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Daily Market Update



Daily Market Update – May 29, 2014 (8:30 AM)

Hard to believe that the morning isn’t faced with the challenge of having to add to another previous day’s closing high.

With volatility so low and now even precious metals testing some resistance levels the thought that comes to mind is the inescapable reality that cycles rule everything in economics. It’s just the onset, length and magnitude of those cycles that are hard to divine.

With some occasional brief and shallow interruptions this has been a 5 year cycle that appears to have a slowing acceleration as it continues to move higher.

At the same time all of the fears surrounding the impact of the 10 Year Treasury rates on equities have been unfounded as even the direction of rates has been missed. First the fears focused on the rate approaching 3%, barely a couple of months ago and now the fears have followed the rate from 2.75% to 2.5% and still, nothing. The market just goes higher despite the well reasoned theories on why it should not do so.

For the rest of the week there is plenty of economic news scheduled to be released but none of it likely to move the needle very much as we’re on target to have a second consecutive week of gains.

The big difference between setting record after record today versus 5 years ago or in the 1980s is that there isn’t the same kind of complacency. Back then there was often a belief that regardless of the investment it was bound to go higher, if only because it would be carried along with the rest of the market.

By and large that was true for certain times over the past 25 years and the complacency was justified until it wasn’t.

Sometimes the loss of justification came suddenly and caught most everyone by surprise, while at other times that lack of justification came with fair warning that was frequently ignored.

This time around the complacency isn’t there because the market has been very selective. Even while it moves higher and higher not all are taken for the ride and there appears to be much more sector rotation than ever, perhaps accounting for a divergence between the new market highs and the number of stocks in the new daily highs list.

Common sense would tell you that if the market, which is nothing more than the sum of its component parts keeps going higher its component parts must, as well. The fact that the number of stocks on new highs list is decreasing is telling of  the fleeting strength of individual positions, which may in part explain why the vast majority of hedge funds are trailing the market index.

I suppose that those may be concerns for next week.

For this week there aren’t too many positions set to expire, but I’m hoping that there is again a nice mix of assignments and rollovers, much as was the case last week.

The early market indication is for a flat open and even if that is sustained through tomorrow’s close that would be just fine and create the right frame of mind to deal with all of those future concerns.








Dashboard – May 26 – 30, 2014





MONDAY:   Happy Memorial Day

TUESDAY:     At another new high and the market looks like it wants to add some more. That would be nice for as long as it can last.

WEDNESDAY:  With another new high to start the day or no real news left for the rest of the week it can really be anyone’s guess what the market does in a vacuum. Any of those guesses can be equally valid

THURSDAY:    A quiet day on the news front and the morning set to begin in an unusual place by not having to follow up to another new record close.

FRIDAY:  A quiet close would be fitting for a quiet week that was just your typical new record close day in and out kind of week.




Today's TradesCash-o-Meter





Sneak PeekPie Chart Distribution

Weekly Summary


Daily Market Update – May 20, 2014 (Close)



Daily Market Update – May 20, 2014 (Close)

With an occasional exception over the past 3 months Tuesdays have been a day for markets to move higher.

Eddy Elfenbein, of Crossing Wall Street, keeps track of statistical oddities and in the past has shown that there actually is a predilection by day of the week, for positive market performance, that transcends a mere three month period of observation.

Tuesdays have a reasonably long history of good performance, although you would be hard pressed to call it anything other than an anomaly. There isn’t much reason to suspect that a single day of the week would repeatedly be better than any other day of the week.

I haven’t figured out f there’s any way to take advantage of that, as the statistics don’t look at what kind of machinations may take place during each of those days and only looks at the end result, but today is one of those days that I’d like to see the pattern continue.

While yesterday saw a handful of new covered positions get sold there are far too many more sitting and not generating income. A few nice days higher could help remedy that, but the pre-open futures trading is giving no indication of a market set to move higher.

But today wasn’t one of those nice Tuesdays.

Instead, while the flow of earnings reports is now slowed, there are still more reports to come for another month and the ones coming through this morning are doing nothing to move the market higher.

While Dicks Sporting Goods, Staples and Home Depot are all retailers, they represent very different segments of retail and none of them have much good news to share this morning. While Home Depot isn’t getting sold off too heavily in the pre-open and eventually was one of the few gaining positions during the regular trading session. the others are looking at large losses and if the recent pattern holds their share price recovery will be slower than is usually the case.

With a broad range of retailers consistently presenting disappointing earnings or seeing profits rise, but in the face of falling revenues, you do have to wonder where the economic growth is hiding. It can’t all be concentrating itself in Nordstroms. Yet this disconnect between the reality and the perception is rarely mentioned, much less discussed.

Today, however, that changed and it was a prominent topic of discussion all through the day. Somehow, it had gone unnoticed up until this point, as so many have been left deluded by the impact of share buybacks and simply accepted the unequal comparisons of one quarter to the next, with EPS being reported on fewer and fewer shares in the public float.

After yesterday’s late day push higher the market was within about 0.3% of another new S&P 500 record before the morning’s trading began, as it pays no attention to the economy. While it’s often said that the market discounts the future if you look back 6 months, when the S&P 500 stood at 1800 I suppose you can make a case for today’s 1885 level, but if you go out a year in time it gets much harder to justify a 15% advance.

However, most would agree that the economy isn’t exactly humming along at the moment and that there’s still plenty of room for further economic growth ahead. Maybe that’s the fuel that has been advancing the market and will continue doing so. 

The anticipation of further growth to get us back to historical standards may be the driving factor, because we’re certainly not at a stage when the economy is red hot and the markets can be expected to start slowing down as less acceleration of growth becomes more likely.

But what does any of that mean for today or this week?

Not too much.

The plan remains the same. Not too many new positions, maybe a purchase here or there and just the hope that some of these good for nothing positions can begin to support themselves, even if it’s only something symbolic, as from an occasional DOH trade or two.

At least there’s always hope.









The Dark Side of Crowd Sourcing

(A version of this article appeared in TheStreet)

Crowds can certainly be a means for achieving good ends. Ask people in Tahrir Square or those in Kiev, although some may disagree and see only the dark side of crowds.

The power of crowds has made Wikipedia an increasingly legitimate asset as the crowd has been tamed and made to adhere to standards. The burden of creating a useful utility is borne by so many people that no one individual is critical and no one individual can harm the foundation.

In the world of financing “crowd sourcing,” the mechanism of pooling funds from a large group of people to help achieve an objective is getting increasingly popular for charitable and commercial ventures and received great fanfare this week as legendary musician Neil Young sought funding for his project of creating a high fidelity system to play and listen to digital music that restores all of the sounds and nuances of the original recordings as intended by the artists.

Neil Young has been adamant over the years about his feelings regarding the quality of the most prevalent file format used for digital recordings and many believe that the iTunes franchise of Apple (AAPL) is most at risk for an assault against that format and to introduction of a new audio player. Perhaps the sentiment attributed to Young that the songs on an iPhone “sound like crap,” and that even Steve Jobs wasn’t satisfied with the sound of music on the iPod, add to that feeling of an impending assault on the existing Apple eco-system..

As an artist proud of his art, and together with a growing collection of other well known artists who feel similarly about the preservation of the quality of their art, there is certainly a case to be made for providing a medium that faithfully recreates the experience. Of course, doing so requires capital and investment and is faced with long odds when the competitor is Apple.

While there are different models of crowd sourcing, the most commonly used and the one that Mr. Young is utilizing is that promoted by Kickstarter. It is one that offers rewards for contributions toward reaching a specified financial objective. Rewards are based upon the level of donation, which is referred to as a “pledge,” which is returned if at the end of the campaign the financial objective is not met.

As an example, a $5 pledge to this campaign entitles the donor to “LOVE + THANKS” and a mention on the website. Greater amounts may result in “swag,” including T-shirts, signed posters and even a discounted price on the music player. At the highest level, $5,000, donors receive a “VIP Dinner and Listening Party with Neil Young.”

