June 25, 2013 Update

DJIA:14,660 S&P 500:1,573 NASDAQ:3,321 Gold:$1,283 Oil:$96.03 EURO:$1.31 YEN:97.43

Irrational Anti-Exuberance

When it comes to decision making, I have found it is much easier to recognize when I have made a mistake than when I’ve made the right choice. And seeing how the market has behaved recently, it appears that I cannot be the only one to jump to such harsh conclusions. U.S. equities are declining sharply. Treasuries are selling off. Gold and silver are tarnishing. Investors internationally are perplexed by the unusual activity, especially since stocks and bonds do not currently have the inverse relationship that people expect. Because the markets are acting in a way in which many investors have yet to experience, I think people are terrified to invest in anything. However, what if these selloffs are overreactions to investments that people have started to believe to be mistakes? The market is a zero sum game. But unfortunately when all markets trade lower and people lose money, recognizing a good investment (or the “right choice”) becomes increasingly more difficult. As the markets adjust for tapering, it has become clear that most investors understated the risks. And as a result of mis-priced risk, investors are jumping to conclusions since identifying a “bad investment” is more obvious now than during bull markets. At the end of the day I believe it all comes down to human behavior, and most of us are irrational; especially when it comes to our possessions.

Domestic News

• Market Update Futures trade higher before the release of a wide range of economic data, following gains in bonds and metals and the upbeat momentum in Asia and Europe. 
• The durable-goods report for May will be released at 8:30am, and is expected to rise 3.8% from a surge in auto and airline growth. 
• Case-Shiller composite and the FHFA house price index will be released at 9am, new home sales are expected to climb by roughly 2% to an annual rate of 463,000 in May from April’s 454,000. 
• The Conference Board’s consumer confidence report will be released at 10am, and is expected to drop to 74 in June from May’s 76.2 level. 

International Updates

Asia

• Market Update Chinese stock markets made a slight comeback from yesterday’s mini-crash but continued to decline, with Shanghai Composite reaching a four year low.  

Europe

• Market Update Markets rallied from a six-month low as bonds as metals advance, and from rumors of a possible PBOC softening in a stubborn liquidity stance that likely helped Chinese stocks tumble. 

Corporate

• Neiman Marcus has filed for an IPO with hopes of raising $100MM. 

Earnings:

• Lennar Corp. (LEN) reported Q2 earnings of $0.32 per share, vs. $2.06 the year prior. 
• Walgreen Co. (WAG) expected earnings of $0.91 per share. 
• Barnes & Noble Inc. (BKS) expected to report a loss of $0.96 per share. 
• Carnival Corp. (CCL) expected earnings of $0.6 per share. 
• Smith & Wesson Holding Corp. (SWHC) expected earnings of $0.43 per share. 
• Apollo Group (APOL) expected earnings of $0.86 per share.  

Commodities and Forex

• The dollar rising against the euro, treasury yields climb.