Thursday, May 1, 2014

Three morning reads: Liz Ann Sonders, Rosie and Bespoke

Just quit your pussy whining and buy SPY:

BI - only two things make the stock market go down, and overvaluation isn't one of them. So says David Rosenberg, who seems to be trying to make up for years of being a goldbug clown. Quote:
[...]in a recent research note, Gluskin Sheff's David Rosenberg notes that stocks don't fall just because they've gone up a lot.

"We go into fundamental bear markets either when the Fed overtightens, when the economy heads into recession, or both," he said.

Rosenberg presented this chart showing 12-month returns in the S&P 500 since 1969. As you can see, downturns typically coincide with recessions (shaded area).

It's particularly interesting to see that 30%+ rallies over 12-month periods — like what we saw last year — happen pretty regularly.
And we get this chart:

where you see that overtightening and recession are the only two ways to get negative returns out of a market. And actually, overtightening causes fast recessions, so really there's only one thing. So either you listen to someone who's learned what makes economies run and pays attention to real economic data, or you read some clown who's never had a real job who pulls a new bear case out of his ass every week. Your choice.

Liz Ann Sonders - Fed does as expected and tapers again. Quote:
[...] remember, GDP is very backward-looking, with the quarter having ended a full month ago. Since then the economic data has been decidedly stronger; including other economic releases today. In addition, there were even some positives within the GDP report. Consumer spending, which is about two-thirds of the US economy, remained strong at 3%, with the Fed's statement noting, "Household spending appears to be rising more quickly." There was notable weakness in non-residential and residential investment—certainly weather-dampened; but it bears watching. Net exports were also weak; but likely a "payback" from the exceptionally strong fourth quarter. Inventories were also a drag on growth. It's rare for both trade and inventories to be a drag on growth; suggesting a coming rebound. Finally, government drag is easing this year relative to the past year, when it hit a cyclical peak.

We had strong economic releases today to accompany the weaker GDP report. The Chicago PMI came out much stronger than expected (although the smaller Milwaukee index was weaker), and the ADP employment report was also strong and above expectations. In fact, the totality of economic releases since the end of the first quarter have led economists to raise their forecasts for second quarter real GDP; in a few cases to as high as 4%.
You can listen to some guy who's never had a real job in his life, or you can listen to a professional, or you can listen to a professional who's also a hot babe. Your choice.

Bespoke - no joy in investorville. AAII is profoundly negative despite the broader US market only being a stone's throw from its last peak. If retail is negative with no fundamental reason, do you sell? Or do you buy?

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