In Search of the Perfect Investment

Godot played havoc with yesterday’s market. Note the steady rise until the moment of the Yellen’s no-change announcement, then a spike, then a sheer drop, to end the day down 65 points (0.39%) on the Dow and 5.1 points (0.26%) on the S&P 500.

What can you learn from this?  Jon Markman of the Trader’s Advantage, thought the choppiness was caused by the Fed’s decision not to hike interest rates now while leaving open the strong possibility that they could be raised later in the year. This was the option that had come to be known as the “hawkish pass,” says Markman, “as the central bank passed on rates now but did so in a militant way. It’s kind of passive aggressive, if you want to know the truth, which is one reason it did not go over too well with investors.”

I suspect this means is that we are in for continued massive volatility — up and down like a whore’s drawers (Australian expression.)

Look at the VIX yesterday. Very unusual for it to be so volatile in one day.

The Fed’s dovish statement cited global economic and market volatility concerns — which is going to hurt the market, at least short-term. Here’s the full Fed statement:

Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

The big movement was in the TLT. It spiked with the non-event 2:15 PM announcement. But then stayed up. Go figure:

Apple was the big disappointment, dropping a whopping $2.49.  Apple customers are reporting difficulty upgrading to the new iOS 9, which was released on Wednesday. I’ve stated once. I’ll state again: Do NOT upgrade to iOS 9 for at least two weeks. By then the bugs should be fixed.

This year, many traders have made fortunes playing oil, minerals, and commodities to the downside. Many have lost their shirt. Perhaps the best comment is on the cover of the latest issue of Modern Trader magazine:

Lowe’s versus Home Depot. Here’s a five-year comparison chart:

I became interested in Lowe’s after I figured Home Depot has been one of my top performing stocks. I wondered about Lowe’s. Not impressive on the chart.

Then I decided to visit a new Lowe’s store around the corner from us, on New York’s upper west side. I went to buy three items. Lowe’s had only one (Loctite) — and it was 15% more expensive than Amazon!

But what it did have was a horrible, hard-to-find anything layout and far too many salespeople hanging around, idle and clueless (as measured by schlepping me to the wrong places in search of what I wanted). They had a few shoppers, most of them between 90 and death. (Exaggeration, but you get the message.)

I looked at their financials, courtesy the Wall Street Journal:

To me there are “edges” that favor HD. In addition to a slightly faster growth in net income, HD has a 2.0% dividend yield, LOW has 1.6%. HD seems to have more positive buzz around the investment community.There’s a decent piece comparing the two on MarketWatch, which favors HD. Click here.

For now, I’ll stick with my big (and adding to) position in HD and my tiny position in LOW. They’re both doing well, just that HD is doing much better.

God bless capitalism. In Turkey, for $2,000 you can buy a Syrian passport, ID card and driving licence. The Syrian papers are being sold to ISIS fighters sneaking into Europe hidden among refugees. A forger boasted that ISIS fighters are using the documents to travel to Europe to start terror sleeper cells or live under false name free of past crimes. They are also being used by economic migrants from other countries exploiting the generosity of Europe to Syrian refugees. For more, click here.

Sleep Aids to Get You Through the Night. From yesterday’s New York Times:

Like diet and exercise, sleep is a necessary ingredient for a healthy life. But keeping yourself rested is often easier said than done. Whether you seek 40 winks or a full night’s slumber, here are some noteworthy gadgets that may help you get more out of your sleep. One of the sleep aids:

SuperMax the Turtle, $22

Inspired by Max Wilford, an 8-year-old boy with brain cancer, SuperMax the Turtle is a smaller version of Cloud b’s Twilight Turtle, a therapeutic night light for children. Like its larger predecessor, SuperMax projects a starry night sky on the walls and ceiling of a room, helping to ease fear of the dark. To buy, click here.

For more New York Times sleep aids, click here.

So how bad is Carly as a business manager? The answer is “very bad.” In fact not only is she a  bad CEO, she’s a distorter of the truth and a creator of fiction, also called a liar.

Jeffrey Sonnenfeld , a professor at the Yale School of management, studies CEO performance. He was on CNBC yesterday. He made these points on the air:

+ Her performance at Hewlett-Packard was terrible.
+ She sliced shareholder wealth at Hewlett-Packard by more than half — by 55%. In contrast, the S&P 500 was down only 7%.
+ She said technology was off. Yet Apple was up three-fold then. Dell was soaring. Google and Facebook were launched.  Xerox turned around and was up 75%.
+ HP was in great shape when she got there. She left it in tatters.
+ Virtually everything she bought (including Compaq) has either been shuttered or Meg Whitman has now divested it.

Yesterday’s New York Times The Upshot contained this paragraph:

As Carol Loomis wrote for Fortune Magazine in 2005, the Compaq merger brought a lot of growth to H.P. but not the sort that H.P.’s board or its shareholders found attractive. Hewlett-Packard’s profits in 2005 were $2.4 billion, a billion less than in the year Mrs. Fiorina started as C.E.O. That is a key reason she was fired (from HP).

Read also a MarketWatch piece on “Why Fiorina’s failure as a CEO ensures she’d fail as president.” Click here.

Last night Planned Parenthood Action Fund EVP Dawn Laguens, wrote to Mrs. Fiorina:

The full letter is here.

Useful stuff:

+ Zenni Optical has substantially expanded its offerings of frames. Anyone who pays retail for glasses needs his eyesight checked. Click here.

+ Not good to use specialty chemicals on anything since they remove finishes. Warm water and Palmolive work best.

+ If you buy your iPhone outright, make sure you get a $30 a month or so reduction on your monthly cell carrier bill.

+ Want to create quick mobile app? Try a new service called DWNLD:

It really works. Creating your app is free. Getting it going is free. They even get you on the Apple and Android app stores. After you get going, it’s $15/month, but you keep 90% of the revenues you generate from advertising, or subscriptions, etc. Good deal. Click here.

Ah, our wonderful mother-in-laws:

A mother-in-law said to her son’s wife, “I don’t mean to be rude but the baby doesn’t look anything like my son.”

The daughter-in-law lifted her skirt and said, “I don’t mean to be rude either, but this is a vagina, not a photo-copier.”

Harry Newton who dumped his Verizon stock. Verizon’s CEO told BubbleVision its financials would be flat for the next year or so. The stock fell. Verizon is spending $4.4 billion to buy AOL. I don’t understand that “strategy” one bit. Traditional phone companies like Verizon also don’t have the understanding to manage complex digital/advertising/editorial projects like AOL. (Actually I doubt anyone can.)

Love this quote from Bloomberg Businessweek:

Trump isn’t exactly self-made — he inherited substantial wealth from his father — but he is definitely self-invented.