Candy – Does It Ever Stop?

By David B. Armstrong, CFA | Apr 21, 2014 | Weekly Market Commentary

My Jewish friend was lamenting the other day that if there is one thing the Christians get right, it is religious holiday marketing…they celebrate Passover with crackers while the Christian kids get a bunny and lots of candy.

Of course I just responded that all the leftover candy will just end up in offices all over the country on Monday morning along with leftover dyed Easter Eggs and batches of strangely colored egg salad.  I feel bad for my one neighbor who has yet to account for all the hidden eggs in their house.  I assured him they would present themselves over time.

Do you know what else presents itself over time?  Opportunity.  And I don’t mean it’s a good time in the market because there has been a decent dip in some indices.  I mean there is an opportunity to invest well.  How?  Read on…

First, let’s review our standard charts below to bring you up to speed on who we fared over the shortened trading week. It was nice to see a little pickup in the markets with some +2.0% moves over a short week.

Okay, now on to an observation.  I read a great article that is a little old now but still relevant.  The full article by fivethirtyeight.com can be found here but it was about the fact that UConn made 100% of their free throws in the NCAA Final Men’s Basketball game two weeks ago while Kentucky only made 13 of 24…  which by the way was greater than the final margin of the game.

This applies to investing.

Why?

Because it shows that hitting the easy shots is important to winning.  All of the spectacular three-pointers that brought the crowd to their feet were not enough to offset the boring foul shooting part of the game.  Just like people standing around Easter dinner bragging about their super hedge fund investments (the three-pointers) and comparing them to a boring dividend portfolio (foul shots).

Oh, by the way, it was Kentucky Coach John Calipari’s fifth-straight NCAA tournament loss where his team’s missed free throws in an amount that was greater than the final margin of the game.  He should be a hedge fund manager.

So on that note, see below from Goldman Sachs.  Yeah, everyone should be bragging about their hedge funds right now.  VERY cutting edge…These are also on my niece’s list of favorite stocks too.  The one she has tacked to the fridge written in crayon.

So do yourself a favor and if you are a ‘do-it-yourself-er,’ work on the basics of investing.  It may be boring, but will help win championships.

I don’t get ISI Research much anymore, but when I do see the occasional report, I pay close attention.  They are a smart crew.  Below is their estimation of where we are in the business cycle.  We are watching.

Retail Sales

Retail sales in March jumped 1.1%.  That was a good report because it topped expectations and the number that was originally reported in February was revised substantially higher. On top of that, core sales (“core sales” excludes the volatile auto category and gasoline stations, and this helps filter out the changes in gasoline prices), rose a healthy 1.0%, which is the best reading since February of 2012.  The chart below shows a nice trend and is probably accounting for a lot of the poor economic activity from December and January.  The bad weather tends to hurt a little bit.

And Finally, Earnings Season

Yup…earnings.  This week will be BUSY.  There will be about 550 companies reporting this week so there should be PLENTY to write about next week.

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