MorningWord 8/18/14: This is the Business that We’ve Chosen

by Dan August 18, 2014 8:59 am ‚ÄĘ Commentary

I am writing this from an airport in Maine, about to board a Delta flight to New York City, about 500 miles away. To say that I want to stay would be an understatement but the markets are set to open as they do every Monday morning at 9:30am and I have a job and other obligations back home. As we all do ūüôĀ

Like most in the business I am tied to my desk from about 7:30 am in the morning to at least 4:30pm every Monday through Friday, staring at my quote screens/trading systems, going back and forth between news/research reports, charts, Twitter etc. This makes working remote a tall task on most days. ¬†That’s all fine and good, as Hyman Roth advised¬†Michael Corleone in The Godfather II, “This is the business that we’ve Chosen“.

So I guess on a beautiful August morning I am entitled to a little whining as I head back to the city to get back to business. I’ll be back in a couple hours but until then I thought I’d highlight part of my good friend Ken Grant’s weekly note to his institutional clients:

September and Everything Before
I lift the theme for this note from the album that made the Counting Crows famous — August and Everything After. ¬†I actually have little to say about September, other than that it should be a barn burner. ¬†But today’s trade is absolutely a microcosm of what tends to go on in August and what’s going in the markets right now. ¬†Indexes rallied all week, including through this morning, in part due to some optimism about decreased tensions in the Ukraine and the Middle East. But then whammo!! Mid-morning, the Ukes announced that they had taken out an entire Russian convoy (pretty balsy), and the SPX reversed 20 handles, before rallying to flat on the close.
You can trade this tape if you wish; I’d rather be sunbathing.
Aside from the herky jerky nature of valuations, the rally-puke-rally reflects a pitched battle between geopolitical bummers on the one hand, and certain fundamental trends on the other. ¬†Most notably, in terms of the latter, Gov’t Bonds, led by Europe, are experiencing a continued historic rally that has taken, among other matters, the German 10 year to sub-1% yields, and its 2-year into negative yield territory. ¬†Makes US bonds at 2.3% and change look like a great place to park some cash. ¬†I believe this paradigm holds for the rest of the year, and will take equity valuations to new elevations. ¬†But mostly that’s a September story, and, in the meantime, we must deal with everything before.
As we head into a week where the Fed Chair would normally be the main event markets will also be at the whim of geopolitical headlines that will continue to cause palpitations. But in the end it all might just be noise. ¬†If I had my way, I’d be sitting on my hands for the next couple weeks and finishing out the Summer. But as a married man and a father of two daughters with a career tied to the movements of stock and options tickers, I rarely get my way.
My view yesterday in Northeast Harbor, Maine: