Nothing to see. Just another 8% bounce…

April 4, 2016

@GoogleFacts: A group of owls is called a “parliament.”

Nothing to see. Just another 8% bounce…

While you were on Spring Break, the risk markets continued their upward ways helped by Janet Yellen’s dovish speech noting slow global growth and continued global risks. As a result, the U.S. Dollar did its best Los Angeles Lakers impression while the yield curve steepened and many equity groups moved to new 2016 highs. While equity breadth measures confirmed the markets strength, not all stocks joined the move. Healthcare, Financials and European equities continue to lag. Energy is still a head scratcher as OPEC meetings continue to sway commodity prices. The recent strong move will have pulled trend followers into the market on the long side at the same time that many hedge funds and active players are just finishing covering their shorts. With so many active players under-invested or neutrally positioned, the pain trade will be to the upside going into the April earnings season. While stocks are up into the reports, expectations are low with plenty of pre-announcements on the table already so expect an increase in volatility once the company reports hit the tape. Also, April is typically one of the best months of the year to be long and the market usually wins following a big up month. So keep your eyes wide open and your head on 360-degree swivel as it will be a busy market.

Solid market breadth confirming this move to 2016 highs. Now time for 2015 highs?


The sharp move higher in most U.S. sectors did much to erase the 2016 losses. But healthcare and financials still have work to do…

If you are underperforming YTD, you have plenty of company…

It was a bruising 1Q for fund managers. The 1% YTD gain in the S&P 500 index belies the rollercoaster path that included an 11% correction and a 13% rally within the past 90 days. More than 70% of large-cap core mutual funds have lagged the S&P 500 YTD, while 92% of growth funds and 75% of value funds have trailed their respective benchmarks. Hedge funds have struggled as 3-month return dispersion is at the 41st percentile since 1986.

(Goldman Sachs)

One of the biggest questions in the market currently is whether or not to own Emerging Markets. The currencies have gained and the credit spreads have improved. Will the significant underperformance end this year?


If EM does outperform going forward, Global Portfolio Managers are not positioned correctly…

But inflows into Emerging Market funds have surged…


While I hate smoking’s impact on health as much as the next person, I also know that tobacco companies will never need to raise capital with their market values. Thus the stocks and bonds that trade in the market are just pieces of paper to make money on. Fiduciaries may not like having tobacco securities in their portfolios, but they can take the gains that the paper generates and do something better for the world with the proceeds…

CalPERS has missed out on as much as $3 billion in investment gains since the nation’s largest defined benefit plan shed its tobacco holdings, as that industry powered ahead, a recent report from its consultant states.

That has the California Public Employees’ Retirement System weighing whether to take up the habit again. Members of its investment committee on April 18 are expected to consider a plan that could allow the $291.2 billion system to reinvest in tobacco company stocks and other sectors that had been culled from its portfolio.

The potential reinvestment plan follows a report by CalPERS’ general consultant, Wilshire Associates, Santa Monica, Calif., that said excluding tobacco stocks has cost the retirement system as much as $3.037 billion in combined investment gains between 2001, when the stocks were first removed from the portfolio, and the end of 2014. Like retirement systems nationwide, CalPERS is under growing pressure to capture investment gains as low interest rates bite into returns and an aging population increases demands for benefits.

(Pensions & Investments)


$19/hour. Now is a good time to be a dishwasher in San Francisco…

When you ask owners to name their businesses’ most vexing challenges, the answer is consistent: labor and wages. The former has been a chronic issue for the past couple of years, with labor shortages driven by unprecedented levels of competition for staff, not only among restaurants but also with tech company cafeterias that can offer chefs decent salaries (reportedly in the high five figures), humane hours, and 401(k) plans. This is most pronounced among highly skilled workers like sous chefs: “Twitter’s just taking them all,” says Anna Weinberg, the owner and managing partner of Big Night Restaurant Group, which includes Marlowe, Park Tavern, the Cavalier, and the recently opened Leo’s Oyster Bar. Front-of-house staff is also ripe for the picking: “I’ve had three hostesses stolen; they’re being paid $85,000 a year to be receptionists at tech companies that shall go unnamed,” Weinberg says. “And by the way, I can’t tell them not to do it—the lifestyle is so much better.”

