Mr. Sensitive

December 14, 2012

FSX Friday Update

Filed under: Uncategorized — lbej @ 17:39

Oooh, uncertainty.  Oooh, fiscal cliff.  Investors must be panicked, right?

The Dow was down 20 points this week.  Not percentage points—index points.  As in, closed last Friday at 13,155 and closed this Friday at 13,135.

Oooh, boredom.

We’ve got two canards being repeated ad nauseum in the financial press this month: first, that the market hates uncertainty; and second, that there’s an incredible amount of uncertainty surrounding the resolution of the so-called fiscal cliff.  Can you guess how many of these pearls of wisdom are, in fact, dried-up dingleberries of wisdom?

Both of them, of course; why else would I phrase it that way?

I’ll take them one by one.  First, the market hates uncertainty.  Investors hate uncertainty; I’ll give you that one.  By investors, I mean people who put money into certain assets anticipating a long-term, reliable rate of return.  If there were only investors buying and selling stocks, the uncertainty trope would be fair.  But there are also traders, hedgers, speculators, and straight-up gamblers.  Some of those folks in fact need uncertainty to drive value in their portfolios.  Option traders, for example, can’t live without uncertainty because it creates volatility, and volatility is the most significant input to most option pricing models.

Second, the fiscal cliff.  The market is completely over it.  As I see it, the stock market expects the following: tax cuts for the bottom 98% of Americans, with the rates on the top 2% reverting to pre-Bush levels; divided and capital gains taxes reverting from 15% to pre-Bush levels; no defense spending sequester.  That’s what the two parties are in a position to get done, albeit probably not until January.  If something significantly better and/or worse happens before the end of the year, the markets will certainly react.  The lack of volatility tells me no big bets are being made in any direction.

The Family Stock Index was also flattish on the week, closing down 0.3% to 13,245.  The big news is that, unlike the broader market averages, we felt the force of the fiscal cliff in a major way.  If there’s one clear impact the fiscal cliff has made on the markets, it’s the mad rush by corporate boards to pay out special dividends to shareholders ahead of the anticipated increase in dividend tax rates next year.  For example, Sheldon Adelson’s Las Vegas Sands just paid a huge special dividend, $1.2 billion of which went to Adelson himself.  Well, Marcus got in on the act this week, paying a $1 special dividend.  When a stock goes ex-dividend (payout and holders of record then are locked in) the price is lowered by the amount of the dividend, but because it’s a return to shareholders, it’s not treated as a decline in the price.  Thus the stock price is lower but the stock hasn’t declined.  Clear as mud, right?   Ordinarily, I don’t adjust FSX component prices for dividends because the amount of the dividend is negligible in relation to the stock price.  In this case, Marcus paid out 8% of his capitalization and MCS opened $1 lower when it went ex-dividend on Wednesday.  Suddenly a $12.25 stock was $11.25.  I decided that it was unfair to punish the entire family just because Uncle Scrooge McMarcus can afford to blow $20 million, presumably on freeze pops.  Thus I will be adding back the $1 dividend to the price of MCS for the remaining few trading sessions of the year, after which point the rebalance will render the point moot.

The argument could be made that I’m systematically understating the return on the FSX by not accounting for dividends.  To make that argument, though, you’d need to have read the entire preceding paragraph, and why on earth would you want to do that?

