The Daily Dose: Back to School

 | Sep 24, 2013 | 11:00 AM EDT  | Comments
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Stock quotes in this article:

bbry

,

wmt

,

aapl

Market pros think they know it all. I see the Twitter feeds. I read the blogs. Even I, a.k.a. Mr. Humble, sometimes get sucked into the black vortex of breathing in amazingness that is self-hype.

Unlike many, however, as soon as I realize my head has grown too big for the office, I step back and seek religion -- investing religion, that is. Believing in your own stock picking invincibility is a surefire ticket to make horrific calls down the line. You lose your hunger, the desire to find the things in companies that helped to drive alpha for demanding clients. Sensing that was becoming the case on my end, I opted to re-learn a couple lessons on individual stocks and the markets.

Lesson #1: Touch the Market's Soul

A week or so ago I sent a relative strength index chart to clients, showing that the S&P 500 was clearly in overbought territory. Somewhere along the way post Fed meeting euphoria, I forgot I sent this chart, in the process falling modestly susceptible to the bullish allure.

Once again I return to the RSI chart on the S&P 500, still indicating an overbought market in my view. Why overbought? Valuations are being reigned in despite the reaffirmed Fed backstop and a re-acceleration of positive global macro data (and absent Blackberry, a punch to the gut earnings warning).

Could it be that the market actually gives a hoot about the real economy, an economy that is basically sluggish and extra prone to shocks even as the 10-year is under wraps? Is the market finally "getting it" that the first quarter 2014 will contain the type of Fed policy risk that renders Bernanke's verbal slips in the summer look like a drop in the bucket?

Lesson #2: Seek Truth from Press Releases

 Observations from Blackberry's (BBRY)press release:

  • Offer on the table, sans due diligence.
  • CEO had no statement on the release. Who is in charge? The company is still public.
  • Fairfax noting a new, exciting chapter for Blackberry is all pitching.

I am reminded that Blackberry is a fundamentally-wrecked entity that just received a pre-due diligence deal from an insurance company. Please stop trying to pick the bottom in this dog. In fact, forget the company exists unless Apple (AAPL) decides to swoop in and pick up parts (its paying user base would be good to have prior to a mobile payment/TV rollout).

Lesson #3: Social Issues Do Not Disappear Overnight, if Ever

Wal-Mart (WMT) did its best to blow smoke in the face of the general public on Monday with its seasonal hiring announcement (normally the case each year with Wal-Mart). The bottom line is two-fold. First, the company does need more workers, seeing as more stores are open year-over-year. Second, the employment structure from total hours worked by full and part time humans (full-time workers clock 37 hours, part-time 27 hours, give or take) to computer generated scheduling is a major societal issue.

The issue is going nowhere because of the internal wheel that causes Wal-Mart's business to turn: low prices to consumers through a beat down of all corporate expenses and costs. Overall, Wal-Mart can't screw employees in order to pad and protect earnings for too much longer before there is a true uprising that spreads across U.S. local TV stations. Here is a chart detailing the stock's performance during the last debt ceiling debacle in 2011.

Source: Yahoo Finance

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