The Dow lost -252 on Friday but it would have been a -302 loss if not for Visa's $7 gain that added about 50 Dow points. Ditto on the Nasdaq if not for Google's +24 point gain, Biogen's +36 and Amazon's +43 points.
Earlier in the Day Visa was up +15 and adding about +115 Dow points but once the selling accelerated into the close that gain was cut to +$7. Google's gains were cut -5 to +24 and Amazon lost -5 to gain +43. Those big gains kept the major indexes from declining further into the red. The Dow lost -251 to close at a six week low. Even a +7% spike in crude prices could not rescue the markets from a very bad day.
January was not a good month for the markets with the major indexes averaging about a -3% loss. Biotechs were the big winners with energy, semiconductors and financials the big losers.
A lot of the market negativity on Friday came from the economic reports. The GDP for Q4 was much weaker than expected and losing almost half of the Q3 gains. The Q4 GDP came in at +2.6% growth, less than the consensus estimates for +3.1% growth and Moody's estimate for +3.4% growth. This was far less than the +4.97% growth in Q3 but nobody expected that to continue. Consumer spending rose +2.87%, up from +2.2% in the prior quarter, but fixed investment gains declined from +1.21 to +0.37%. An unexpected buildup in inventories also boosted the headline number by +0.82% but it will detract from future quarters. A buildup in inventories can occur when manufacturers are expecting stronger demand ahead or when demand slows and retailers are not ordering as much product as before. Final sales, which excludes the impact of inventories, rose +1.8% after gaining +5% in Q3.
Net exports subtracted -1.02% as a result of the strong dollar. Government spending declined and subtracted -0.4% from the headline number. Disposable income rose +3.8% after a +2% rise in Q3.
We will see two more revisions of the Q4-GDP in the coming months and the revisions are typically volatile. We will not see Q1 GDP until late April and expectations are for another decline in growth. Almost all of the recent economic reports have shown a decline in activity and the drop in energy spending will also weigh on the GDP.
This report confirmed what many analysts had feared regarding the slowing U.S. economy. This report along with the many earnings misses due to the strong dollar helped push the indexes lower on Friday.
The Employment Cost Index for Q4 posted a minor decline in the headline number from +0.7 to +0.6% and a three-month low. Wage growth slowed from +0.8% in Q3 to +0.5%. Benefit costs were flat at +0.5% growth. Compensation is up +2.3% for the full year and flat with the Q3 rate. That is actually the highest rate in more than two years. Benefit costs for the full year rose +2.6% and also a multiyear high.
The weakening of the economic numbers drove treasuries higher and yields lower. The yield on the 30-year declined to 2.251% and a 65 year low. Treasury yields are still telling us there is trouble ahead.
The final revision of Consumer Sentiment for January declined only slightly from 98.2 to 98.1 and remains at an 11-year high and up +4.5 from December. The current conditions component rose from 104.8 to 109.3 and the expectations component rose from 86.4 to 91.0. Consumers are very happy about the decline in gasoline prices plus 40% reported their incomes were higher than last year. That is up from 34% of the respondents in December. The holiday bonus payouts must have been higher than expected.
Those respondents expecting business conditions to be better in 2015 increased from 29% in December to 37% in late January.
Next week is payroll week. The worry over the Friday payroll numbers will hang over the market all week. The ADP report on Wednesday could soften some of those fears if the number is decent.
The Manufacturing ISM on Monday could be a pothole if it comes in much weaker than expected. This is a national report and the various regional reports have been showing weaker results.
There were several new splits announced last week. Visa was the biggest company with a 4:1 split for six weeks from now. This will definitely be tradable once the Friday bounce fades. Hanes Brands is also a 4:1 for March 3rd and should also provide a split run if the market cooperates. Rollins is a 3:2 split and that ratio does not normally provide much in the way of a ramp into the split. I would bet on Visa and Hanes for the best performance.
