Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance.
The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved.
These are simply thoughts (some completely random) as I attempt to connect the dots:
- Watching the price action in the markets you realize how skeptical investors continue to be by observing the relationship between the US Treasuries and equities. For every downtick that occurs in the market, there is a disproportionate reaction into fixed income. It's as if investor are expecting a bearzombie apocalypse at any minute. Conversely, for every uptick that occurs in equities, bond investors are relatively slow to react proportionate to their buying activities.
- Apple supplier, SWKS, cut sales and profit forecasts in their earnings report today. The stock was up 5% afterhours as a result. There will be some cuts to guidance at a greater rate than investors happen to be used to. However, it's important to keep in mind that markets look forward and what they might be seeing some months down the road is a lot better than most realize.
- Crude oil is leading the market. It led on the way down as equities and crude topped almost simultaneously in October and it has led with the most recent breakout. Again, crude is rallying overnight on a bullish data release and equities are following with Dow futures up 120.
- NVDA has been unusually weak. It may pick up into the end of the week. However, if it remains an underperformer, there may be something devious brewing beneath the surface for the company specifically. Might even worth a shot on the short side at some point.
- Meb Faber had a tweet today that said the following: Every single 2019 investment outlook: Returns stunk in 18,Economy in 9th inning, The Fed, Recession on horizon, US stocks expensive, Value vs growth, Volatility is increasing, Too much debt, Credit spreads are low, Something about China's economy, Emerging markets cheap. Being a staunch contrarian, it feels like all of these are a fade. However, there is one thing about contrarian theory that must be remembered: Many of the above theories are grounded in sound analysis that will likely end up being correct. However, the route the markets take to get there will be much different than everyone excepts. I agree that emerging markets are cheap. I agree that value is a better bet than growth. I agree there is too much debt in the economy. At the same time, I need to make money for my investors. And being a staunch contrarian often times means being very early on these secular shifts, which doesn't translate to alpha.
- Corporate credit is on a rocket ride currently to the upside. Those who were discussing its forecasting abilities on the downside must now come to terms with the fact that it now moving up with substantially more intensity than it moved down. The translation then has to be that perhaps the corporate credit monster wasn't as scary as most expected. At least for the time being.
- Banks look like they want upside. Currently long USB and JPM.
- Typically, I don't follow restaurant stocks. However, LOCO had some admirable earnings last quarter behind a new CEO. The company looks like it wants more on the upside.
- SFTBY looks like a viable short candidate. Opaque structure. Too many moving parts. Zero focus between all the divisions. Eccentric CEO that while undoubtedly being smart, subjects himself to volatility with his ultra-long term view of things. It's too early to take a stab at it here, but there will come a point.
- Rates on the long end of the curve look like they are about to skyrocket. Currently short TLT.
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