3.23.14: Weekend Linkfest

Strange action in the markets last week, with Chairwoman Yellen being accused of a “gaffe” by some of the financial media, while I simply thought she was being honest. You would think that with all the weeping and gnashing of teeth over interest rates, the 10-year yield would have moved higher, but it didn’t, and it seems to remained contained within the range it has been in since the first of 2014. The SP 500 rose on the week, although the biotech’s (biowrecks ?) got crushed. When a leadership group like that gets taken out to the woodshed it gets your attention. We were long AMGN coming into 2014 and had been for a while, but sold our remaining shares at $123, which might look like a smart move. Far smarter than our sale of Sandisk (SNDK) at $71.

All the earnings reports last week were pretty decent in terms of guidance, with the possible exception of Nike (NKE) and that was currency-related. Oracle, Fed-Ex, Lennar and Tiffany’s were all pretty solid in terms of results and / or guidance.

With about 7 trading days left in the first quarter, the SP 500 looks like it will be +1% for the quarter, while the DJIA is down 1% – 1.5%. Lots of volatility but little change overall.

This fits with the 2-year Presidential Cycle pattern that was discussed here in mid-January ’14.

It still bothers me that January ’14 was negative for the SP 500 with -3.62% decline for the month. Remember, as January goes…


Ryan Detrick from Schaeffer’s Investment Research on buying climaxes. Bearish and worth watching.

Mike Goulavaris, a regular reader with a great chart of the Dow 30. Mike is bearish as well. This chart was a little old, but one he sent me Friday, I couldn’t cut and paste to this blog. To Mike’s credit, he said about a month ago he didnt know when the Dow 30 might cave, but he was negative. The Dow 30 is the worst performing index year-to-date, down 1% – 1.5%, while the SP 500 is up about 1%, and the Russell 2000 is up about 2%.

Biotech’s were absolutely hammered on Friday, and last week, and have been a leadership group. Here is another good article quoting Ryan Detrick. It is a good rationale for why we sold client’s AMGN, why we sold our IWM (Russell 2000 ETF), and why we are still long US Steel (X).

Speaking of the Russell, from what I read, the 4-quarter trailing P.E is 86(x). Contrast that with something Josh Brown wrote last week saying the SP 100 is trading at 14(x) earnings. Using the forward estimate, from our Weekly Earnings Update, the SP 500 is trading about 15.5(x) forward estimates for expected 7% – 8% growth, hardly screaming overvaluation.

Good column by Josh Brown on “What’s Working this Year”. The column was dated Monday, March 17th – wonder how it looks after Friday’s bloodletting in biotech ? Commodities, after being at the bottom of the relative performance charts the last three years, are looking much better, except copper. Alcoa (AA) looks like it is ready to break higher. US Steel (X) too.

Very interesting graph by Norm Conley of JAG Capital. I wonder if technology has something to do with this. Manufacturing continues to shrink as a percentage of GDP, but productivity continues to increase.

Dan Fitzpatrick, excellent technician, grows leery of the biotech sector after last week’s drop. Check out his weekend video.

From Bob Brinker’s twitter feed later on Saturday afternoon: Russia takes over Ukrainian Base. Well if you wanted a decent market correction, thank Putin. This clown is Saddam with a brain.

Incredible article from Crain’s Chicago Business on 3D printing. We are not long any DDD, but the stock has come down from $97 to $56. The stock is now trading below its 200-day moving average, and the October ’13 low was just a smidge below $50. Another drop of 7% – 10% depending on the volume. We’ve never owned DDD but after a 50% haircut in price, it is looking far more interesting. (None)

Todd Salamone from Schaeffer’s and a good technician in his own right on staying bullish amid volatility. Todd is writing about the Russell and SP 500 Mid-Caps bumping up against round numbers.

Ukarlewitz on the corporate high yield market. If there is ever a reason to worry about the SP 500, the warning will show up in credit first.

To conclude, every time we review the earnings data, it continues to buoy my attitude about the prospects for the market. The sentiment, caution and downright bearishness over any market setback is so not like the late 1990’s. We’ve avoided the hot groups, and rotated into sectors (very slowly) that look like they are technically basing, and might see fundamental improvement. Jeff Miller of a Dash of Insight routinely makes the weekly call and has a good feel for might be the topic du jour. We try and focus more on what sectors, stocks and areas look interesting. For us, commodities continues to be a relevant theme.

We have maybe 5% – 7% cash in client accounts, which I am ready to put to work on any volatility. I do think 2014 earnings will come in (again) better than expected in q1 ’14 and this year in total.

Thanks for reading. Blackhawk’s game tonight. Walgreen’s preview needs to be done tomorrow.

Trinity Asset Management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager







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