The Wall

Equities start the day lower as we continue to deal with The Wall. Look, I don’t plan on using movies in every single blog (I know I just did Bohemian Rhapsody) but I need to do another one because I’ve never experienced anything like Free Solo. If you haven’t seen it yet it’s on iTunes for $5.99 so skip the two pump, half caf, half chai soy mocha skinny latte that people hate you for ordering and dial up this movie. It’s an unbelievably gripping, nerve wracking documentary about Alex Honnold and his quest to climb El Capitan with no ropes / safety precautions at all (dubbed in the climbing world “free soloing”). Early in the movie an expert climber says “this is the equivalent of a gold medal Olympic performance but if you don’t get the Gold you die”. I swear to God you’ve never experienced “movie stress” quite like you will when Alex approaches “the boulder problem” (email me when you get thru this). His achievement, getting up and over this wall with zero ropes, will probably never be ATTEMPTED again. It took a certain set of circumstances and a quirky, mentally tough athlete to even happen (most Free Soloers just end up dead). So what does this have to do with the market? Let’s look at another wall that’s proving difficult to get over, the 2800 wall. We keep walking up to that wall and saying “nope, not today.” Which I can understand, my friends at Strategas have argued that a pause makes sense here and I’m on board with that. But what kind of courage do we need to scale it? In my opinion it would involve 1) the World starting to grow again 2) investors willingly paying a higher multiple for earnings that appear to be slowing and 3) some kind of clear cut resolution to the US China trade war. It’s a tall task but as Alex Honnold has shown, humans can do anything they put their minds to.  (btw, I just found out that it’s playing on TV soon: Free Solo. 9 p.m. Sunday, March 3, National Geographic Channel.)

After the open we spent an entire day debating 4Q GDP and marveling at the fact that stocks are going absolutely nowhere. You know what the last 4 closes are for $SPX?  2792.37, 2793.90, 2796.11, 2792.67. Equity markets at the end of Feb…FEEL THE THUNDER. Q4 GDP came in better than expected, 2.6%, and full year 2018 is going to register 2.9% so yea…the same as its been for years. If you’re expecting some kind of political comment on Obama vs Trump economies you can forget it, here at BullandBaird we talk markets, pop culture, and how I can obtain one of these because I hate WI winters. Here, let’s play alongside @ukarlewitz where he asks us to “spot the pattern.” Did you know there’s almost zero correlation between GDP growth and what the stock market does 12 months later? The correlation only becomes meaningful when GDP is NEGATIVE (of last 31 times we’ve seen negative GDP growth, SPX has been positive a year later 29 times). Oh well, as Buffett once pointed out, there’s no reason to cry over that level of growth. Winners MNST, TTWO, LUX, LKQ, and UHS. Losers HPQ, BNKG, CELG, and LB. Feel bad for LB, a company with incredible brands that just can’t seem to catch a break among rapidly changing consumer trends.  By lunch we were still going nowhere.

The rest of the day featured Bryce Harper being paid a stupid amt of money, a debate over MMT (don’t click unless you like wonky), and a close at 2,874 down 0.28%. I just..I still can’t get over what this Alex guy did. I’d like to say my primary emotion watching that movie was fear but after it was over I think it was inspiration. When you work in markets and finance you run into pessimists everywhere. People who say “this is bad and that’s bad and this can go wrong and that can go wrong.” It’s just the nature of the industry to constantly worry, to point out that something somewhere is scary and that we should pull back to a safer more comfortable space. Alex Honnold probably faced those same people on his path to the rock but he, like all the most successful people you read about, had optimism as his default setting. He saw a challenge and instead of saying “that’s not possible” he said “it is possible and I’m going to do it because I believe in myself”. Take his lesson to heart, watch him overcome a seemingly impossible obstacle, then come back here and share my joy in human achievement. 

Final Score Dow -26bps, S&P500 -28bps, Nasdaq -29bps.  

News Highlights:

I have two final links for you tonight but I’d rather you just go watch Free Solo.

The first is a guy skiing in France….on rooftops

The second is some hilarious “tongue in cheek” parenting tips.  Its comedy, don’t even @ me

Have a good night.