Heisenberg Report

Back To The Future.

Here’s something to think about (excerpted from my latest over at DealBreaker called “Amazon Is Cheap At Any Price, Say Carnivorous Animals“):

Amazon is the poster child for a consensus view about “world-changing” companies. That consensus is basically that no price is too high when it comes to staking your claim on a share (figuratively and literally) of the future.

“I’d pay anything for a piece of a company that’s going to change the world” isn’t really a “thesis.” It’s just common sense. If you know that something or someone is going to change the world, then the only way you’re not bullish on that something or someone is if you’re bearish on human progress, and I’m not sure “neanderthal nostalgia” is really a thing.

The question then, becomes this: can you see the future? And if you can’t, then it would be wise to avoid overpaying for companies that you imagine are going to shape a future you can’t see. Doesn’t mean you shouldn’t own them – you should own them. But you shouldn’t own them at any price. More in the linked post above.

With that said, it was one helluva good day for the “future” where “the future” means today’s tech behemoths.

Obviously that’s the reaction to Thursday’s earnings and it was all that mattered on Friday. In fact, as Bloomberg notes, the Nasdaq 100 had its best day in eight years relative to the broader market:

Best day for the Nasdaq Comp. since the election:

CNBC reminds you that Amazon just added one whole FedEx in a single day.

Massive day for FANG in general – just as things were looking dicey:

Note the timestamp on this tweet (i.e. just as everyone was laughing at iPhone 8):

Fast forward to this morning:

Bottom line: Nasdaq 100 companies added $200 billion in market value on Friday.

The VIX was crushed back to a 9-handle:

Super day for anyone who quit Target to become an armchair VIX futures trader:

Here’s some fun color from Bloomberg’s Andrew Cinko:

Amazon rules the roost in the S&P Consumer Discretionary sector. Breadth in the sector is terrible, 23 up versus 61 down given JCPenney’s woes and Expedia’s earnings miss. But with Amazon rallying 11%, it’s adding 12 points to the index, accounting for the entire 8-point gain. Its reported expansion into health care yesterday only makes it more alluring for growth starved investors. Amazon’s gain keeps its growing strength versus the rest of retail intact — showing that any relative weakness doesn’t last.

Treasuries rose after a couple of people familiar with Trump’s “thinking” told Bloomberg that Jerome Powell is the frontrunner for the Fed which, if true, would be dovish compared to Taylor and his “rule.” The Powell headline hit the dollar as well:

It goes without saying that Trump could very well change his mind depending on what the next person he talks to tells him. Remember, this is a President who is now polling Lou fucking Dobbs on the issue:

White House spokeswoman (and furious hamburger in lipstick), Sarah Huckabee Sanders, had the following to offer at her daily propaganda briefing:

I can confirm the president plans to make an announcement on that next week.

Meanwhile, bond market volatility is showing some signs of life as the MOVE’s monthly average is on pace to log a third consecutive rise:

For his part, TD’s Priya Misra thinks any selloff beyond 2.50 isn’t likely sustainable. “While UST 10Y yield can sell off a bit further if John Taylor gets tapped for Fed chair, we remain long duration via 5y5y real rates and plan to initiate long nominal 10Y in model portfolio if yield reaches year-end target of 2.50%,” the strategists says in a new note.

Spanish equities fell 1.5%, reversing their weekly gain in the worst one-day loss since a couple of days after the referendum:

Here’s a look back the 2-day rollercoaster:

The euro generally took Rajoy’s late-afternoon announcement that he’s fired Puigdemont in stride, although the picture is muddied by the ECB’s dovish taper which obviously dominated in terms of dictating EURUSD this week:

But if you look at the euro versus the yen, you can see the trouble showing up on Friday:

You can see a similar dynamic showing up in bunds around the time this hit:

Oh, and the Nikkei crossed 22,000 on Friday to hit a fresh two-thousand-year high:

This was the seventh straight weekly gain for the index:

One last thing: