Buzz on the Street: Hurricane Sandy Hits
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
All day and every day, some of the stock market's best and brightest traders and money managers share their ideas, insights, and analysis in real-time on Minyanville's Buzz & Banter. Below are some excerpts from this week's Buzz. Click here for a 14 day free trial.
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Monday, October 29, 2012
Markets closed due to Hurricane Sandy.
Tuesday, October 30, 2012
Markets closed due to Hurricane Sandy.
Wednesday, October 31, 2012
T Report: 1,000 Acts of Kindless
I have grown addicted to Twitter. I find it to be a useful source of information -- I'm not supposed to say rumors, but those too. Having said that, if all I knew about the hurricane came from Twitter I'd be curled up in a ball in my basement, sobbing and lamenting the collapse of civilization.
In CT, we got hit harder last year by two storms, but that's not the point. It's the thousands and even millions of acts of support and kindness that strike me. Neighbors helping each other, or even just checking in to make sure people are safe. Not best friend, do everything together neighbors, just people who live near by. People spending a bit of their time helping someone. Offering people a place to shower if they don't have water. So many little things, but things that to me represent what made America great. It seems sad sometimes that it takes disasters to bring people together, or that too often politics (and the Fed) forget that Americans are great at battling adversity. When something is thrown at this country, it is able to deal with it. Sure, some government support is useful, but ultimately it comes down to the people and their drive and determination. In any case it was nice to see the "participation award" culture disappear even if only for a day or two - though with election night less than a week away we have a firm deadline for the return of rhetoric, hyperbole, and vitriolic blame games.
While on the subject of hurricanes, I didn't think it would mean much to the market. So far that looks correct. I don't see natural disasters like this being positive - not a fan of broken glass. It will shift some wealth - wealthier people tend to pay less wealthy to fix things, insurance companies dip into their coffers to distribute some wealth to make payments, and even Keynesians are rewarded as debt burdened governments borrow more to do their part. The wealth shift can be mildly positive as it circulates some savings into the economy, but it is more of a shift and drags activity forward. Away from that, it is slightly disruptive since the somewhat random nature of a disaster is hardly likely to lead to optimal capital utilization. It's great for my wood guy that I have to spend a few k on damage cleaning, but not ideal for me. For every city spending money on clean up crews, that money likely would have been better spent on a specific (non pork barrel) project than this.
Looking for opportunities. So far, with Home Depot (NYSE:HD) up 3% that looks like a short. If insurance companies get hit hard, it's probably a buy. Not only is this affecting only a small portion of the country, it is more of a shift in business/income timing, not a permanent sustainable change.
This is the key and Italy is in play. Greece had been a buffer for Spain. Now Greece is a shambles. No matter what bizarre choices, or non-choices, the Troika makes, it is clear that Greece needs one more default/restructuring to have any hope. Meanwhile, time is running out for Spain to make a request for ECB and ESM money. The programs are in place, but they have many moving parts and the delays are making it hard to hold together in a way that can generate meaningful help for Spain. While Rajoy does what Rajoy does (and I'm not sure even he knows why he does anything anymore) you can sense the tension mounting in Italy. If Spain takes a bailout, Italy might not need one. Italy might be able to bask in the glow of the Basque sun. The market would be so confident that bailouts are available they wouldn't need to get one - at least near term.
But if Spain doesn't ask, then Italy will need one. Spanish bonds will continue to slip if they don't ask for money. It is obvious that currently the money is there of they ask, but their is growing opposition to making it available. As Spain slides, Italy will too. That's why Monti met with Rajoy. He sees this. He sees the need for Spain to act.
So once again, we are at a tipping point in Europe, and I think once again they will take a step towards debt monetization. Given current valuations and the recent uptick in bearishness, this should be enough to spark a rally.
So I remain bullish, but would take some chips off the table on this current rally, which is 2% off the S&P futures lows, and wait for a pullback to accumulate.
Good luck and hope everyone is safe after the storms, and thanks to those who have acted in such a heartwarming way.
Apple Technical Analysis and Key Support Levels
Below is an annotated chart and technical breakdown of Apple (Nasdaq:AAPL) stock.
Note initial support at 600-ish (head & shoulders target), then the 200 day moving average at 585-ish.
Click to enlarge
Bull Market in Redundancy
Before I begin my financial thoughts this morning, I want to give a huge shout-out to the volunteers out there -- firemen, paramedics, Red Cross etc. who have worked around the clock to help those in need, and to those whose job it is to serve -- police, fire, utility crews, national guard etc. THANK YOU.
A few weeks ago, I had the pleasure of participating in a panel discussion on the election and the markets and I highlighted that one of the big investment opportunities that I saw in our period of weak social mood was in "redundancy".
Needless to say, this week's hurricane will only add pressure to that call.
RE: Bull Market in Redundancy
As a follow-up to Peter Atwater's earlier post, I just wanted to point that two of the best-performing stocks today are Generac Holdings (NASDAQ:GNRC) and Quanta Services (NYSE:PWR).
Generac, which makes back-up generators, guided up huge today because of sudden demand from Hurricane Sandy. After this weekend's storm, I would assume an awful lot of business owners and people living in high-risk areas (places with exposed electrical lines that are prone to outages) are reassessing their backup power needs, especially following the backup failures in places like NYU Hospital.
If we really are in an prolonged era of high-frequency big storms, I would assume we are going to enter a serious bull market for back-up generators. There are a ton of people throughout the Northeast without power right now. And they might not have it for another week or so. How many of those folks are going to head to Home Depot (NYSE:HD) to buy generators before the next big storm? Or even right after the roads are clear?
