DAILY DIARY
Federal Express Taking a Bath & Beyond!
Break in!
Back of envelope: Federal Express (FDX) has a modest miss to sales but a big miss to EPS.
More to come after analysis and conference call.
Shares -$8.
Going Large on Allergan
Moved to large sized Allergan (AGN) long at $214.50
My Takeaways and Observations (Early Afternoon Edition)
And I think it's gonna be a long long time
'Till touch down brings me round again to find
I'm not the man they think I am at home
Oh no no no I'm a rocket man
Rocket man burning out his fuse up here alone
- Elton John,Rocket Man
"'The Brain' Was Great but The Other Brains Just Drain Me."
And a response to the above from a well regarded hedge hogger.
A tranquil market of historic proportions.
Mega large Wells Fargo (WFC) long now. I added and raised my buy level for this Best Ideas stock.
The S&P lives three standard deviations above its three-year monthly moving average.
As of 2:30 p.m. another historically narrow intraday move in the S&P Index -- with little differentiation between the three major indices (S&P, Russell and Nasdaq).
* The US Dollar weakened.
* The price of crude oil dropped by two bits to $49.68.
* Gold rose by +$2.
* Bitcoin broke below $4000 again this afternoon (-2%).
* Ag commodities: wheat -1, corn -3.50, soybean -2 and oats flat.
* Lumber +5.
* Yields were unchanged today as was the yield curve.
* Municipals lower and high yield higher in price (both modestly).
* Banks strong for the second day in a row.
* Brokerages ripped along with insurance.
* Autos up slightly but auto parts were shellacked.
* Energy stocks were flat, along with the commodity.
* Retail took a drubbing. Dillard's (DDS) -$2.50 and I just added at $56.65.
* Biotech was hit -- led by Allergan (AGN) to the downside.
* Farm equipment continues its rip higher.
* Old technology was mixed. Microsoft (MSFT) +. The optical space was led by an apparent continued short squeeze in Applied Optoelectronics (AAOI) .
* Media was slightly higher.
* (T)FAANG mixed.
Here are some value added contributions on our site today:
1. Jim "El Capitan" Cramer on avoid being Amazon roadkill.
2. Paul "The" Price "Is Right" on Apple going nowhere fast.
3. Divine Ms. M also writes about Apple.
4. Rev Shark goes with the flow.
Hanson on Housing
Here are some pithy comments and observations from real-estate maven Mark Hanson:
Housing Starts/Completions: Time to Start Paying Attention Again
The trend reversals I was pointing out a year ago are now evident in the charts.
Housing permits, starts and completion trends make clear that builders don't really believe the popular narrative that home sales are being held down due to a lack of supply. If so, developers would build more.
In fact, trillions of dollars of debt and money printing -- aimed largely at the housing asset -- have only brought housing starts up to what are historically recession levels. Housing starts and completions at the current level of around 800,000) are a feature of recessions, as this chart shows:
So, if there's such a shortage of houses, why aren't they building more? Answer: Because builders know that it's not about lack of supply, but rather a lack of supply that people can really afford. Those aren't profitable for builders:
Tweet of the Day
Tweet of the Day:
Putting a 'Top Rope Elbow Drop' on Wells Fargo
Speaking of WWF, I am now putting on a 'top rope elbow drop' on Wells Fargo.
This is my new term to connote a very large position. (I have decided to further add to Wells Fargo (WFC) today -- abandoning my $52 buy limit).
In the late '80s and early '90s, the most spectacular finishing maneuver was not Hulk Hogan's 'Atomic Leg Drop,' Ric Flair's 'Figure-Four Leglock' or Jake "The Snake" Roberts' 'DDT.'
It was "Macho Man" Randy Savage's 'Top Rope Elbow Drop.'
Here is a compilation of The Macho Man's 'Top Rope Elbow Drop.'
WFC is on my Best Ideas List and my 12-month price target is about $62.50. Using a three year time frame -- I can get as high as $85/share.
On a risk-adjusted basis, I believe WFC is one of the most attractive long positions in my portfolios.
Cashin Musings: FOMC, 10-Year, Trump
Midday musings from Sir Arthur Cashin:
Market meanders in front of the FOMC and press conference. Traders intrigued by the seemingly random air pocket down spikes in the S&P (suspect it could be caused by an algorithmic glitch).
Yield on 10-year pushing up against resistance (100 DMA).
Trump speech appeared to have no market impact.
Retail Hit
The retail space is getting hit hard now -- continuing the weakness that started yesterday afternoon.
A Tranquil Market of Historic Proportions
Regular readers of my diary know I sometimes post things that replicate the theme of the "Tell Me Something I Don't Know" segment on MSNBC's "Hardball With Chris Matthews."
So... "Tell me something I don't know, Dougie."
OK, here it goes:
According to Charles Bilello, the last five trading days have exhibited the most peaceful trading period in market history, with an average 0.24% intraday range in the S&P cash index.
As I have written it feels like a potential developing Minsky Moment!
Wells Fargo Hits One-Month High
Wells Fargo (WFC) hits a one-month high and I believe the best is yet to come.
I have been a consistent buyer and I would buy more under $52.
Amazon Slides Off Its Start
Amazon (AMZN) is down $8 from the morning's high, continuing the pattern set yesterday of rising early and then falling.
Shorting More SPY and Facebook
I have added to my large SPDR S&P 500 (SPY) short at $249.92 and I have increased to medium in size my trading short in Facebook FB at $171.65.
Quick Look at Bonds and Commodities
This morning the U.S. dollar is weaker as are bonds (yields one basis point lower).
The 2s/10s curve stands at a near yearly low of 83 basis points.
Meanwhile, the price of crude is up $0.38 and gold is up $3.
Ag commodities are mixed.
Amen, Brother
Input and response to my opening missive today (just below) from one smart investment cookie (a Grandma Koufax term) that you all know:
This is maddening to me too when people make this point: How can one say an asset class such as equities is inexpensive relative to an asset class such as bonds that most believe are inflated? Does this make any sense?
'The Brain' Was Great, but These Other Brains Drain Me
* Accentuate the positives and the negatives
"The money is the same, whether you earn it or scam it."
Late last week the World Wrestling Federation's Bobby "The Brain" Heenan passed away.
My two sons and I were big WWF fans. We attended both Wrestlemania I and Wrestlemania II. My boys literally learned to read by looking at the WWF magazines.
A high school dropout, The Brain started out as a wrestler but neck surgery ultimately kept him out of the squared circle.
The Brain managed the WWF's biggest heels, among them Big John Studd, Harley Race, Ric Flair, The Brooklyn Brawler, King Kong Bundy, Ravishing Rich Rude and Andre the Giant (whom he led to the ring at WrestleMania III). Along with Jim Cornette and Paul Heyman, The Brain was one of the three greatest wrestling managers of all time.
Over time, The Brain and Gorilla Monsoon became the most entertaining announcers in the sport. Their skits were hilarious; they had a natural chemistry. (They even were better than Jesse "The Body" Ventura and Vince McMahon, who were an outstanding announcing duo).
The 1992 Royal Rumble Match, in which Ric Flair outlasted Randy "Macho Man" Savage, British Bulldog, Rowdy Roddy Piper, the Undertaker, The Barbarian, Sgt. Slaughter and Hulk Hogan, was the best commentary of The Brain's career. It was special.
For those that pooh pooh The Brain as just another blowhard or character who came out of the World Wrestling Federation, you are wrong; he was the consummate entertainer who likely would have succeeded in any other entertainment venue.
And now the segue into some of my pet peeves...
This morning I woke up for the umpteenth time to hear, on CNBC from a guest, the continuing meme that the U.S. stock market has not incorporated tax reform and other Trump administration initiatives into its pricing. Over on Fox Business, I heard that stocks are cheap because of (and relative) to low-yielding bonds, which most admit are in a speculative bubble or at least are dramatically overpriced.
My responses?
* Please prove the statement that the market has not already incorporated tax reform and other initiatives in stock prices; it is not provable.
* Explain the confidence you expressed in that view with most valuation metrics now in the 97% decile?
* How can one say an asset class such as equities is inexpensive relative to an asset class such as bonds that most believe are inflated? Does this make any sense?
I also continue to be critical of the talking heads who talk with confidence, emphasize their winners and sweep their losers under the rug. This is a condition I see every morning.
"You've got to accentuate the positive
Eliminate the negative
Latch on to the affirmative
Don't mess with Mister In-Between"
--Johnny Mercer and Harold Arlen, "Accentuate the Positives"
This process -- accentuating the positives -- is what Harold Arlen and Johnny Mercer wrote in their song that was nominated for an Academy Award in 1945.
"To illustrate my last remark
Jonah in the whale, Noah in the ark
What did they do just when everything looked so dark?"
--"Accentuate the Positives"
To illustrate my last remark, talking heads who parade on Fox Business Network, Bloomberg and CNBC routinely conduct themselves as if Arlen and Mercer's words float right off the song pages into the business media.
It is now routine to forget the losers; the "smarty pants" (Grandma Koufax's demeaning term to describe phonies she saw in life) simply move on to the winners.
Remember yesterday's popular stocks, many that I have been short for a year or more, that were pushed by so many -- stocks such as Starbucks (SBUX) , Amazon (AMZN) , Disney (DIS) , Goldman Sachs (GS) , Ulta Beuaty (ULTA) , Chipotle (CMG) and others -- that have fallen on bad times? These stock no longer are seen anywhere in their public lexicon; instead, they are replaced with discussions only of today's winners (and ostensibly their holdings) -- e.g., Nvidia (NVDA) and other semiconductor stocks, Caterpillar (CAT) and other superior-performing stocks currently.
