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Potato Chips & America
Last year Lay's began a contest that will ultimately allow the public to create a new flavored chip. This is the first time in 76 years and a smart move in this age of inter-activeness between business and consumers. From July 29 to October 6 the company combed through 3.8 million submissions for a new flavor. This week the finalists made their way to supermarket shelves.
> Cheesy Garlic Bread
> Chicken & Waffles
> Sriracha
I'm not sure of the origins of cheesy garlic bread, although I'm told garlic bread isn't authentic Italian; in fact, like a lot of our favorite Chinese dishes, garlic bread is tailored for American taste. Chicken & waffles have been a secret in the black community for years, and sriracha is a hot sauce from Thailand.
These flavors speak to demographic shifts that haven't been friendly to the GOP; someone better figure it out fast.
In addition to the flavors that made it to the finals, where the winner will win $1,000,000 or 1% of sales (whichever is greater) between now and May 4, when the winner is announced there will be some all-American options conspicuously absent.
Meatloaf & Mashed Potatoes
Venison Meatballs & Sweet Barbecue Sauce
Jack Daniels & Coke
14,000 Angst & Fatigue
The market continues to stall around 14,000 while looking for catalyst. In the past two weeks all the news events that could have sparked a big time breakout have failed. The jobs report, consumer confidence, and even yesterday's retail sales data all of which left us scratching our heads. The market is looking for something to push it over the top, but so too is the economy. There hasn't been a major data point that erased the notion the economy needs help. That was also capped off during the State of the Union address where victory laps over the economy were taken at the same time we heard pleas for massive spending.
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At this point we should all be honest about President Obama's plans-they are not economic plans. His initiatives are all about social justice. His advisers try to help him wrap these ideas in economic garb. I really wonder why at this point that charade goes on. Every child should learn how to read early and no man should work for $7.25 an hour and we must save Mother Earth or doomsday is right around the corner, give or take a hundred years. It's a giant government that will need all the money ever earned in this nation to right the wrongs of yesteryear.
The notion that maybe the parent should teach that child, and people should avoid mistakes that haunt you so deeply into adulthood that you are working for minimum wage.
This stuff is going to cost a lot of money and yes, it will add to the deficit because there isn't that much money to snatch from hedge fund managers and open loopholes.
Pre-School will cost $98.4 billion over ten years
Child Care will cost $84.2 billion over ten years
Early Head Start will cost $11.5 billion over ten years
Infrastructure will cost $50 billion over ten years
And the hits keep coming.
I think the market reaction to the SOTU was moot, not a big deal either way, as it was the same old stuff. The big question remains about the impact of payroll taxes and Washington DC. On that note while there isn't significant effects yet, there are only two weeks left before the sequester takes place. Oddly enough I think the street wants to see it go through. It brings closure and other goodies.
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Yes, it results in slower growth from spending but it could give businesses confidence that it seals off other potential action such as additional taxes and regulations.
Yes, it's draconian on military spending. Just a couple days ago North Korea exploded a massive nuclear bomb and there are enough hot spots that should justify a strong military.
The market knows that even if the White House wins the public relations war and somehow sequestration is blamed on the very people that have defended defense spending forever, it is still going to be almost impossible to follow it up with more tax hikes. So, for the moment the market is looking for a period of no news in the aftermath of sequestration.
Under that scenario the market will be able to take the pulse of investors without outside noise. I think there are enough animal spirits to see stocks take off once all the news events are behind us. At least until the next jobs report where investors will fret about rooting for another flaccid number in the mid-one hundred thousand range so the Fed keeps printing, or something north of 200,000 so we might really feel the economy is getting better rather than have someone tell us like reading fairy tales to children at bedtime.
Investors are getting fatigued and frustrated which means a breakout must come soon or there will be a nice pullback.
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Closing at a new high in the next two weeks triggers fear ... fear of missing out on hot money, and that brings a lot of cash off the sidelines. Keep in mind that adjusted for inflation, the Dow has to rally to 15,685, which isn't out of the realm of possibility in a buying frenzy and would coincide with Fed money finally coming in aggressively.
A failure to break out, coupled with any "bad" news not anticipated, could send the index to 13,600 - a "must hold" support point.
Woodshed
After a big run-up in the stock market there is greater pressure on companies to deliver or pay a huge price. This makes it rather difficult for long term investors. Case in point Whole Foods (WFM), which we have in the model portfolio is under immense pressure this morning. Those sellers are not investors. This is the company you want to own and when the stock gets hit you let the dust settle and buy - if you are an investor. The problem is so many people say they're investors but panic at the first sign of tension.
I have to deal with this every day which makes the job so difficult.
Whole Foods' guidance was a disappointment. The company saw 14% top line growth in the first quarter so its new full year guidance reflects growth between 9-10% and same store sales possibly dipping to 6.3%. The story seems to be tougher resistance to pricing power based on the broad economy. But I like that management will make the adjustments and operating margins will actually improve during the course of the year.
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Pedigree - companies that stick close to its early pedigree are more often than not good investments. Moreover, companies that have survived good times and bad times are more often than not good investments. And companies that are growing their business are more often than not good investments. Heinz was founded in 1869.
Value - I marvel at people that think value is reflected in the share price instead of the sum of the parts under the hood. Yesterday Heinz was trading $5.00 above its previous peak back in 1998 and up significantly. A quick glance at the chart and most investors would have surmised the stock was overvalued.
Then there are names that are taken to the woodshed that don't have the core of a Heinz. ITRI, CTL and STMP are just a few names getting destroyed this morning. At some point they'll be buys but not today. The bottom line is the street is taking them all out to the woodshed so it's incumbent on investors to hold some and let others go, and the only way to really know that is to look under the hood.
We have been taking a lot of profits this year and everyone should have a fair amount of cash. So, we are bound to get nicked in this woodshed environment but we are bound to find great stocks on sale - and that's what it's all about.
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