Some Good Old Fashioned Geopolitical Tension

Equities start the day lower on some good old fashioned geopolitical tension. Remember that stuff? Someone does something bad in a place no American can find on a map then we lob a few million dollar cruise missiles at it and that’s supposed to solve something. Great. Anyway, let’s move on because bad people doing bad things in our world is not a good enough reason to sell stocks. As I trolled the web yesterday looking for some kind of explanation about what happened to Hannah Montana I ran across the following link on (don’t hate me). Bubble Watch: Ridiculous Stock Values Edition. That’s right, one of the classiest sites on the internet, Gawker, home to articles about high heels and what kind of dogs celebrities are buying is weighing in on stock market valuations. Isn’t that great? Here’s the quote: “The farther we get from the last economic collapse, the closer we get to the next economic collapse. But which bubble is next to pop? Student loans? Desert real estate? Today, we turn our untrained eye to the backbone of the U.S. stock market.” So why am I bringin this up? Other than to raise your ire? Because if you are bearish here, and think the top is in, you have to sleep with the knowledge that GAWKER is on your side. That if this truly was a bubble, and stocks have finally peaked for this cycle, then a website featuring hard hitting articles about otters called it. Yikes.

After the open it was all red all the time as safety was sought. Lots of bids in Treasuries, Oil, and Gold. Not so many in Equities and optimism. Actually wait, optimism did get one small boost from Consumer confidence, which came in 81.5 vs 79.0. So if we’re gonna crash it’s going to happen with consumers as confident as they’ve been in 4 years. Which is nice. The first half of the session saw the S&P make lower highs and lower lows as whoever was left at their desk this last week of summer decided to sell indiscriminately (maybe Gawker is running a hedge fund now?). What moved today? JCP of course, as Ackman dumped his stake last night. Can we stop talking about this now? He took a shot and brought in a new CEO to try and shake up a failing retailer, that’s it (Baird rates JCP neutral). Let’s talk about other retailers like Costco! I mean who doesn’t love buying 13lbs of nutmeg alongside a garden shed. God I love that place. Anyway, there were only 3 stocks in the S&P up over 1% (GT, CCI, and VTR) and only 30 stocks that ended positive. Losers were everywhere led by DFS, LNC, SEE, STI, and BLK. By lunch we sat on the low, 1,635, down 1.2%. Just an ugly morning driven by the drums of war.

The last few hours saw the market really get twerked and we closed on the lows, 1,630, down 1.6%. So apparently we are in correction mode, which is fine. How many times have you said to yourself “if I just got a pullback I’d do some buying.” Well, here’s your chance, make sure you have a shopping list sitting by your desk. Unless of course you subscribe to the Gawker school of top calling then I guess you continue to puke risk while Europe improves, US housing improves, US unemployment improves, and Consumer confidence sits near its highs. Will we pull back to 1,600? Probably, technicals say we are headed there. Are we going to pull back to 1,500? No. 1,550? No. Might I be wrong? Sure, I don’t have some crystal ball. But Syria isn’t going to change the fundamental investment thesis people have been operating under all year: that things continue to improve. We had a 7% correction in early May..did everyone throw in the towel then? Was it over when the Germans bombed Pearl Harbor?

Final Score: Dow -114bps, S&P500 -159bps, Nasdaq -202bps, Rus2k -241bps.

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Have a good night.