Advancers

  • Jodi Ann (JOY) +7.3%.  I was going to say something about Jodi Ann’s special-dividend windfall, but when I asked Katie if she had any tips on the action in JOY, she had this to say: Jodi Ann’s a cool person who had a Pinterest success; a crafty one, too.  I have no idea what that means, but who am I to argue with the market?
  • Nami & Lita (NL) +7.2%.  As much as Charlotte luuuvs animals, these two have to be the safest cats in the world; there’s always demand for safe-haven investments.  I bet Charlotte would jump in front of a bus for her kitties, and it should surprise no one that the market is taking notice.
  • Marcus (MCS) +3.8%.  Freeze pops can be tough to track down in December.  Of course, with $20 million in his pocket, Marcus can have his freeze pops imported.  Heck, he can buy them in Australia, have them flown to Antarctica to freeze, and then delivered to his door.
  • LULU +2.8%.  Lulu’s fattening up again; is it sad that I consider that a good sign?
  • Lee (MSTR) +2.8%.  In May of this year, I traded up to $160 on the market’s ebullient response to the completion of the first draft of my book.  What was particularly impressive was the manner in which I laid out a realistic plan and executed on it.  Investors who’d driven MSTR up nearly 50% in four months presumed I would handle the second draft with similarly efficient aplomb.  I assumed I could wrap it up by October.  I was a fool, and MSTR at $160 was fool’s gold.  I decided to go through the first draft and mark up a print copy, thinking I could then simply(!) make the changes to the Word doc.  In retrospect, I see that it was a terrible plan.  Not only did it take me far longer to finish the mark ups than I expected, and not only did I end up making cuts, changes, and additions far beyond what I had anticipated, but now that I’m making the changes in Word, I find I’m re-reading and re-writing the whole thing all over again, again.  The first draft was right at 144,000 words; this draft is on pace to top out above 210,000, and I’m not expecting to finish before April 2013.  That’s ridiculous, and the market punished me savagely.  After MSTR traded below $84 last week—a nearly fifty percent retracement—I might be stabilizing.  So would I, as a former investment professional, suggest investing in me, as a writer?  Certainly not yet.  There should be plenty of time to get in if I turn things around, and I’m afraid the risk is still to the downside.

Decliners

  • Charlotte (ICE) -2.2%.  I bet Charlotte would jump in front of a bus for her kitties, and it should surprise no one that the market is taking notice.
  • Wilson (WILC) -1.5%.  No one’s jumping in front of a bus for Wilson.
  • Jenny (JNY) -3.8%.  Only Lucas (-38%) and yours truly (-32%) have fallen further than Jenny (-15%) this quarter.  It’s no coincidence that two of the three laggards are in middle school, and some might argue I never fully escaped.
  • Nicole M. (COLM) -4.8%.  Nicole can’t go to Mario’s special work bowling Christmas party (maybe Katie said it was a Christmas work bowling party, I don’t know).  I’m sure Nicole is sad.  Unless she can go to the bowling work Christmas party; Katie wasn’t sure.  But then again, she might be sad about that, too.
  • Zondro (ZQK) -16%.  The only question here is whether Zondro is more likely to run in front of a bus than I’m likely to throw him in front of one.

 

Name Ticker 12/14/2012 Change
Brinkley BCO $28.27 -0.24
Charlotte ICE $127.90 -2.82
Dustin DST $61.11 -0.83
Ghost Marisa MOLX $26.70 -0.30
Icarus FAST $43.12 +1.00
Jenny JNY $10.88 -0.43
Jodi Ann JOY $61.64 +4.21
Justin SCI $14.34 +0.09
Katie CATY $17.88 +0.14
Lee MSTR $91.00 +2.44
Lisa LNCE $23.82 -0.43
Lucas LEI $1.41 unch
Lulu LULU $74.55 +2.02
Marcus MCS $12.71 +0.46
Mario T.E. MGEE $50.65 +0.03
Mario T.Y. WMAR $10.35 +0.07
Namilita NL $11.18 +0.75
Nicole E. NICE $33.55 -0.15
Nicole M. COLM $53.79 -2.71
Reagan REGN $179.71 -1.16
Ruby RJET $5.74 +0.06
Wilson WILC $4.70 -0.07
Winston ED $56.12 +0.09
Zero ZIP $8.41 -0.01
Zondro ZQK $3.54 -0.66
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2 Comments »

  1. Aw, I totally would jump in front of a bus for my kitties. I would also survive because their ancient feline superpowers would be transferred to me in the moment of my sacrifice.

    Comment by Sis — December 15, 2012 @ 15:02 | Reply

    • Unless they’re playing with a piece of lint at the time and don’t notice the sacrifice. It’s a real attention-span crap-shoot with cats.

      Comment by lbej — December 15, 2012 @ 15:56 | Reply


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