No doubt that all of these reward have some value, but what they belie is greed.

First, Kickstarter offers a great opportunity for those without ready access to capital and a wonderful means to generate financial support for what may be great projects, products and ideas that would otherwise never see the light of day. Crowd sourcing may be the mechanism by which yet another great American success story is launched without the potential burden of over-bearing and demanding investors worried about their capital investments.

The alternative, the more traditional route is to access capital markets or venture capital and accept the potential liabilities that may come along with those alternatives. Whether that includes the re-payment of business loans or the granting of equity, the price is very tangible, although perhaps necessary and even an indispensable part of the equation.

The novice inventor has little chance to access either of these traditional routes of funding, having neither their own capital nor networks to get a foot in the door. That is where Kickstarter comes in and offers an opportunity to open the doors with very few strings attached other than a token gift of appreciation. That opportunity can make all of the difference for so many, but seems inherently wrong when the ones asking for pledges have infinite avenues available to them and are more likely to find the path to success to be a paved road.

And then there’s Neil Young.

While I’m not privy to his ability to personally finance this laudable project it may be reasonable to believe that through his own resources or through his personal network of contacts he would be able to find the resources necessary to bring this project fully into being. There is, however, scant information on the Kickstarter site as to the earlier backers of this effort.

In the event that there is a gap in funding for additional components of the strategy to bring the enhanced music player to market, there is clearly a downside to going back to original investors. That downside is the need to cede further equity to attract funds. However, the non-traditional route offered by Kickstarter entails none of that need to reduce personal equity. Instead yoou keep it all and pass the costs down to those who get no share in any potential future success.

In this case the objective of the campaign was to raise $800,000 which seems like a small amount, although there’s no indication of just how much has already been invested in the project. That $800,000 threshold was easily surpassed in just the second day of the campaign. In fact, it was more than doubled with more than a month remaining to collect even more.

Like the duo in “The Producers” the campaign can keep collecting as much as it wants because all that needs to be done is to print more T-shirts or sign more posters. As opposed to 100% of the pie the universe of T-shirts is conceivably unlimited and carries no future obligation to any of the donors.

Donors, many of whom, like me, probably already have a large collection of rock and roll T-shirts just love the idea of being associated in perpetuity with one of their favorite rock stars. In that case of the 8300 such items to be given away 5741 potential items still remain with an additional donation value in return of over $2.2 million. Of course, there are also those unlimited donor levels of $5 and $50, because “LOVE AND THANKS” is in eternal supply.

On the other hand, the cynic in me wonders how $800,000, in a project of this size could possibly have made any difference, particularly when access to real investors shouldn’t be a limiting factor. One has to wonder whether the campaign is simply part of an awareness and publicity campaign, as it has certainly already achieved quite a bit of attention in addition to money and helps to create a potential audience for the planned new hardware, made a bit more enticing with donor discounts.

No matter what your opinion this campaign will be an example of the power of crowd sourcing and will serve as a model for others eager to protect their own interests and perhaps drain from the pool of donations available to others less well connected to capital sources.

Too bad, but at least for the artist, if successful, it means hearing his work in the manner in which it was intended. For the donor who received a discount on the player it’s more likely a situation of wondering when he was going to hear the difference and how many washes that T-shirt can endure.

Dashboard – February 17 – 21, 2014


MONDAY:   President’s Day Holiday. The rest of the world is behaving so hopefully no firewroks to beig the week tomorrow.

TUESDAY:     Short week with what will likely be a non-newsmaking FOMC report released tomorrow, as we’re now less than 1% away from another S&P 500 high

.WEDNESDAY:  FOMC minutes released this afternoon, but no one really cares, despite this being the first meeting presided over by new Chairman Yellen. Still, reaction can be in the making, even if no surprises.

THURSDAY:    If Wal-Mart can’t make a go of things what chance does anyone else have?

FRIDAY:  A busier week than expected with no surprises appearing on the horizon to close out the monthly cycle.                                                                                                                                                


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