Mr. Sensitive

May 10, 2013

FSX Friday Update

Filed under: Uncategorized — lbej @ 16:49

Another week, another parade of new highs for the major stock market averages.  I don’t know when this rally will end, but I know it will end badly when it does.  The economy may be improving—and I believe it is—and stock valuations may not be nearly as stretched as they were at previous market tops, but it won’t matter.  The Federal Reserve is driving this equity bull market, period.  The Fed is spending $85 billion a month buying bonds; thus there is always a bid in the bond market regardless of the piddling rates bonds now pay; thus the Fed is crowding out any and all investors who want to buy bonds for the interest income; thus investors looking for returns (i.e., everyone) have no place to go but equities.  What else can you do?  You have to have large amounts of excess capital to buy real estate, so that’s off the table for most folks.  Commodities—another option—are in a grinding bear market and don’t provide interest or dividend income to cushion the price declines.  It’s stocks or nothing, so as long as the Fed is distorting the bond market, stocks will rally.  This is the reason stocks are rallying, and once the Fed slows the rate of bond-buying, the S&P 500 will drop ten to twenty percent, no matter what the economy is doing.  If the Fed shuts down quantitative easing altogether, it’ll be more like 30 percent.  If the Fed actually gets worried about inflation and raises short-term rates, we’re looking at a 50% drop.  I’m not saying that investors won’t rediscover fundamentals after the rout is over, or that stocks won’t subsequently regain much of the ground they lose—that will depend on the state of the economy and the effect the rout has on investor psychology.  But make no mistake: there will be a rout.  Bernanke’s grand plan to stimulate the economy may work, and it may not; if it works, the labor market will improve and GDP will rise—and the market will crash anyway.  Maybe Bernanke accepts a crash in financial asset prices as the cost of reviving the real economy—that seems possible.  If that’s his thinking, he certainly can’t say so.  It would be nice if he could get some help from our elected officials, but I doubt he’s holding his breath.  In fact, if the Republicans make gains in next year’s midterms, that $85 billion a month is more likely to go to $185 billion than to $0.

The Family Stock Index lagged the broader market this week…at least until Jenny and Reagan decided they’d had enough of the shameful lollygagging and subsequently drove us to a new all-time high within sight of 16,000.  For the week, the FSX added 2% to close at 15,812, with more than half of those gains coming on Friday.  Internals were much improved: advancers outnumbered decliners by a 4-to-1 margin and five FSX members notched fresh 52-week highs.  Should we be trading at 20 times forward earnings?  Heavens, no.  So either earnings estimates are too low (yay!) or stock prices are too high (boo!), and I believe we’ll know which it is by the end of next month.

Advancers

  • Zondro (ZQK +9.7%) and Icarus (FAST+6.1%).  In the broader market we’re beginning to see a rotation out of the rally’s early-stage leaders (pharma, consumer staples) and into sectors that have thus far lagged (industrials, tech, financials).  Could we be on the verge of a similar rotation out of fast dogs and into slow dogs?  Looks like investors aren’t selling speed this week, so it’ll take new money to move the less-athletic canines of the FSX.
  • Jenny (JNY +5.6%.) and Reagan (REGN +2.8%).  Last night we watched old YouTube videos of Reagan and Jenny performing Rilo Kiley, Cheetah Girls, and High School Musical songs, circa 2008.  I’m not sure how that came about, but it did remind me of something my daughters sometimes forget: they’re best friends, and they have been since Reagan was born.  It’s pretty awesome.
  • LULU +5.3%.  Lulu was the worst performer in the FSX last quarter, but a furious six-week rally has taken her from -18% on the year to +6%.  I should be happy for her.  I’m not.
  • Lisa (LNCE) +5.2%.  Lisa’s going to Hawaii, and that’s the sort of thing that people really enjoy, or so I’m told.  As for me, I’d like to visit the U.S.S. Arizona memorial, absolutely, but that’s about it, and there are a lot of sharks between here and there.
  • Marcus (MCS +3.8%) and Jodi Ann (JOY +3.6%).  That first ultrasound image of your baby is exciting, sure, but one day you’ll look at the calendar and realize you’ve only got a year left to finish the basement you promised her she could move into when she turns thirteen.  What will you do then, I wonder?  Seriously, if you’ve got any idea, I’m listening.

Decliners

  • Mario the Elder (MGEE -0.8%).  Grandpa’s hitting the gym, trying to get ready for Brinky’s first visit to Hilton Head.  It won’t be enough.
  • Ruby (RJET) -3%.  Boo-boo’s planning to go to Brinky’s gymnastics class tomorrow, so she’ll find out what drove Grandpa to try and up his reps on the bench press: Brinky’s a lot stronger than he looks, and he looks pretty darn strong.
  • Winston (ED -3.3%) and Wilson (WILC  +0.1%).  Nope, no new money here.  The slow-dog sector of the FSX still has a lot of catching up to do.

 

Name Ticker 5/10/2013 Change
Brinkley BCO $26.70 +0.26
Charlotte ICE $172.10 +0.08
Dustin DST $70.09 +0.73
Ghost Marisa MOLXA $24.98 +1.10
Icarus FAST $50.78 +2.92
Jenny JNY $14.34 +0.76
Jodi Ann JOY $59.71 +2.08
Justin SCI $16.95 +0.21
Katie CATY $20.03 +0.26
Lee TGI $73.83 +2.44
Lisa LNCE $26.68 +1.31
Lucas LEI $1.26 -0.04
Lulu LULU $80.41 +4.05
Marcus MCS $13.52 +0.50
Mario T.E. MGEE $55.02 -0.47
Mario T.Y. MAR $43.97 +0.96
Namilita NL $11.54 +0.13
Nicole E. NICE $36.46 +0.41
Nicole M. COLM $59.52 -0.73
Reagan REGN $273.50 +7.34
Ruby RJET $11.00 -0.34
Wilson WILC $6.85 +0.01
Winston ED $61.57 -2.09
Zero ZAGG $5.24 +0.24
Zondro ZQK $7.36 +0.65
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