Inspirational Daily Investing Motto: "Do it right, do it intense, or don't do it at all."
This is serious stuff -- no doubt about it. The Fed meeting was supposed to be a grand throwaway event stuffed between the Yahoo! (YHOO - Get Report) and Apple (AAPL - Get Report) earnings calls. After the Fed event, the news went where "old" news is sent, to the punishment cell at the bottom of a homepage, resigned to be a seemingly boring occurrence in a reeling market. Lost in the sauce, however, may be 20 or so branches that lead to two conclusions: (1) the Fed's efforts have attained diminishing returns, and (2) the global economy continues to be structurally messed up for action upon action has led to a perpetual state of subpar.
Here is the craziness I brought to the office whiteboard on the Fed:Root: Continue to expand at a moderate pace (economy).
- Branches: Good to have growth in recent months but it may be so miniscule beneath the surface, and so at risk of a falling off the Apple iPhone 5 map, that stocks today are adjusting for that probability.
- Branches: Even as massive liquidity has been pumped into the system, in turn aiding the housing market and year to date stock prices, it has not caused a virtuous circle to adjacent sectors. If companies are curtailing capex and seeking new areas to trim operating fat, shouldn't this downshift slow employment growth to slowing employment growth? Big difference.
- Branches: Consumers needed the lag impact of stronger first half employment growth, plus higher stock prices, plus rising home values to feel confident to spend a "bit more recently." Pretty sad right there. In this market backdrop that reads as at risk of disappearing should murky fiscal clarity bring economic uprooting post-election.
- Branches: Thus far in earnings season, I have not heard that much chatter on inflationary pressures except at Brinker's International (EAT - Get Report) and Buffalo Wild Wings (BWLD). Core inflation is weak, and I see that in the form of unfavorable sales mix and promotional merchandise. It would be a welcome sign to score a touch of inflation to suggest re-emerging pricing power and then a trigger pull on high quality stocks that are likely oversold.
- Optimistic me says that dollar store stocks trading below key moving averages, which has been anything but the case in the last two years, is a tell of an acceleration in discretionary spending at places not named Ethan Allen (ETH), Williams-Sonoma (WSM), Hermes, and the North Face section at an A-rated Macy's (M). The realist in me says these cheap merchandise destinations are turning into ever cheaper stocks as low income patrons ignore higher margin categories; hence, this is weighing on operating profits. Other factors weighing on profits include store renovations, system upgrades, and new openings.
- Gloss over these two words describing the European Union's (EU) sequential demand conditions at your own peril: "deepening" and "accelerating."
- When a solid earnings report from a company such as Boeing (BA - Get Report) can't hold gains into the close, that's a red flag.
- Add Brinker's to the list of companies feeling consumer blowback from attempts to raise prices.
- Banks are impotent off strong housing numbers (and generally weak post earnings reports). This is also a red flag.