Remember the Quiet Moments, Embrace Every Second because Only Time has Value.
Equities start the day lower as September comes rumbling in. Oh and guess what, I wore white to work today, BOOM come at me bro. I for one will miss summer, there’s no better season than one filled with sun, freshly mowed grassed, endless vacations, the sounds of children playing, and an ice cream cone at 8 o’clock surrounded by family and friends. There’s a line in Les Miserables that I’ve featured in recaps for years on end and if you think I’m not pulling it out again you’ve lost your mind: “The summers Die one by one, how soon they fly on and on”. I can feel the lament of Jean Val Jean as he sings to a sleeping boy, I can feel the passage of time as my children race towards college. Remember the quiet moments, embrace every second because only time has value. Nothing else is even remotely close, not even the bitcoin I own. Anyway, what should we take away from price action in August? @Mark_Dow put out an awesome tweet and I think it has relevance for the past 30 days (as well as a longer time frame). “The dominant error in professional investing is over-forecasting corrections and then chasing bull markets from a position of weakness" Take a look at price action in August and then come back here for a 2c take on what happened. That selloff was primarily driven by “nuclear war fears” and “the market is a bubble” and “wow, look at what Trump tweeted now”. Yet by Friday September 1st all of those losses were erased. Poof, gone. Once again those who were caught leaning the wrong way i.e. bearish in a primary uptrend were forced to capitulate that view and chase the market back to all-time highs. The story has been the same for years now and @Mark_Dow is right, that error (along with maybe hubris about forecasting) is causing way too many unforced errors. The bull market will end when it ends, there’s no reason to try and out think it. Have a plan and stick to it, there is literally no other rational option.
After the open someone started playing that R.E.M song and the market puked like it was having a 21st birthday. Down 1% in a straight line with things like Irma, North Korea, DACA repeal, Purdue almost winning, that horrible new Taylor Swift song, and the return of Pumpkin Spice lattes being blamed (they suck). September is the worst month for stocks historically but I’m not sure anyone expected to lose 1% on the first Monday. That being said, there’s only been four down 1% days in 2017 so I’m not sure the fifth is a real cause for a panic (there were 14 of them in the first two months of 2016). UTX is buying COL for $22.75B making it the largest M&A event in 2017. I’ll put that in the “good for overall risk sentiment” category. We are nowhere near peak M&A (as a % of GDP it’s actually below average right now) so it’s not a top signal just yet. Winners were few and far between but STX, TRIP, HAL, UAA, and WMT were among them. Losers were plentiful including the entire insurance sector (in front of this new hurricane) as well as RCL, QCOM, VIAB, and CMG. By lunch the market continued to trade as ugly as we’ve seen all year and if we’re gonna price nukes flying around the Korean peninsula 1% feels about right (this is irony, I hope it you can feel it dripping off the page. There isn’t going to be Nuclear War).
We spent the rest of the day being treated like this and by the time the bell rang we gave up a whole 0.75% of our YTD gains. I mean we still have 9.8% to play with but come on, let’s not ruin a good one day panic with trivial details. Apparently everyone was grumpy coming back from vacation because I couldn’t discern one valid reason why the market acted so poorly. I get that global tensions are high and the debt ceiling seems real and we may suffer another devastating natural disaster….actually those are all valid reasons to be grumpy, carry on. Final Score: Dow -106bps, S&P500 -75bps, Nasdaq -93bps, Rus2k -98bps.
- Succinct Summation of the Day’s Events: Everyone dumped all their worries into a glass and drank them. Got indigestion for 1%.
- Today’s super-hot link comes from Ben Carlson: 36 Obvious Investment Truths. I like 2 and 3. 13 should be chiseled into stone. No investor understands 19 because they are human. 24 is for all the “would be” PhD traders out there.
- Things Michael should’ve invented #3 (that’s high on the list people). How did I miss this?
- Great Fed commentary here from Tim Duy. Must read: “Bottom Line: Brainard is making a push to slow the pace of rate hikes. I am not sure she will be as successful as her last effort to change the course of policy. But she still has two important takeaways for investors. First, if you think interest rates will rise sharply, think again. The neutral rate of interest is too low to expect much more tightening - we need much faster growth to justify a higher estimate of the neutral rate. Second, assuming she is right and the Fed doesn't take her advice, her colleagues are positioning themselves for a substantial policy error that would both bring the expansion to an end sooner than later and further entrench disinflationary expectations. And that would only make the Fed's job harder in the future.”
- This is PURE INSANITY and the topic of the book I plan on writing. Nearly 20% of U.S. families spend more than $12,000 a year, or $1,000 per month, on youth sports, per child, according to a TD Ameritrade survey of parents between 30 and 60 years old with $25,000 in investable assets with kids currently playing youth sports or ones that did. That's in line with the median mortgage payment of $1,030 that Americans make monthly, according to the U.S. Census Bureau.
- CAPE (everyone’s favorite way to say the market is expensive) is about to undergo a weird change. It looks back at the past 10 years and guess what’s about to fall off the chart…
- Ill miss you summer
- Would you slip n slide off a cliff?
- Honey, I got us this awesome home in the mountains, go buy us the most uncomfortable stuff you can find.
- Sleeping on the ground here would be more comfortable than that stupid couch in the previous link
- Area man found dead leaving only his shoes and a windex bottle
Tonight we’ll end on an awesome mashup. People are awesome plus Fails?? Game meet change!!
Have a good night