Moreover, many of those talking heads (I take Warren Buffett's advice here and name by category and not by individual) took the investing lemmings off the cliffs in early 2000 and in late 2007 by ignoring or failing to recognize the problems that were ahead. They have forgotten that bit of history, and apparently so have the commentators who interview them.
I wonder who these talking heads are fooling?
Bottom Line
"Gather 'round me, everybody
Gather 'round me while I'm preachin'
Feel a sermon comin' on me
The topic will be sin and that's what I'm ag'in'
If you wanna hear my story
The settle back and just sit tight
While I start reviewin'
The attitude of doin' right"
--''Accentuate the Positives"
They talk confidently and, typically, relay Group Stink (consensus thought).
They rarely qualify their answers even though, as I like to write, the only certainty is the lack of certainty.
And they certainly never say those three important words, "I don't know."
But, as I recently wrote, the nasty scent of group stink smells a lot like 2000 and 2007.
There are simply too many "brains" around today who accentuate the positives and de-emphasize the negatives and who present themselves as all-knowing but in actuality are disingenuous and rarely are confronted by their inquisitors.
Over here, in my Diary, I aim to be honest and transparent (though I may not always succeed). Win, lose or draw, you will see all my investment blemishes. And when I screw up I will admit to it.
"I've looked at clouds from both sides now
From up and down and still somehow
It's cloud's illusions I recall
I really don't know clouds at all."
--Judy Collins, "Both Sides Now"
My views, typically non-consensus, ursine and often critical, are hopefully different than the bullish pablum that permeates the media, investment sites and, of course, from the near-perennially optimistic Wall Street research houses. In doing so, I want to stray from consensus and often present a contrary viewpoint that is based on logic of argument and hard-hitting analysis.
I do this, in part, because I hope by delving into the downside as well as the upside I can help, in a small way, in making you a better investor.
This is basically a brief summary of how I have tried to provide value-added content to all of you in my Diary over all these years.
The Book of Boockvar
My friend Peter Boockvar, chief market analyst with The Lindsey Group, touches on investor sentiment -- a subject Rev Shark and I have been going back and forward on -- in his commentary this morning:
A day before the FOMC announcement, let's talk sentiment for a quick minute. Last Wednesday I included this commentary from Gallup which was in a release from the previous Friday: 'the Wells Fargo/Gallup Investor and Retirement Optimism Index rose to the highest level since September 2000. They referred to this as a "new surge of optimism among US investors." This is the key internal component for those who pay attention to sentiment and for those who think this is 'the most hated bull market': "68% now say they are optimistic about the stock market's performance during the next year, matching the record high for the question from December 1999 and January 2000." ' This was followed the day after with the AAII poll of individual investors which showed Bulls at 41.3, the highest since January and up from 29.3 in the week prior. Bears fell almost 14 pts to just 22, the least since April 2016. This past Friday in the UoM consumer confidence figure, 65% of those polled said the stock market will be higher over the next 12 months. That is the highest percentage since this question started to get asked in 2002. Lastly, after yesterday's close in markets the CNN Fear/Greed index finished at 80 which is considered in the 'Extreme Greed' category. One week ago it was Neutral at 53 and one month ago it was on the 'Extreme Fear' side at just 17.
Bottom line, on some of the above metrics, investors are more bullish ahead of the beginning of Quantitative Tightening than they were during Quantitative Easing. For the contrarians out there take note but I do have to say, QE came during times of more unease and closer to the financial crisis than we are now. Tomorrow we will see the weekly Investors Intelligence survey.
The German ZEW index which measures investor expectations of the German economy (as opposed to IFO which directly asks business) rose to 17 from 10. The estimate was 12 and comes after falling by 7.5 pts in September. The current outlook was up slightly at 87.9 from 86.7 and that is just below the best level in 6 years. The ZEW said "The solid growth figures in the second quarter of 2017 in combination with a steep rise in bank lending and increasing investment activities by both the government and private firms are likely reasons for the financial market experts' significantly more positive outlook compared to that of last month. Their expectations are further corroborated by stable global economic development. The German federal elections do not seem to have been a source of uncertainty. The worries about the recent strengthening of the euro has, for now, also faded into the background."
Bottom line, the German economy is of course a place of stability in the region but growth is still around just 2%. As for the market reaction, they don't move too much off confidence figures, especially a data point like this from investors that never tells us the degree of strength or weakness, only its direction. Of note, the improvement in the eurozone economy this year does remind us how out of whack ECB monetary policy is, especially with negative interest rates. The euro is higher while the DAX and bunds are basically unchanged.