Mr. Sensitive

June 29, 2013

FSX Friday Update

Filed under: Uncategorized — lbej @ 11:27

The market seemed prepared to continue its taper-tantrum this week, as worries about U.S. monetary policy and a nasty overnight plunge in Chinese stocks caused the Dow to open Monday down over 250 points.  But as the day wore on, buy-the-dip investors—unexpectedly AWOL last week—returned in force, and the stock market rallied as a result.  The Chinese Communists were able to calm the markets by insisting they are tightening credit selectively in order to reign in the country’s elaborate shadow banking system, and that the People’s Bank of China can and will provide liquidity to whatever extent might be necessary to ensure stability.  More importantly, the many mouthpieces of the Federal Reserve went on a barnstorming tour (of really boring places) to stamp out erroneous market expectations spawned by last week’s policy pronouncements.  As you recall (ha!), last week Ben Bernanke told the markets what they already knew, namely, that if the performance of the economy matches Fed projections over the next several months, the pace of quantitative easing could be reduced later in the year.  Bernanke distinguished between quantitative easing—the unprecedented bond-buying program being used to keep long-term interest rates low—and the Fed Funds rate used to set short-term rates and balance inflation against economic growth under normal conditions.  QE became necessary because the collapse of the housing bubble and the 2008-2009 financial crisis did extraordinary damage to the economy, and extraordinary measures were necessary to prevent a deflationary spiral and a second Great Depression.  Bernanke is now telling the markets that he believes this risk has been largely contained, and if the evidence continues to support that conclusion, the extraordinary measures taken to avert disaster can be curtailed.  He insisted that the Fed Funds rate is an entirely separate matter, and that it will remain at or near zero for a long time to come.  Despite that, long-term rates spiked last week and traders began to price in a Fed Funds rate hike in 2014.  This week’s powerful equity rally was fueled primarily by Fed officials’ repeated insistence throughout the week that a Fed Funds increase in 2014 will not happen.  No one said it will not happen—they can’t see the future, after all—but they did everything but say it, and everything-but was more than enough.

So is it safe to buy stocks again after last week’s rout?  Nope.  Friday was the last trading day of the second quarter, and vacation season is about to really get underway.  That means lower volume and a lessening of market depth that will exacerbate price swings over the next two months.  When Q2 earnings hit next month, that’s the thin market they’ll hit in, and it’s no place for long-term investors.  If you can’t get in and out quickly—and you can’t—your best bet is to stay market-neutral through August.

The Family Stock Index outperformed the S&P 500 for the second straight week, rising by 1.6% to close at 15,327.  This week’s gain allowed the FSX to finish the second quarter in the green, albeit with a market-lagging 0.3% three-month gain.  Our technical position has improved this week, as well.  After closing below 15,000 on Monday, the FSX regained that critical level on Tuesday and held it for the rest of the week.  We also notched two straight closes above the 100-day moving average on Thursday and Friday, suggesting that the intermediate-term bull trend is still intact.  We need to get back above the 50-day to reestablish momentum, but the technicals are no longer deteriorating.

I’m sure you were all worried.

Advancers

  • Zondro (ZQK) +7.2%.  Zondro made it through the week without Jenny and Reagan—the dog crates are in the girls’ room—even though we didn’t leave the TV on at night for him and the little fat one like we have when the girls have been gone in the past.  The times that it seems that he’s a pretty good dog are gradually outnumbering the times it seems that he isn’t.  The same can’t be said for his insane compadre, Wilson.
  • LULU +5.8%.  The less said about the stupid cat, the better.  She rallied this week despite still having no replacement for her ‘retiring’ 51-year-old CEO.  It’s been rumored for years that Nike should/will acquire Lululemon, considering that Nike has a keen interest in expanding into yoga wear, a market segment dominated by LULU.  But the stock’s relentless climb–$20 in 2010, $40 in 2011, $80 in 2012—has lessened the chances of a takeover.  Now that LULU is trading 20% below its highs and appears (temporarily?) rudderless, the speculation has picked up again.  Nike would probably have to pay upwards of $100 a share to get a deal done, valuing the company at $15 billion.  On the other hand, I’d take $100 for my Lulu, with no messy shareholder vote or antitrust review.  Phil Knight—call me.
  • Zero (ZAGG +4.7%) and Charlotte (ICE +3.0%).  They survived The Vampire Diaries; can they survive Crazy Random Question Time?
  • Reagan (REGN) +4.4%.  Crazy Random Question Time isn’t a show, but it really should be.  The world needs to know about Reagan.
  • Justin (SCI) +3.8%.  Justin and Nicole sent me some eBay money for my birthday, and this is what I bought.

