Skip to main content

Oct 19 2013 Weekend Market Comment

B.O. I love you man
Oct 19 2013 - The S&P 500 closed Friday at 1,744.50, an all-time high, making it safe to say the bulls are in control on Wall Street. Neither the four-month rise in benchmark Treasuries yields that topped in September nor the government shutdown and near-technical default on U.S. debt earlier this week could derail the rally. In retrospect everyone knew a deal had to be done because you cannot be the world’s reserve currency and pull shenanigans like Russia did in 1998 and still be an economic safe haven. But more concerning is that investors calmly stayed long through the whole thing, because that means there is both complacency and a clear message to the politicians, that these kind of games are not damaging but clearly they are.

It looks like clear sailing up to S & P 500 level of about 1800. At 14.6, the S&P's forward price-to-earnings ratio is near its highest in four years and slightly under the long-term mean of 14.9. The P/E multiple has risen throughout the year as earnings growth has remained stagnant, and forecasts are likely to fall in coming months. Without improved growth, that P/E will start to look expensive. Since we are at the high end of the PE scale and that means that stocks are price for perfection at that level and the earnings reports have got to be solid. Chances are they are not. 

As for the coming week expect these graphs to complete their typical rise and as we get to 1800 expect the typical soft pull back down.

The YP Primary sell looks like there is room to run.

But the 50 day overbought and the Green Arrows graph both say -- you are late to the party of you are buying now.

I hope you all followed me into DVY last week. You are up about 2% on the week if you did. Yes a more aggressive play like MVV would have been more profitable but this week’s action has been violent and MVV would have been no fun if the debt deal blew up, I am happy with my 2% in a week and glad I played safe.

Google 1000
Not that I owned any , but I did say in this blog that Google would hit 1000, and it did. Google’s shares soared more than 13 per cent on Friday to top $1,000 for the first time as investors reacted to the latest signs that the internet search group is eating up market share across the online advertising market.

The jump followed a strong earnings report late on Thursday that pointed to broad strength in the company’s newer advertising businesses, including video, display, product listings and mobile. Several analysts raised their earnings estimates and share price targets for the company on Friday in anticipation of a strong end to the year. The hopes were boosted by signs that a new format for product listing adverts was starting to prove effective, raising expectations of strong demand from online merchants during the holiday shopping season.

Canada Inks Trade Deal
The European Union and Canada agreed a multibillion-dollar trade pact on Friday that will integrate two of the world's largest economies and pave the way for Europe to clinch an even bigger deal with the United States.

The deal will make Canada the only G8 country to have preferential access to the world's two largest markets, the EU and the United States, home to a total of 800 million people. "This is the biggest deal our country has ever made," Canadian Prime Minister Stephen Harper said in Brussels, adding that it outstripped the North American Free Trade Agreement between Canada, the United States and Mexico.

Talks between the two sides launched in May 2009 but stalled for months over quotas for Canadian beef and EU cheese. Harper and European Commission President Jose Manuel Barroso met in Brussels to resolve outstanding issues and seal the deal.

In a cheeky touch, chefs served Italian gorgonzola and Greek feta cheese at a four-course lunch laid on for the two leaders to celebrate the deal, which EU trade chief Karel De Gucht called a "template" for negotiations with the United States.

In any case anything that can get me a deal on bordeaux wine is welcome. Perhaps they will buy some of our highly subsidised products like agriculture, trains or airplanes and vise versa. Ah "free trade".


There was some buzz this week about a new incentive plan at the Goldman Sachs' cafeteria. The cafeteria has a set of timed discounts. If you show up in the cafeteria before 11:30 or after 1:30, you get a 25 percent discount on your food. Goldman incentivizes employees to avoid the rush hour.

Goldman didn't like the idea of its people waiting on long lines to get their lunch. People are capital to Goldman. It wants to use its capital efficiently. Standing on line waiting for dumplings or salad or a burger is not an efficient use of Goldman's capital.

In Greg Smith's tell all book “Why I Left Goldman Sachs” we hear how a man with not much more going for him that height and good looks in three years is sucked into the big machine of Goldman and along with over 400 others finds himself in middle management at a salary of $450,000 a year -- that he carps about how little that is because New York is expensive -- cabs alone set him back a few thousand dollars a year -- he whines. Meanwhile, Smith's request to his managers to more than double his pay from $450,000 per year to more than $1 million, was rebuffed. He also failed to get promoted to the position of managing director before resigning, according to Dealbook.

So message from earth to Goldman Sachs -- I think you have other places to cut cost than your cafeteria.  For starters I am available for $300,000 a year just call me. . .