you need money to invest today, and can repay that money with a substantial future income stream. Apple is in the exact opposite situation: it needs no money to invest today, while its long-term future income stream is quite uncertain. So it makes sense to save up in flush years, like it has been doing. It will continue to create amazing new products; what’s less clear is whether any of those new products will have the ability to become a world-conquering profit monster like the iPhone. The job of the markets is simply to price the shares accordingly; it’s not the job of management to change the deep structure of the company just to make the markets happy”
- When the smartest housing analyst around speaks, I listen: “There has been a dip in housing starts recently, but I think starts are still closer to the bottom than the next cycle top. I agree with Hatzius that starts will continue to increase over the next several years - and this will be a key driver for economic growth.”
- Another AWESOME sentence here, this time from JB: “Stocks trade based on three things: sentiment, valuation and trend. Yes, economic data feeds into these things, but it is up to the trader or investor to determine their combined favorability, an economist does not do that sort of work” Perfect, nails it. If you remember that sentence, and one that I mentioned a few weeks ago (that when you are buying stocks you are buying the current expectations for the future of the business), you know more about how markets work than the majority of people.
- At what point did someone say….I gotta build up there?
- I would jump into this thing and never leave.
- This is unabashedly BULLISH for Wall St: This year just 27 percent of newly minted Harvard MBAs took jobs in financial services, according to preliminary data from the school.While finance remains the biggest destination for elite MBAs, it's a much smaller share than at any time in recent history. Even in the years immediately after the financial crisis, the sector's share of Harvard MBAs never fell below 31 percent. If this number kept falling, and these people kept going to Tech/Silicon Valley instead, we would know exactly where the bubble is (hint, it wouldn’t be bankers). I love this. Please continue to head West you group project lovin, School name droppin, we are the best in the world sayin crimson heads.
- Another headline that is unabashedly good (from the WSJ): The number of LSATs administered in October is down 11% from last year. Down 45% from 2009!! LESS LAWYERS!!!
- BAML putting out good work lately! “The 2013 scores-on-the-doors: global stocks are up 20%, bond returns are flat and commodities are down 3%. The asset allocation trade of the year has been long developed market equities (20%) and short Gold (-20%). So what’s the trade into year-end? The contrarian would clearly buy Gold & Treasuries. But the historian would stay long stocks. There have been 34 years since 1928 in which the S&P500 gained more than 10 per cent in the first 10 months of the year. Subsequent Nov/Dec returns were positive in 28 years (by a hefty average of 6 per cent) and modestly negative in only 6 years.”
- What are the S&P500 stocks furthest from their 50day MAVG? (i.e. most overbought). Well I’m glad you asked, click here to find out.
- Probably not the most appropriate Halloween decorations…..
- Definitely getting a Go Pro for Christmas (I swear I’m not a paid sponsor, I’m just a sucker for their advertising)
We’ll end tonight with two links
The first appears in my recap every Halloween, it’s the intro song to one of my favorite movies ever. I love it so much.
The second is for the 99.9% of you who won’t watch that link because you’d rather see people hurt themselves. Shame on you.
You are missing a brilliant piece of movie making, I weep for humanity. As an aside, why do so many people say “are you ok” in these videos when clearly the person ISNT?
Have a good night.