Visa (V) reported earnings of $2.53 compared to estimates of $2.49 and revenue rose +7% to $3.38 billion. Transaction volume rose from $1.84 trillion to $1.90 trillion. The company affirmed 2015 estimates but warned they expected at least a 2% impact from the strong dollar. About 60% of Visa's volume is outside the USA. The CEO said the use of credit cards was unusually strong during the holiday quarter. Also, he said they were seeing the results of the lower gasoline prices in the payment/shopping trends of card holders. Fifty percent of the savings was actually being saved with 25% going towards paying down debt and 25% spent on groceries, restaurants and clothing. Visa shares spiked +15 at the open to supply about +110 Dow points but faded at the close to +7 and +50 Dow points. The company also announced a 4:1 split, which will remove some of the volatility in the Dow when Visa shares decline from $260 to $65. Visa will go from the heaviest weighting in the Dow to number 20. Goldman Sachs will become the top dog in terms of weighting.
Amazon (AMZN) shocked investors with a huge profit for Q4. Earnings were 45 cents compared to estimates for 23 cents. That translates into $214 million in net income compared to losses in the prior two quarters. Revenue rose +15% to $29 billion and gross margin was 30%. Sales increased +20% to $89 billion for the full year. Amazon took a monster hit of $895 million from the strong dollar.
The company said its Prime memberships grew by 53%. They added more than 10 million Prime members since Thanksgiving. Some analysts estimate they have between 40-45 million Prime customers but Amazon does not release the numbers. The average Prime member spends $1,500 a year and a regular Amazon customer spends about $625 per year.
Amazon said its Amazon Web services (AWS) grew 90% in Q4 and topped 1 million customers. Starting in Q1 they will breakout the revenue/income for AWS rather than lumping it into the "other" category. Amazon obtained a bank loan of $2 billion and sold $6 billion in debt in order to continue building out datacenters and regional distribution hubs for faster shipments. There are some analysts who believe Amazon will eventually spinoff AWS and with gross margins of 90% and user growth in the 90% range it would likely be worth somewhere over $30 billion compared to Amazon's total market cap of $145 billion.
They guided for Q1 for sales of $21.9-$22.9 billion compared to estimates for $23 billion. Because Amazon spends/builds frantically in the first two quarters when online buying is slow they guided to a -$450 million loss to +$50 million in profits in Q1.
Amazon makes up 4.03% of the Nasdaq 100.
Google (GOOG) reported earnings Thursday evening of $6.88 compared to estimates for $7.08 but investors did not seem to care. The CFO blamed the strong dollar for the lower than expected performance. Revenue minus traffic acquisition fees was $14.48 billion and lower than the $14.61 billion estimate. Google's share of the advertising pie is still shrinking. Facebook's share rose from 5.4% in 2012, 17.5% in 2013 and 21.7% in 2014. In 2013 Google owned about 50% of the market but that is declining as Facebook and Bing continue to grow. Expenses rose +22% with 46% of that in R&D for things like self-driving cars.
Investors seemed to applaud the results with Google shares rising +24 to $537. This is still below decent resistance at $550. Google makes up 7.22% of the Nasdaq 100. Apple is 11.55%.
Biogen Idec (BIIB) reported earnings of $4.09 compared to estimates of $3.76. Earnings nearly doubled the year ago quarter. Revenue of $2.64 billion fell short of estimates at $2.65 billion. The company projected earnings for 2015 of $16.60-$17.00 compared to analyst estimates of $16.37. Shares exploded higher with a 10% gain of +$36. Biogen is 1.07% of the Nasdaq 100.
Intuitive Surgical (ISRG) reported earnings of $4.92 compared to estimates of $4.38. However, despite a 10% growth in robotic surgeries in Q4 the company warned that growth in 2015 could range from 7% to 10%. Expenses rose +10% while surgical profits declined -12% due to increasing competition. With a PE of 45 this was not good enough and investors dumped the stock. ISRG is not in the top 25 highest weighted companies in the Nasdaq 100 so the $10 decline was not a material influence.