ebas

They are obviously great patrons of the arts.

  • Mario TY (MAR 3.7%) and Katie (CATY +3.2%).  The latest season of Mad Men is over, and Katie and Mario managed to survive the depredations of Dong Draper without being bored to death.
  • Winston (ED +3.4%) and Nicole M. (COLM +1.8%).  Second-hand Mad Men isn’t usually fatal, but its stultifying haze lingers longer than the unwary might expect.  I believe I may have lapsed into a coma once or twice while Katie marathoned it during her last maternity leave.

Decliners

  • Marcus (MCS -0.9%).  So Marcus and Jodi Ann are having a girl.  The market seems slightly disappointed that there will not be a little Demarcus joining the FSX, at least not yet.  All this reaction proves is that the market has not spent all day, every day, trapped in a house with a two-year-old boy, and should really shut up about things it doesn’t understand and horrors it can’t possibly fathom.
  • Jenny (JNY -1.1%).  Jenny was bad when she was a toddler, don’t get me wrong.  But she mostly kept her badness to herself, destroying toys, books, and clothes in relative quiet and contentment, something I failed to appreciate at the time.  It was infuriating to have Jenny mistreat her things, but at least she left my things alone.  Brinky believes he knows what must be done with everything in the house.  There are many examples.  The cough drops I have on my nightstand must be placed, one by one, in my bed, where they must remain, forever, under penalty of fit-pitching.  The silverware does not go in the silverware drawer, as I previously believed, but instead must be arranged artfully on the opposite kitchen counter or possibly on a stool.  And of course, drawers and doors must never be left open for any period of time, and I have no one to blame but myself for my inability to get food out of the refrigerator and clothes out of the dryer without opening either appliance.  None of this bothers Katie, of course, because Brinky is her sweet, baby boy.  Whereas if Jenny sends a text message with a dismissive tone (?) and bad grammar, it’s not funny (as I think) so much as it’s the worst thing in the world.

jentext

There’s something to be learned from this parental juxtaposition.

  • Jodi Ann (JOY -3.5%).  I expect little Josephine to educate her parents herself in a decade or so, probably with a dismissive tone and bad grammar.

 

Name Ticker 6/28/2013 Change
Brinkley BCO $25.51 -0.18
Charlotte ICE $177.76 +5.20
Dustin DST $65.33 +0.47
Ghost Marisa MOLXA $24.86 +0.31
Icarus FAST $45.79 +0.72
Jenny JNY $13.75 -0.15
Jodi Ann JOY $48.53 -1.77
Justin SCI $18.03 +0.66
Katie CATY $20.35 +0.64
Lee TGI $79.15 +0.30
Lisa LNCE $28.41 +0.46
Lucas LEI $1.29 -0.01
Lulu LULU $65.50 +3.60
Marcus MCS $12.72 -0.11
Mario T.E. MGEE $54.76 +1.38
Mario T.Y. MAR $40.37 +1.44
Namilita NL $11.30 +0.17
Nicole E. NICE $36.89 +0.31
Nicole M. COLM $62.65 +1.13
Reagan REGN $224.88 +9.41
Ruby RJET $11.33 -0.08
Wilson WILC $6.86 +0.04
Winston ED $58.31 +1.92
Zero ZAGG $5.35 +0.24
Zondro ZQK $6.44 +0.43
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