Loss of a Legend

Equities start the day flat as a legend passes away. The great Yogi Berra died last night and the world is a slightly worse place today. In his honor let’s use a few of his quotes to kick off the recap. “You can observe a lot by just watching”. The market has been miserable the past few weeks, absolutely horrible, and sitting at my desk every day watching the carnage has taught me a lot. The mood of the market has changed, “buy the dip” isn’t even a thing anymore. Market psychology is a powerful force, maybe the most powerful force, and it has gone from bullish to decidedly bearish. “We’ve made too many wrong mistakes”.  Believing that 1) the Fed solves all market problems 2) China can weather any slump  3) European QE is the answer 4)  Buybacks will support the market and  5) falling Crude prices are net positive  may come back to bite us.  “The future ain’t what it used to be”. The primary trend has changed, and it has changed meaningfully. Paul Tudor Jones said “bad things happen under the 200 day” and he is right. My colleague in London Steve Holt put it this way “when the market closes below the moving average for a month or more (sustains) the downside is pretty big with very few headfakes” (You got quoted with Yogi Berra and Paul Tudor Jones, I want a raise!).  “It ain’t over till it’s over”   We may yet recover from this dip but it’s going to take a herculean effort.  What could right the ship?   What if we woke up and saw this headline “China to engage in open ended QE.”  Would that be enough? Maybe, hard to tell, the impact of monetary QE seems to be waning, but it would jolt markets in a huge way.  “We have deep depth”.  The great 2009 -?? bull market may be ending but you know what?  We will endure because that’s how things work.  Markets rise and fall but our great nation (and other great nations) have incredible bouncebackability (did Yogi use this word?  He had to). The future is and always will be bright. 

After the open we spent the entire morning drifting around on low volume. Today is Yom Kippur so holiday markets will act holiday-ish. Two things dominated conversation today: The Pope and Volkswagen. I must say, I like this Pope, seems to be a good guy, but are they really going to shuttle him around in a tiny Fiat? Can’t my main man get a Ferrari or a Lambo or something? Though I guess humility and simplicity is kinda his thing so it makes sense. Speaking of humility, the CEO of Volkswagen is off for a permanent vacation in the Alps because his cars did a little rule bending. Come on man, you can willfully deceive regulators like that, they get really itchy about that kind of stuff.   Me, I disclose everything.  You want my lunch receipts for the past year?  I got the records right here, don’t judge me on my Chipotle consumption though (barbacoa soft tacos is the plan, extra cheese on those bad boys).   What else….no rhyme or reason to winners today: TSO, CCL, AZO (still near its all-time high. I guess auto part retailers are the place to be?), and PYPL, but most of the losers were Materials names like CNX, FCX, VMC, and JOY because Chinese manufacturing data stinks. By lunch we were sitting on unchanged with volumes running 20% below recent trends. Oh and if you are looking for tasty treats for your Halloween party this right here is a brilliant idea. You can thank me later. 

The rest of the day was similarly quiet and we closed almost exactly where we were at lunch. Rather forgettable day here so I won’t bore you with any more of the details. Needless to say I am worried about the market and I’m hoping that fact is the bottom of this selloff.  It just feels like so much has changed with respect to price action, the market isn’t acting like it has been for the past few years.  Almost every dip from 2011 to 2015 was a solid buy and this one doesn’t feel that way. Often times it’s hard to sell stock for clients and that tells me that dip buyers are gonzo…poof… up and vanished. I go back to the notion that there wasn’t excessive euphoria a few months ago so that can’t possibly have been the top. Maybe the market is just dead money for a while? Is that just wishful thinking?  I’ll admit I feel confused about where we are going so I guess we watch the tape and look for clues about sentiment in every nook and cranny. Rest in Peace Yogi, thanks for adding your wit and humour to the world.

Final Score:  Dow -31bps, S&P500 -20bps, Nasdaq -8bps, Rus2k -26bps. 

News Highlights: 

 We’ll end tonight with something I still haven’t been able to figure out.   Someone help me out here. 


Have a good night.