Paccar (PCAR) reported earnings of $1.11 compared to estimates of $1.09. Revenue of $5.12 billion also beat estimates of $4.96 billion. The company said lower fuel prices were stimulating a boom in truck sales. Despite the positive results shares collapsed with a -6% loss.
Intercept Pharmaceuticals (ICPT) said its obeticholic acid (OCA) product had received "breakthrough therapy" designation from the FDA. The product treats the life threatening liver disease NASH. The designation will allow ICPT to speed the drug through the final trials and into the market. The drug reverses liver damage due to NASH. Shares rallied $30 on the news.
Dow component Chevron (CVX) reported earnings that declined -28% to $1.85 but that still beat expectations of $1.63. Revenue fell -18% to $46.09 billion and well above estimates of $30.65 billion. Production was flat at 2.58 mbpd. Prices received per BOE declined from $90 to $66 in the U.S. and down from $101 to $68 internationally. Chevron announced a capex budget of $35 billion that was down -13% from 2014. The company said it was going to halt its share buyback until oil prices improved. Chevron shares were down only fractionally.
The earnings calendar for next week is heavily weighted towards Wednesday and Thursday. However, Exxon on Monday is the bellwether for the energy sector. How they handled their capex decisions will be critical news for investors. Disney and UPS highlight Tuesday. More than 100 S&P companies report this week and three Dow components.
In other news Shell said it would cut $15 billion in spending over the next three years. Conoco said it was cutting capex spending even further than previously announced, down from $13.5 billion to $11.5 billion.
Shake Shack (SHAK) priced its IPO on Thursday night at $21. Shares rocketed to $52.50 at the open before falling back to close at $45.90 and a +118% gain. This is an amazing open considering they only have 63 stores. The $1.6 billion valuation at the close equates to about $27 million per store. That is a price to sales ratio of 15:1 compared to Chipotle (CMG) at 6:1. SHAK started in Madison Square Park in Manhattan in 2008. Store locations grew during the recession but locations outside Manhattan are far less profitable. For the first nine months of 2014 the company only generated $84 million in revenue while net income of $3.5 million was -21% below 2013 levels. They burned $7 million in cash in the first 9 months and had only $6 million as of Sept 30th. Net profit margins are only 4.2% and very low considering the post IPO valuations. McDonalds averages 17% profit margins but most of their 36,000 stores are run by franchisees.
The IPO will transfer 31.6% of the parent corporation ownership in Shake Shack to Shake Shack. The funds from the IPO will be used to repay a $22 million loan to the parent SSE Holdings Inc. Cash payments from Shake Shack will also be made to the existing 68.4% of owners as a tax avoidance strategy to Continuing SSE Equity Owners. They don't disclose the amount of the payments but they will be large and that will subtract from the available cash left to build the business. Lastly, the post IPO valuation of more than $1 billion now requires them to report earnings using GAAP methods and that will eliminate a lot of the nonstandard terms they used in the prospectus to discuss earnings and expenses. Things like "adjusted EBITDA," "Shack-onomics" and "cash-on-cash return" will now have to be stated in normal accounting terms. The potentially negative impact of this change was also mentioned in the prospectus.
I know Shake Shack is a cult like favorite in New York but I would be looking for any way possible to short it once the IPO buzz wears off.
A rally in crude prices tried to lift the market late in the day but the general negativity from economics and earnings was too much to overcome. The +7% spike in crude prices was blamed on news that ISIS had launched a surprise attack on Iraqi Kurdish positions on the outskirts of Kirkuk on Friday. A senior Kurdish commander and at least five of his men were killed. The assault on Kirkuk was one of the most aggressive on record by ISIS.
The surge by ISIS into Kirkuk surprised everyone given the beating they have been taking from coalition air assets.
Kirkuk is a critical area for export of oil from Iraq with those fields exporting oil through a pipeline through Turkey.
I am doubtful this news will amount to anything but it may have been the spark that touched off some serious short covering in the futures market. With numerous analysts still expecting to see WTI decline into the $30s there were a lot of shorts in the market. The afternoon spike was clearly a short squeeze that once started tended to feed on itself.
