Mr. Sensitive

December 13, 2013

FSX Friday Update

Filed under: Uncategorized — lbej @ 19:35

S&P 500 -1.6%.

FSX -2.4%.

The Volker Rule was passed this week, the government sold the last of its stake in General Motors, headline economic numbers continued to trend upward, and a budget deal reached between Democrats and Sith Lord Ryan appears likely to avert a government shutdown in the near future.  The crisis that began in earnest with the collapse of Lehman Brothers five years ago has passed—or so says everyone.  Among retail investors, bulls outnumber bears 4-to-1, and good luck finding a pundit to tell you that a pullback in stocks is anything other than a buying opportunity.  And yet the market has spent all of this week and most of last week in retreat from its recent all-time highs, even as the pundits promised a Santa Claus rally driven by index-lagging fund managers chasing performance into year-end.  Do savvy investors know something the pundits don’t?

Yes, obviously.

This market is expensive.  Even if we ignore the gargantuan economic imbalances that have been drowned in the sea of QE (rising poverty and widening income inequality, accelerating currency wars among the great powers, transfer of industrial capacity to Communist China) and take profits generated by corporate America at face value, the market is expensive at 18 times trailing earnings.  That P/E is above the high end of the historical valuation range, and in a period of revenue stagnation and single-digit EPS growth driven primarily by share buybacks, it makes no sense whatsoever.  Price matters, and U.S. stock prices are too high.  Can the market rebound from here?  Yes, it can.  Can we make new highs?  Absolutely.  But ultimately, price matters.  Millions of homeowners learned that the hard way when the housing market cratered.  The last time we saw this level of bullishness was 2007, and everyone remembers what happened next…don’t they?

This is not a market timing call.  When this market falls, it won’t be because it’s overvalued.  Valuation didn’t drive the market up, and it won’t drag it down.  Why does it matter?  Because when the bullish sentiment reverses and the bubble bursts, it will happen at levels that are 30 to 70 percent above levels that value investors will find compelling.  That means the market will hit an air pocket and can gap down from the point at which momentum investors sell to the point at which value investors buy.  That’s how a huge downward move—think 3000 points on the Dow—can take place over just a few weeks.  In a normal market in which value investors haven’t been long ago priced out, those investors will start nibbling when stocks pull back five to ten percent, provided price support.  That doesn’t happen when a bubble bursts.

Katie picking up now: I agree with what he said. So on to the people!

Advancers (new highs for Nicole M., Charlotte and Dustin; Jenny’s being sold)

  • Jenny (JNY) +4.3%. Apparently Jenny’s being sold. Because she’s super smart! She got super-awesome scores on last year’s end of grade tests. Communication from the schools were warning us that scores would be much lower because the test changed last year, but not for Jenny (or for Reagan, but I’m not talking about her right this second). So we’re taking suggestions on stocks for Jenny if you have any.
  • Nicole M. (COLM) +2.4%. Maybe a baby name will soon be chosen. If you’re wondering about opinions from here, I think Andrew is fine. Lee likes Leo, short for Leopold. The girls like Roman.
  • Dustin (DST) +1.6%. Dustin’s steadily increasing, so turning 39 hasn’t slowed him down any. I think getting old maybe improves your golf game.
  • Charlotte (ICE) +1.0%. Straight A’s on final exams, I assume!

 

Decliners

  • Lee (TGI) -2.8%. The eye of Reagan staring at you all day could bring you down. Perhaps it’s time to rearrange the furniture in the office?

eye

  • Lisa (LNCE) -3.8%.The freezing cold winter blues have arrived, but we can hope it will be a short winter.
  • Justin (SCI) -4.2%. The visit to our house was too short for tons of super fun times. Maybe next time he can go to the park with us too.
  • Katie (CATY) -4.2%. Last night the girls and I sang Brinky to sleep with several random night time lullabies. There were two problems with this plan. One, I must accept that I can’t sing. Two, it doesn’t actually put him to sleep. So I’m thinking we need to come up with a new approach.
  • Brinkley (BCO) -4.4%. Um, he really needs more sleep. He’s back to being generally unwilling to go to sleep when we put him to bed.
  • Jodi Ann & Josie Ann (JOY) -4.4%. But if I had to guess, I’d say we’re probably getting more night time sleep than the two JAs.
  • Reagan (REGN) -4.7%. Have we told you the saga of Reagan and the vest yet? It’s making her life so hard. She got a puffy vest, something she’s apparently been wanting for months. But now she won’t take it off. Like, ever. She keeps it on and buttoned up to the top all day, every day, even when she’s eating. She wears it with jeans or regular pants during the day, comes home, switches out her pants for pajama pants and keeps the fleece sweatshirt/vest combo on. This can’t go on indefinitely because it gets really gross and food covered, so we have to periodically force her to take it off and allow us to wash it. She may need a second vest because this one is causing too much stress.
  • Charlotte’s cats (NL) -11%. Study time probably reduces cat love time a bit. Hopefully they’re being patient and can look forward to snuggle times with Charlotte during her school break.
  • LULU -15%. That fat cat has slept in our bed a couple times again recently, instead of with Brinky. I understand why our bed might be more appealing because we don’t try to sleep on top of her, completely smushing and smothering her. But, honestly, I don’t want her in our bed. So there, Lulu. Or Lu-lee as Reagan calls her.

 

Name Ticker 12/13/2013 Change
Brinkley BCO $32.18 -1.47
Charlotte ICE $220.44 +2.24
Dustin DST $89.62 +1.37
Icarus FAST $46.24 -1.21
Jenny JNY $14.65 +0.60
Jodi Ann JOY $53.53 -2.45
Justin SCI $17.61 -0.77
Katie CATY $25.23 -1.11
Lee TGI $72.27 -2.06
Lisa LNCE $27.10 -1.08
Lucas LEI $0.98 -0.06
Lulu LULU $59.20 -10.64
Marcus MCS $13.59 -0.10
Mario T.E. MGEE $55.07 -0.83
Mario T.Y. MAR $46.57 +0.34
Namilita NL $10.47 -1.24
Nicole E. NICE $39.67 -0.24
Nicole M. COLM $70.61 +1.63
Reagan REGN $269.59 -13.15
Ruby RJET $9.72 -0.26
Wilson WILC $8.11 -0.07
Winston ED $54.33 -1.52
Zero ZAGG $3.81 -0.10
Zondro ZQK $8.28 -0.10
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