A sense of calm has returned to global equities markets. Dare I say, the same type of misguided normalcy we have come to expect, and profit from, during the four-year-plus raging bull market?
Here is a helpful list to help tie all of the news together.
- Bank of Japan stimulus measures, and those by the ECB, have made the end of the Fed's QE program less relevant. Investors are laying eyes on groups of policymakers trying to reignite broken economies by lighting fires under risk asset prices. So, for the time being, earnings risk for multinational companies due to broken economies (where spending and pricing power sucks) is backburner stuff to the energized headlines that illuminate money handouts.
- The Fed successfully halted QE without triggering bond and stock market crashes, bolstering the views that it will be able to slowly raise interest rates eventually with relative ease. In other words, the market has expressed its confidence in the Yellen-led Fed.
- A less publicized thing that I am picking up on in talking with top executives is the desire to do deals between now and the end of the first quarter. Obviously, that supports equity valuations.
Although highly skeptical of the recent rally, there doesn't appear to be a negative event (or events) on the horizon to derail the exuberant sentiment. Auto sales releases today, while not gangbusters, won't be a huge negative event is they fall short. Chain-store sales, and likely holiday quarter warnings, later in the week? Meh. The market has oddly overlooked warnings from Kohl's (KSS) and Wal-Mart (WMT). The employment report is setting up to be not too hot and slightly ahead of consensus, supporting the Fed's teensy bit of hawkishness in the latest salvo. A jobs miss would only lend credence to Bullard's comments that QE could reappear. Even the midterm elections look stock friendly, especially for the financials if the Republicans notch major wins.
So, cheers to the Santa Clause rally (said tongue in cheek).
Why you have to be intrigued by GoPro (GPRO) first and foremost: it sells a tangible product, unlike the excessively valued Twitter (TWTR) and Facebook (FB), which were rocked on their earnings days. Further, what does Amazon (AMZN) really sell? Second intriguing aspect is that GoPro is coming up with new products that people are actually buying and seemingly telling their friends about, given the sequential revenue growth rates. Third, it is getting prominent placement on retailer websites (see BestBuy.com). Finally, its social aspect is catching on, which will help to spur more sales of hardware. A virtuous circle is being created.
Now, I am not in the trenches digging for gold, or one to subscribe to the view of the past four years that deadly, wallet-crushing inflation is lurking in the weeds. But here are the basics that I do know and how I would like to approach gold in terms of investment advice:
- QE is over, the Fed is sounding more hawkish, the next step is to sound more hawkish before a rate increase in late 2015, which pressures the price of gold.
- Pockets of inflation are emerging, as noted by Buffalo Wild Wings (BWLD) raising its menu price by 3% in November due to wing prices and countless other restaurants (Dunkin' Donuts (DNKN), for example, with coffee beans) and that may lead to more hawkish Fed comments.
Put all of that together, you want to be looking for companies that could benefit from the drop in gold and similar assets (such as silver). One would be Tiffany (TIF).
The Early Start of Holiday 2014
Ultimately, Amazon and Wal-Mart pulling their promotions for holidays forward is disturbing. It's a way of them saying they do not trust the outlook for the consumer and want to try and get sales when the consumer is inside the stores (or on the site). In particular with Wal-Mart, I fear it once again bought too much inventory for the holiday season. Further, in spring 2015 investors should expect a restructuring plan to be shared by Wal-Mart following a lengthy review of the business.