Halloween Draws Ever Nearer

Equities start the day flat as Halloween draws ever nearer (my town did Trick or Treat last night, how strange is that?). In another attempt to frighten you I’m going to relay a couple articles I read over the weekend and let you decide on their “bubble-ness”. The first article is from Slate and discusses the current valuation assigned to Pinterest. You know it, you love it, you post pictures of muffins and Louboutin shoes hoping your friends will marvel at the coolness. They just raised another $225m making their valuation a smooth $3.8B. Amazing right? Did you know they have no revenues whatsoever? Pfft....in 2013 you don’t need revenues to have a billion dollar valuation come on. Ok, so that’s a bit odd, what else do we have? How about Snapchat? You know it, you love it, you take pictures of things you have no business looking at and send them to your friends hoping they marvel at the coolness (they also explode after you view them, you know the deal). Well Snapchat is in talks to raise capital too! At what valuation you ask? Well I’m glad you did, an app where you look at random images taken by your crew will be worth a sneaky $3.6B. Heady days I tell you! Maybe it’s different this time? Maybe an app where you look at cool pictures (that has no revs) and an app where you…ummm…look at cool pictures are both worth multiple billions? Look, I’m bullish on stocks in general but there are things that are starting to raise my hackles. I’ll keep pointing them out to you and maybe, just maybe, we’ll know the right time to jump.

After the open there was a whole lotta this….and this. Just an EXTREMELY quiet morning that saw the market trade in a 4 point range. Industrial Production beat but Pending Home Sales missed so no real conclusions to draw there. Man how am I going to fill this paragraph. Couple movers today, mostly consumer related. BMY was a big winner up 6% after earnings. JCP rose 8% because, well, because it can’t go down every day. Other winners CF, UPS, AMAG, and BAX. Losers continue to be momentum related names and we may finally be seeing a rotation out of high PE. Names like FSLR, NFLX, CRM, and TSLA were weak for no real tangible reason. Two other names of note: EW and ROP which both gagged on earnings. You know what my absolute favorite chart is right now? This one. I wish I knew who authored it because I’d love to give them credit for its beauty and simplicity. Now don’t be intimidated by what you see, I know it’s got a fancy R2 term and a bunch of dots on a sloping line so stay with me here. This puppy tells a simple two part tale (using Warren Buffets favorite valuation metric). Where do we sit now and where could we be going? Cool chart huh? So it this as a “sell Mortimer” type chart? No, not at all. It’s one in which we ponder future returns for our given environment. As this chart shows, unless we get major league GDP growth we could see a whole lotta tepid returns going forward (which is why you cannot miss years like 2013). But we could get that growth, it is possible, which is why calling tops on stuff like this is so hard. Anyway, by lunch we sat on 1,763, up 20bps.

The final hour saw us go sideways but we don’t care, we’re driving Cadillacs in our dreams. But everybody’s like: High PE, Mouton, One timers in your earnings, Bank Stocks, Kanye, Brokers on a short leash, we don’t care….we aren’t caught up in these stock affairs. And we’ll never be spoiled (spoiled), it don’t run in our blood, that kind of lux just ain’t for us, we get paid in ever shrinking numz. Let me end this recap (recap), you can call me King weird…and baby I’ll rule, I’ll rule, I’ll rule, I’ll rule…Let me live that fantasy.

Final Score: Dow -1bps, S&P500 +13bps, Nasdaq -3bps, Rus2k -3bps.

News Highlights:

Since we are close to Halloween I’m on a constant hunt for Pumpkin related videos. I think I found a good one here (it was the best I could do, cut me some slack).



Have a good night.