The Daily Dose: The World Will Still Be Here

 | Mar 04, 2014 | 9:30 AM EST
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Breathe in, breathe out. I assure you the world will still be here by the end of the week, no matter what transpires in Ukraine.

Well, I guess I am pretty sure. Putin and Russia are intimidating and accounts from the ground from random Twitter feeds overseas are disturbing. 

You, the investor, will have Ukraine headlines shoved down your throat at least for the next five days because it's buzzy, it's a risk to stocks in a market that has refused to lose and it's what SEO specialists are demanding.

When asked on Fox Business yesterday if I would be a buyer or seller of stocks on Monday's weakness, here are a bunch of bullet points I didn't have time to share.

  1. Putin has a knack for giving the finger to the world and seems ready to go for something prolonged. This poses a risk to the European recovery thesis, but also emerging markets amid higher interest rates in a country such as Russia.
  2. Ukraine has a history of fighting back hard against foes.
  3. The event is likely to be prolonged and that could lead to a fundamental risk to second-half 2014 earnings estimates for multinationals.
  4. A good sign you could look out for to determine if the stock selling is nearing an end is if, as headlines cross the wires, the riskier areas of the market bounce back. Sometimes analysis is simple.
  5. Once rising in the face of scary headlines, stocks have a follow-through day on good volume.

Let's look at four and five. The market overlooked some positive reads on consumer spending and manufacturing Monday, both surprising me given a month plus of data misses. But both reports did lend validity to the market's advance before the Ukraine news outbreak. That's the type of data the bulls will return to once geopolitical risk subsides, which is why it's good to start paying to attention to broader market aspects.

The appearance of irrational exuberance can be detected in slow-growth multinationals, where P/E multiples have unmoored from the most optimistic of forward earnings growth assumptions.

A nice name that falls into the category is Disney (DIS). It's one of my top stock picks of the past 12 months, but I gotta tell you, it looks pricey at current valuations levels. Another area of froth, outside of Tesla (TSLA) and social media stocks, is in some of the railroad/transports plays. We best get a boom in the economy in the first half of 2014 to justify paying 15x for Union Pacific (UNP) and 18.5x for JB Hunt (JBHT).

New Findings on Starbucks

Based on my research findings, Starbucks (SBUX) has continued to ramp up promotions quarter to date on drinks and food to reignite traffic that slowed during the holidays. The market may be taking notice as the stock has underperformed the Dow and S&P 500 in the past month.

Here are two things that I have learned.

  1. Starbucks was more promotional on Valentine's Day 2014 vs. 2013, offering a promotion on all specialty drinks compared with a select few a year earlier
  2. Starbucks has been offering a $1 bakery treat promotion after 2 p.m. since Feb. 15, excluding breakfast sandwiches.

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