However, note that the rebound started on Thursday and faded somewhat at Friday's open. When the morning dip was bought the afternoon short squeeze was born.
The active rig count plunged by -90 to a five year low at 1543. That was the biggest weekly decline since the financial crisis. That brings the number of rigs cut to -388 since the end of September. That is a -20% decline and the pace is accelerating.
Canadian rigs are down -214 to 608 (-26%) from last year's level at 822.
With the massive cuts in capex spending, 20% decline in active rigs and the expected production declines 3-6 months from now we are probably at or near a bottom in the energy crash. I believe this is a twice a decade buying opportunity in energy stocks.
Since June investors have lost -$393 billion on energy stocks. Over $350 billion of that loss came from declines in 76 energy companies that Bloomberg tracks. Another $40 billion loss came from high-yield bonds issued by energy companies. Oil and gas E&P companies have invested more than $1.4 trillion into the sector over the last five years. There were $286 billion in joint ventures, investments and spinoffs. There were $353 billion in initial public offerings and companies borrowed $786 billion in bonds and loans.
We are just starting to see the earnings reports from the energy sector and there will be a lot of ugly in the weeks ahead. Those with the best reports will be the best candidates for long term positions. Those with the worst reports, falling cash balances, high debt and expensive production will be the ones to short and or be acquired.
There are so many problems with the market I don't know where to start. The market runs on two things. Those are earnings and economics. The decline in the global economy is accelerating. The Eurozone is falling further into deflation status and the ECB QE program will not begin until March. Prices in the Eurozone declined -0.6% year over year in January and a steeper decline than the -0.5% drop expected by analysts. This follows the December decline into deflation of -0.2% and the weakest since 2009.
Germany reported it also slipped into deflation with a -0.3% year over year decline in prices in January. The drop in Germany means that not only the periphery is in decline but also the core since Germany was the strongest economy in Europe. The Danish central bank cut its rates for the second time in a week. They cut the rate paid to commercial banks for excess funds parked at the central bank to -0.5%. It was already negative but now even more negative. That means banks have to pay the central bank to hold their excess cash. The Danish Krone is still pegged to the euro so expect another currency upset like we saw from Switzerland as the euro continues to fall.
Energy prices are aggravating the decline in overall prices in Europe. In January energy prices fell -8.9% after a -6.3% decline in December. While that may be good deflation since lower energy prices are stimulative it also reduces the cost of everything else because of lower input costs. Unemployment in the Eurozone declined from 11.5% to 11.4% and the lowest level since 2012.
The Baltic Dry Index declined to its lowest level in 26 years indicating a severe lack of cargoes to be shipped. The Baltic is the base rate for renting a cargo ship for dry cargoes such as grain, fertilizer, mineral ore, coal, etc. The demand for shipping is not just at the low for the economic cycle but a multi-decade low.
It is hard to build a market case for a rebounding economy when there is almost no demand for commodity shipping. The commodity index rebounded +2.9% on Friday only because of the short squeeze in oil of +7%. It is still at six year lows. If there is no commodity demand there is no economic growth.
Baltic Dry Index
The S&P is in decline mode and the internals are terrible. At the close on Friday only 35.8% of the S&P-500 stocks are trading above their short term 50 day average. On the longer term 62.6% of the S&P is trading above their 200-day average but that number is dropping rapidly and is very close to being the second weakest since reading since 2012. There is no way you can build a bullish case for the market on these internals.
On the earnings front the overall results have actually been good but the earnings misses by numerous high profile companies has resulted in quite a few declines. As of Friday 227 S&P companies have reported. According to Factset an abnormally large 79% have beaten on earnings with a more realistic 58% beating on revenue. Stock buybacks have been a major factor in many of the earnings beats. When you can't increase your earnings buy back stock and reduce the number of shares to increase your earnings per share.
So far 80% of companies giving guidance for Q1 have issued negative guidance. That is far in excess of the average at 68%. Only 19% of companies have issued positive guidance. This is very low historically. Nearly every company with any international sales is guiding to the low end of their prior estimates because of the strong dollar.