Quanta is an infrastructure/construction company that does a lot of electrical transmission line work. The stock is up nearly 10% today after an earnings beat and raise in guidance, as well as positive sentiment following Sandy. Likewise, if we are entering a nasty phase for storm activity, Quanta's going to have a lot of business doing repairs and installing power lines.
Thursday, November 1, 2012
Earnings Update, Ocwen, Breakeven
Earnings season continues to be on the worst pace in almost 3 years. The percentage of companies beating revenue estimates remains at 40% for the S&P 500 (^GSPC) (against lowered expectations), with the average surprise still in negative territory. These figures would be much worse if it wasn't for the financial companies doing so well. Profits, however, are doing much better, beating 72% of the time.
Ocwen Financial (NYSE:OCN) reported inline earnings this morning, but did not disclose any additional information on the Rescap deal. The filing said that they were waiting for additional details from bankruptcy court before releasing definitive details. With the stock so high, we suspected that they may issue common shares over issuing debt and raising leverage, but we'll need more information. The conference call just started, so I will see if anything worthy is mentioned.
2-year breakevens have recovered after getting pounded for the last 3 weeks. However, longer-term inflation expectations remain anchored.
Another day and another lifeless gap higher in the broader indexes. Bearish? From the surface, yes. We are approaching oversold levels and the churning that has occurred over the past 4-5 trading sessions has allowed key moving averages (100 and 200 SMA) to tick higher and provide a higher level of support.
Yesterday afternoon, I tweeted that if we are in fact in a new bull market, this will be the garden variety pullback we will receive going forward. There is little in terms of shock value or drama. Looking back on the post-credit crisis bottom, we have experienced one such event that was a methodical correction. It occurred post QE1 in September 2010 and lasted into November before the market was once again off to the races. This is an environment to trade and keep conviction low.
Scott Redler made an astute observation this morning. We are at a point where traders and investors should look to generate alpha through short-term trading, while holding onto their macro positions. In other words, how every hedge fund manager is currently approaching the tape. Let's see what type of bounce materializes over the coming sessions and if it is one that should be shorted or added for continuation.
Click to enlarge
Friday, November 2, 2012
Between the Ticks
While the S&P 500 (^GSPC) is set to attack its overhead 50 dma, the dollar is attacking its overhead 200 dma.
Something's gotta give. A breakout in the dollar does not imply a continuation in a stock rally.
See dollar index from August w/200 dma here:
Click to enlarge
Better jobs data seems to somewhat justify the move yesterday in equities, but as of this Buzz, all of the initial enthusiasm has faded away. Our ATAC models used for managing our mutual fund and separate accounts are close to a full allocation back into stocks given enough market internal confirmation, but there is no doubt funky behavior is underway.
Yes, there are some strong positives expressing themselves given outperformance in small-caps relative to large-caps in recent days.
Yes, it is healthy to see bond yields rise.
However, the issue remains conviction through magnitude. The weakness in bonds is NOT huge by any means. The outperformance in cyclical sectors is NOT wide enough relative to defensive sectors to signal extreme bullishness is creeping in. This is an incredibly tough juncture. Perhaps after the elections things will be more clear, but for now, we are on the edge of either another aggressive risk-off period, or the October corrective period being over as the Fall Catalyst of new all-time highs takes place.
Man I hate sounding like an economist. On the one hand... on the other.
Crisis Mode, with an Eye on Normalcy
I would like to thank the MV team, professors, writers and universe for their efforts this--and every--week. This one has been particularly tough and the energy, grit and perseverance of everyone involved has been nothing short of amazing, not just in MV but for first responders and municipal workers who have been operating non-stop. Thank you all for all you do; it is appreciated now more than ever.
While many areas have restored power and are open for business, my home town--Port Washington-- was particularly hard hit by the storm. In this, our fifth day without power, there is a scarcity of gas (three hour wait and a $50 limit for cans only at the one station that is open) and that has emerged as an issue for those of us operating with a small gas generator (powering a spare fridge, with is being used to feed two adults, twin eights and a 17-month old with a double ear-infection).
The good news--and there is much to be thankful for--is that we've heard that neighboring towns have begun to come back on the grid. This is a blessing in numerous ways, not the least of which is that the kids will have a warm place to sleep tonight. We have seven large trees down around our home, some of which crushed power-lines and generators, so I'm not holding my breath on Chez Harrison getting energy back anytime soon. With that said, so long as the kids are safe and assuming lower Manhattan is back on the grid this weekend, I expect to be back at MVHQ on Monday.
I've had a number of thoughts over the last few days--inflation in things we need (energy, education, food) and deflation in things we want (TV, cell phones, laptops), the haves and the have not's (with 40th Street in NYC serving as a demarkation line), the realization that Obama has effectively won the election (but rest assured, there will be controversy) and yes, the resiliency of the human spirit, as evidenced by "strangers stopping strangers, just to shake their hand."
2012 sure has been one for the ages--heart surgery, marriage, moves, superstorms---and we haven't even gotten to the worst of it, according to the Mayans--but today, its back to basics for yours truly, which means throwing a log on the fire, grabbing an axe (to ensure plenty of wood overnight) and working with friends to get extra gas as their homes comes back online. Thank you for your patience; as my grandfather used to say, "This too shall pass."
As always, I hope this finds you well.
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