(San Francisco Magazine)

The credit card market is getting much more competitive and have rewards cards tips. Great news if you are a Costco customer who likes to travel and dine out as the new Citi Costco card will move to the top of the current card offerings. But don’t be quick to throw out your old cards before you remember the rewards that you are earning. The original AMEX Blue Card is still paying us 5% cash back on all gas, grocery and drug store purchases. And if you do most of your shopping on Amazon then it is difficult to beat their 3% reward Visa card…

The new Costco Visa card will offer 4% cash back on eligible gas purchases (on up to $7,000 per year, then 1% back), 3% back on restaurant and travel purchases, 2% back on Costco and purchases, and 1% back everywhere else.

That’s a much better deal than the American Express card, which offered 3% cash back on gas (up to $4,000), 2% back on restaurants and travel, and 1% back everywhere else, Fortune reports…

There is no annual fee on the Visa card, but shoppers must pay for a $55 annual Costco membership to use it.

(Yahoo Finance)


How ironic to be reading this article while my wife tells me that my favorite clothier (and Best of Denver) is closing after 44 years…

Clothing and accessories overtook computer hardware as the biggest e-commerce category for the first time last year, as free shipping and mobile shopping spread, according to a new study.

In 2015, consumers spent $51.5 billion shopping online for apparel and accessories, a category that includes clothing, shoes, handbags and makeup, compared with $49.9 billion in online orders for desktop computers, laptops, tablets and accessories like monitors and keyboards, online analytics firm comScore said in a report it published this week.

Digital sales in both categories grew from 2014. But the clothing sector saw a greater increase, up 19%, due to more free shipping options and the rise of mobile shopping, the two catalysts in changing consumer behavior. E-commerce spending on computers rose 5.3%, comScore said.


Talk about market disruption… An electric, self-driving car is one thing, but what about a direct to consumer sales model that generates $10 billion in orders in three days!?!

Tesla Motors Inc said orders for its new Model 3 electric sedan topped 253,000 in the first 36 hours — a fast start for the company’s first mass-market vehicle, which may not begin to reach customers for another 18 months or more.

Tesla Chief Executive Elon Musk tweeted on Friday that the Model 3, which is slated to go into production in late 2017, will sell at an average price of $42,000, including the price of options and additional features, which would give the initial flurry of orders an estimated retail value of $10.6 billion.



The U.S. economy is strong, gasoline prices are low, financing terms are eased but new auto sales continue to come up short. Could this be the beginning of a long string of disappointing results as new technologies (electric, self-driving), new direct sales models (Tesla) and new business models (Uber) change the individual transportation industry for the future? If so, how could any finance company step up and promise a seven-year car loan when I am wondering if my 12-year-old will even have a driver’s license?

U.S. auto sales rose 3% in March over a year earlier, but new warning signs emerged that car companies are stretching to keep demand humming after record results last year.

March’s selling pace came in at a disappointing adjusted annual rate of 16.57 million light vehicles, well below analyst expectations and the 17.5 million clip the industry reported in February. Detroit’s three auto makers each reported sales gains, but their results missed expectations, sending shares lower. Auto makers overall sold 1.6 million light vehicles in March.

Discount spending is on the rise and new evidence emerged in March that sales to fleet customers such as rental agencies in some key cases boosted new-car tallies. Car loans stretching 84 months or longer and the share of vehicles leased both increased, according to researcher J.D. Power.



A great prescription to keep pinned to your favorite bottle of Brandy…

@rogerkimball: Another reason to love Winston Churchill: the note his doctor gave him for his US sojourn during prohibition.

Finally, lots of great football played over the break but the Romanian team easily won our attention…

@frankvoisin: “Romania’s National Football team wearing math calculations instead of numbers to promote math to kids”


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