Mr. Sensitive

May 24, 2013

FSX Friday Update

Filed under: Uncategorized — lbej @ 16:40

It’s all about the Fed right now.  All.  About.  The Fed.  Anyone who says otherwise is full of crap, and suffice it to say that there are a lot of very vocal crap-sacks making the rounds.  Too bad for them that market isn’t listening.  These two paragraphs from Yahoo! Finance’s Market Update on Tuesday capture it perfectly:

The major averages rallied to their highs as Ben Bernanke’s prepared comments made the rounds. During his remarks, the Fed Chairman said premature tightening of monetary policy could stall the pace of recovery.

However, Mr. Bernanke did say the Fed could cut the pace of purchases in the next few meetings. This caveat resonated with the market as equities slipped from their early highs while Treasury yields jumped to fresh highs.

So the Fed giveth, and the Fed taketh away.  The reaction on Wednesday was even more pronounced, as renewed talk of the Fed ‘tapering’ bond purchases knocked the Dow down 300 points from its intraday highs.  I am sick and tired of the bulls’ oblivious argument that tapering or terminating QE won’t be a problem for the market because the Fed won’t consider tightening policy until economic growth has produced significant, sustained employment growth.  This is wrong and dumb, and the market itself is doing everything it can to tell you that tapering will be a huge problem, albeit perhaps only in the short-term.  What the bulls are doing is lumping financial asset prices and economic activity into one basket and declaring that if one’s great, so’s the other.  Asset prices are driven by sentiment, and the Fed has been the guarantor of bullish sentiment since the market bottomed in March 2009.  The bulls want you to believe that the market will make the instant, painless leap from ‘In Fed We Trust’ to relying on the economy alone to support asset prices.  That is, again, wrong and dumb.  The market can make the leap—don’t get me wrong—but it will be neither instant nor painless.  When the Fed decides to reduce its presence in the bond market, the stock market will correct sharply.  The market is making that crystal clear with its behavior this week and throughout the 2013 bull run, and investors ignore its warnings at their peril.  In fact, not all investors are ignoring the risk.  The VIX has been rising, however slowly, even as stocks have continued to climb steadily.  Why?  Investors are buying puts under the market while volatility is still cheap.  That means they aren’t selling their long positions—they believe in the market long-term—but they are buying derivative protection in anticipation of a short-term price shock.

The Family Stock Index reached a new all-time intraday high of 16,119 on Wednesday only to subsequently plunge 500 points in the next two trading sessions.  The FSX recovered slightly from its worst levels of the Friday session, closing down 1.8% on the week to 15,675.  It may seem strange, but this week’s action actually leaves me feeling more positive than last week’s series of record closes did.  It was real ugly this morning, with only three stocks up for the week, but as the day wore on more and more of us flipped from red to green.  Breadth was still lousy—18 decliners to 7 advancers—but it had been atrocious.  Friday afternoon reversals in Brinky, Nicole E., and even my own TGI provided unexpected boosts to the FSX, and Justin stole the show with a three percent pop in a flat market.  It looked for all the world like the FSX wanted to roll over this morning, so this afternoon’s relative strength was a pleasant surprise.

Advancers

  • Lucas (LEI) +3.9%.  Lucas was up 14% through yesterday as investors piled into LEI in celebration of the impending end of middle school.  Then the market remembered that only in Wytheville are they crazy enough to send kids to high school in eighth grade, so Lucas has to spend yet another year in the no-man’s-land of the educational process.
  • Justin (SCI) 3.2%.  Speaking of the educational process, isn’t it about time for Justin to go back to school to get another degree in a completely different discipline?  Why not try something meaty this time, maybe pick up a trade?  I’m thinking welding.
  • Icarus (FAST +1.6%), Zondro (ZQK +1.0%), and Wilson (WILC +0.3%).  When we discussed the bull market in dogs, Katie suggested I re-write Don Henley’s “Boys of Summer” as “Dogs of Summer,” which I agreed that I could totally do if not for needing to re-write several chapters of the Worst Book Ever for the umpteenth time.  Then Charlotte should do it, Katie argued.  Charlotte should write “Dogs of Summer,” record it, make a video of it featuring Zero and the cats, and YouTube that sucker.  Championship.
  • Brinkley (BCO) +0.9%.  Brinky’s decided to bypass talking and go directly to reading.  Earlier this week I asked him to bring me a book, and he actually found a book and brought it to me.  Maybe you think that’s not a singular performance for a two-year-old, but this particular two-year-old typically doesn’t do requests.  Later in the week Katie found him sitting on his mattress reading a volume of the collected works of William Blake he’d taken off the bookshelf.  If it were me, I’d probably start with Mother Goose and work my way up to Blake, but what do I know?
  • Lee (TGI) +0.7%.  I don’t know anything about anything is what.

Decliners

  • Jenny (JNY) -2.7%.  Jenny knows all too well how generally useless I am as a font of relevant knowledge.  Now that she’s reading Fellowship of the Ring she’s discovered that there is one thing on which I am extremely well-versed, and that’s the history of Middle-Earth.  I suspect she may already be regretting her discovery.
  • Dustin (DST) -4.4%.  They say that once you golf in Hawaii, you never go back.  Except then they also say you have to go back because you have a non-refundable plane ticket and you live in Blacksburg, not Hawaii.  So that sucks.
  • Ed Winston (ED) -3.5%.  They say once you wake up a sleeping baby by yelping or yipping for no good reason, you never go back.  Also you get the tar kicked out of you.
  • Ruby (RJET) -4.7%.  They say once you lift Brinky, you never go back to being able to stand up all the way.  By they, in this case, I mean me.
  • Charlotte (ICE) -5.5%.  Better get to work on that “Dogs of Summer” video, Sis.  Zero’s not getting any younger.
  • Marcus (MCS) -5.8%.  Once school’s over, do you think Jodi Ann will make Marcus dress like a butler and serve her croissants and chilled water every time she rings a bell?  If not, why not?
  • Reagan (REGN) -6.2%.  Do you know anyone who needs a checklist just to remember to flush the toilet?  Nope, me neither.
Name Ticker 5/24/2013 Change
Brinkley BCO $27.23 +0.25
Charlotte ICE $167.66 -9.75
Dustin DST $68.19 -3.17
Ghost Marisa MOLXA $24.74 -0.59
Icarus FAST $51.91 +0.81
Jenny JNY $14.71 -0.41
Jodi Ann JOY $55.42 -1.32
Justin SCI $17.82 +0.55
Katie CATY $20.37 -0.26
Lee TGI $75.01 +0.49
Lisa LNCE $26.43 -0.29
Lucas LEI $1.32 +0.05
Lulu LULU $78.89 -2.16
Marcus MCS $13.23 -0.81
Mario T.E. MGEE $55.70 -1.03
Mario T.Y. MAR $42.77 -0.96
Namilita NL $11.71 -0.15
Nicole E. NICE $36.57 -0.06
Nicole M. COLM $59.25 -1.24
Reagan REGN $250.31 -16.66
Ruby RJET $10.44 -0.52
Wilson WILC $6.95 +0.02
Winston ED $58.66 -2.13
Zero ZAGG $5.02 -0.01
Zondro ZQK $7.76 +0.08
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