Earnings growth for Q4 is now at +2.1%. Apple's earnings accounted for HALF of the S&P earnings gains last week. Without Apple the Q4 earnings growth rate would only be +0.2%.
The forecast for Q1-2015 earnings is now negative. Q1 is likely to be the first quarterly decline in earnings since Q3-2012. On September 30th analysts were expecting Q1 earnings growth to be +9.9%. By December 31st that had declined to +4.2% growth. Today the consensus estimate is for a decline in earnings of -1.6%. A lot of this weakness is coming from the energy sector. On September 30th energy earnings estimates for Q1 stood at +3.3%. On December 31st that had dropped to -28.9% and as of today it has fallen to -53.8%.
Bespoke Investment Group posted the following chart showing the spread between positive and negative guidance is the worst since 2008. Actually the spread over the last three years has not been pretty. There are numerous indicators of earnings fundamentals but this one is definitely attention getting.
With Q4 earnings growth about to go negative, Q1 estimates already negative and Q2 estimates probably going negative as well it is very likely earnings are going to have a negative impact on the market and it could be lasting.
QE in Europe has already helped the European markets and eventually it should lift the economy. However, it took multiple QE programs across five years for the U.S. economy to recover and it was the slowest recovery on record. The European QE will be less effective because it is a collection of countries with different economies and different central banks using differing amounts of QE. There is no common treasury bond in Europe like there is in the USA. The impact of QE will be less and may take longer to produce any measurable change.
Meanwhile the U.S. economy is stumbling along. Any week now we could get a series of economic reports that show the U.S. is falling back into recession and with the Fed already at zero interest it is not prepared to fight a new recession.
My hope is that the low oil prices will generate a consumer spending boom that prevents the U.S. from falling back into recession. Hopefully the $1.28 per gallon that consumers are saving today from the same period in 2014 will bolster the economy. Based on the 9 million barrels per day of gasoline consumed that represents a savings of $484 million a day, $3.387 billion a week and $176 billion a year on gasoline alone. With distillate demand slightly over half of gasoline demand that represents another $90 billion in annual savings on diesel, heating oil and jet fuel.
Since we have not seen any evidence of an increase in consumer spending we will have to wait until spending habits change before projecting economic gains. Analysts tell us it takes 3-6 months at the new gasoline prices before spending habits change. However, Ford said sales of F150 pickups exceeded manufacturing capacity at the present time. That is clearly a result of lower fuel prices. We need to see that carry forward into the general economy before getting too bullish on the 2015 outlook.
The S&P returned to the 1,990 level on Thursday and almost hit it again on Friday. Since January was a bad month in the market and last week was month end we would normally expect traders/funds to be closing out losing positions into month end with hopes of entering new positions as the new month begins.
Also, the first three days of any month are typically the best three days of the month because of new retirement contributions being put to work. This suggests we could start next week on a positive note. If by chance we start out with a continued decline I fear we are going to decline sharply once the support at 1,985 is broken. The 150-day average at 1,996 was broken at the close on Friday but only by one point. This average has been support since early December.
The next material support level after 1,985 is 1,906. Resistance is solid at 2,065.
The Dow closed at a six-week low and appears headed for a retest of 17,000 and possibly 16,360. The chart has clearly broken down as a result of too many Dow stocks missing on earnings and taking big losses. The Dow chart is no longer bullish. The pattern of lower highs and lower lows is intact and a dip to 17,000 will only emphasize that even more. There are three Dow components reporting earnings next week along with 100 S&P companies.
Visa's gains added about 50 Dow points or the Friday decline would have been a lot worse.
Support at 17,000 is crucial or we face the real possibility of a serious breakdown. Short term resistance is 17,400 and 17,500.
Only 12 of the Nasdaq 100 (actually 107 stocks) were positive on Friday. The strong performance of AMZN, GOOG, GOOGL and BIIB kept the index from returning to the mid-January lows at 4,100.
