Memorial Day Weekend “Linkfest” Worth A Look

A photo that never ceases to choke me up. The only picture I’ve ever seen reminiscent of this, is JFK Jr. saluting his Dad’s casket and caisson. This woman’s grief is palpable, captured perfectly in one photo that requires no explanation. This is probably a good opportunity to remember and thank all those veterans who’ve died in combat, regardless of which war it was. I’ve always felt the Korea and Vietnam vets got the worst of the of the deal. Korea vets because the Korean war followed WW II, and was much smaller in scope, and – well – the Vietnam guys were treated so horribly upon their return to America. It was shameful. My older brother almost went to VietNam, (I remember the day we drove up to the local drugstore together, to get the newspaper to check where his birthday fell in the draft lottery. Fortunately, he was way down the list and was never called. This was 1967, or 1968.) I had many older cousins who served in ‘Nam. Some came out ok, some didn’t. Horrible war. I remember watching the the collapse of Saigon on TV, and the South Vietnamese clinging to chopper rails as the US helicopters tried to lift off the roofs.

Back to the markets:

From Josh Brown’s blog, The Reformed Broker (@reformedbroker) this was found from JC Parets, on the continued illusion of rising rates. JC is a pretty good technician, but lets loose with a screed on how interest rates may not rise all that much. His great point from the article was the question, “Why does it (i.e. the 35 year bull market in bonds) have to reverse overnight ?” I’m leaning bearish on rates again, which is always painful. The big issue today is “liquidity” – like blood pressure, liquidity seems to be the silent killer. I don’t know how to protect clients from that risk other than being in cash / money markets. Personally, I use 2013 as my analog, which saw credit spreads widen despite a strong stock market and the bottom fall out of muni’s thanks to the Detroit bankruptcy. The point is that the bottom fell out of both high yield corporate and high yield muni very quickly in 2013, despite the strong US stock market and a decent economy. It is very tempting to take all fixed-income allocations to cash simply because illiquidity is an undefined risk. Simply thinking out loud.

Another solid Josh Brown link on the SP 500’s P.E, and the absence of a meaningful correction in the SP 500, something I’ve been emailing clients to expect. The thing is, the SP 500’s P.E does not look that bad, given this link from this blog on SP 500 earnings, both Ex-Apple and Ex-Energy. I thought these metrics from Fundamentalis.com would stimulate some discussion, but no such luck. (Long AAPL and some allocation to Energy today).

On the flip side of the interest rate story, here is a chart from Norm Conley’s twitter feed on the 10-year Treasury yield breakout. A trade over 2.33% is my key technical level. Norm looks to be posting less and less on Twitter. Reach out to him at @Jag_Norm and let him know his work is very good. Those who use Twitter for Street research from insightful investors like Josh Brown, need to follow Norm as well.

A link from U. Karlewitz or UrbanCarmel on the SP 500’s shrinking volatility. Look for a bigger move, could be either way,  possibly sooner rather than later ? Most prognosticators leaning bearish, expecting the long-awaited SP 500 correction. Reading Bespoke’s sentiment data this weekend, the data as a contrarian indicator is leaning bullish. That means bullish sentiment (or those expecting the stock market to continue higher) is negative and well below average.

Another interest rate opinion/link picked up from UKarlewitz’s blog: Commercial traders (COT report) have flipped from short to long now. This is very interesting – universally bearish rate forecasts (see JC Paret’s article above) for years following the ’08 Crisis and now the professionals are all bullish bonds. Remember, trends always change, and traders can be right for years, and then all of a sudden be very wrong (March of 2000).

This Week on Wall Street (@garysmorrow and Doug McKay) on the Dow divergence with Transports. Doug McKay also notes the VIX testing support.

Chart from @soberlook on inflation potentially creeping back into the picture. An “advisor group” I belong to with Jeff Miller, the excellent blogger at “A Dash of Insight” and Rob Martorana, my former editor from TheStreet.com days in the early 2000’s, conducts conference calls every month or so on topics of interest to us as investors, analysts and PM’s, and this week we will be talking about “inflation”. Rob does a lot of work to prepare for these calls. We talk about everything from using cash, to inverse ETF’s to options in client portfolios (which is the better hedge ?) to econ data, to valuable research tools (like Bespoke, etc.). It is a good group, very informal. “Inflation”, measured so many different ways, may not yet be as dead as we think. The Core CPI released on Friday, May 22nd was +0.3%. Health Care inflation rose +0.7%.

Blaine Rollins of 361Capital writes one of the better weekly blog posts that is usually published on Monday nights, chock full of graphs and charts. This post from the 361 Capital’s twitter feed on Friday, looks at the new all-time high list. With the SP 500 challenging an all-time high this week, but not really breaking out like you’d want to see it, monitoring the “new all-time highs” list like this one, helps me monitor what I could own to insure keeping up with the SP 500. Not a surprise that Health Care continues to lead the list.

Per Briefing.com and using the SPDR sector ETF’s here is how 10 SP 500 sectors have performed year-to-date:

  • Health Care +10%
  • Consumer Disc +7%
  • Technology +6%
  • Basic Mat +5%
  • Cons Spls +2%
  • Telco +2%
  • Financials +1%
  • Industrial’s +1%
  • Energy +1%
  • Utilities -6% (yowser)

 

Apple (AAPL) would break out if it trades above the April 28th, 2015 $134.54 high. Could be why the SP 500 is struggling and the Street seems to have turned bearish. Leadership stocks need to lead.

Final note: Costco and Tiffanys are two of several retailers that report this coming week. Toll Brothers (TOL) also reports. United Natural Foods (UNFI) is a bullet-maker in the very large shooting war that has become the specialty grocery space, which has hurt iconic brands like Whole Food (WFM). (long small positions in COST, TOL and a bigger position in WFM). Retail has been beyond ugly, and a little core inflation could help the retailers dramatically.

 

 

 

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