Tower Private Advisors
- 1,000 points
- Mr. Sunshine
- Tale of Two Cities
Capital Markets Recap
An interesting thing happened today. We marked the point where 1,000 points were tacked on to the S&P 500‘s March 2009 low. Check out the chart below.
As one can see in the table above, Gold continues to get crushed. As is fitting, I was struck by this striking chart (below.) When I was growing up–as a wee lad–there were three fantastic bubble gum brands. First, there was Hubba Bubba–it would never stick to your face if a bubble popped. Next, there was Sugar Loaf–man, that stuff was the best, but I haven’t seen it for a long time–anyone remember it? Last, there was Bubblicious, which can still be found. We’d pick these up on our way home from school at Ed’s Corner Store–I am not making this up; could you have a more quaintly named establishment?
Anyway, this striking chart that struck me, struck me as sort of bubblicious. It shows the trajectory of what now appear to be two bubbly assets, gold and Apple. The price return from five years ago is almost perfectly equal, and if the bubble label is appropriate, it might be some time before we see new highs in these two. On the other hands, a recent Bloomberg survey showed that 71% of survey respondents thought that Apple had lost its coolness edge…permanently. Apple stock peaked at the time of its Maps app snafu, but has it really lost all its mojo? And sentiment toward gold is likewise gloomy. I only know of a couple of professional pundits who like the yellow metal. Both are due for a pop of some consequence, but it’s likely to trap some bulls–if bubble is the correct label.
We held out Spring 2013 Economic Seminar this week, and it featured “Mr. Sunshine.” That was the moniker Brian Wesbury, Chief Economist at First Trust Securities, earned when he was on CNBC saying things like Dubai? It’s really small. Why should we worry about it? and Greece? It’s really small. Why should we worry about it? Simialarly, he’s not worried about the U.S’s debt picture (it’s small…in relation to the combined value of household balance sheets [not counting national assets]) or the coming student loan crisis (yep, it’s small.) In spite of his perma-bull label–and I think it was rightly earned–the 1,000-point above is testimony to the right-sidedness of his calls of late. To be fair, googling his forecasting accuracy will turn up some well-documented disasters (e.g. in 2007…there’s no need to worry about a credit crunch; etc.) You can click here for a nice summary of the presentation.
In economics this week, it was sort of A Tale of Two Cities…”it was the best of times; it was the worst of times”–neither of which is really true, but there were a couple of dichotomous–no relation to a hippopotamus–releases.
Best of times…
The NFIB Small Business Optimism Index reached its best level since October 2012. Almost all components rose, with the exception of Capital Equipment Spending Plans…Hiring Plans rose sharply, as did the General Outlook component.
University of Michigan Consumer Confidence rose–make that shot up–to its highest level since September 2007, as the Current Conditions index rose sharply; the Expectations index rose more modestly.
Worst of times…
The twin release of Industrial Production and Capacity Utilizationshowed softness in the manufacturing sector, as both ticked down in April. Looks like just a wiggle in the uptrend. Capacity Utilization, however, looks to be hitting a ceiling.
Initial Jobless Claims took a sharp spike up this week. Like the chart above, the series appears to be going through its normal fits and starts in the same southeasterly trend. It would have to rise considerably before the trend is threatened.
So, no, it’s not the best or worst of times. Instead, it’s like much that has happened in this recovery. There have been items on both sides of the balance, something to like and something to worry about.
Graig P. Stettner, CFA, CMT
Chief Investment Officer
Tower Private Advisors