The Nasdaq 100 lost -33 points on Friday and -129 for the week. As mentioned above were it not for those four big caps the damage would have been a lot worse. However, the number of multi-dollar losers on the Nasdaq Composite still far outweighed the winners.
The NDX has support at 4,085 and resistance at 4,215.
The Nasdaq Composite has support at 4,545 and resistance at 4,700.
The Russell 2000 lost the least of any major index at -1.98%. In theory fund managers may be less afraid of future earnings from the small caps because they have minimal exposure to the strong dollar and overseas sales. The small caps may be the safest place to ride out the economic weakness in Europe. However, once the big caps pick a direction by violating critical support the small cap babies will be thrown out with the big cap bath water. There is no safe harbor once a confirmed market decline appears.
The Dow Transports ($TRAN) closed at a three-month low at 8,649. There have been several intraday dips below that level but this is the lowest close since October 30th. With oil prices hitting a six-year low last week the transports should have been stronger. However, they declined steadily all week and are in a confirmed decline. The 100-day average has been support since August 2013 and that has failed. The weakness in shipments and the worry that oil prices will rise soon is weighing on the index. With the transports at a three month low any continued decline will be an anchor for the Dow.
The NYSE Composite is on the verge of a breakdown below 10,400. The index is already in a confirmed downtrend and a break below the December lows at 10,400 would be significantly bearish. The NYSE is struggling because of a lot of small banks and energy companies and both sectors are in the penalty box for declining earnings.
For next week the first three days could see a bounce as a result of the -500 point Dow decline last week and the influx of month end retirement funds. However, since it is payroll week and last week was so negative fund managers may elect to wait for the Nonfarm smoke to clear before adding to or establishing new positions. When the market is in a steep decline managers tend to drag their feet on putting new money to work. The S&P had two down months back to back for the first time since 2012. That is a red flag warning.
I would be cautious about new long positions until the market finds a bottom. There is no rush to invest. There is always another day to trade as long as you have capital to invest.
Ignore the Super Bowl Indicator and most other random indicators of the same vein. This will be the 49th Super Bowl. They have been played by different teams, in different locations in all kinds of weather. There is NO relation to the market despite what some analysts will predict. Claiming years when the NFC wins as a predictor of a strong market is hogwash. If you manipulate any data long enough you can always find a temporary relationship despite the coincidence being entirely random. Stick with your charts for market direction.
The Mexican Peso is in free fall at 15 to the dollar and a nine-year low. The Brazilian Real is at 10-year lows against the dollar. The only thing they have in common is that they are large producers of oil and the black gold has turned into a slippery slope for foreign currencies.
Comments from Philly Fed President Charles Plosser on the Fed managing expectations:
"It may work out just fine, but there is a risk to that strategy, and the risk is that we wait until the point where markets force us to raise rates and then we have to react quickly and aggressively. I believe that if we wait too long, then we run the risk of falling very far behind the curve or disrupting the economy by rapid rate increases.
The history is that monetary policy is not ultimately a very effective tool at solving real economic structural problems. It can try for a while but the problem then is that it's only temporarily effective, and when you can't do it anymore you get the explosion in the Swiss market.
One of the things I have tried to argue is look, if we believe that monetary policy is doing what we say its doing and depressing real interest rates and goosing the economy and we are in some sense distorting what might be the normal market outcomes. At some point we are going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We are not going to be able to hold the line anymore. And then you get that rapid snapback in premiums as the market realizes that central banks can't do this forever. And that is going to cause volatility and disruption.
I think the jury is still out on the costs. Because the cost I was worried about was the longer-term cost of unraveling all of this. So maybe I was right, maybe I was wrong. That remains to be seen.
I do worry about the longer-term implications for the institution. Part of my criticism has been that we have pushed the boundaries into fiscal rather than monetary policy. That has brought us praise and opprobrium. Perhaps justifiably on both counts. I do wonder as I look down the road five or 10 years, how will that shape the institution? What happens to our independence? What happens to our ability to do things effectively? Given all that we have done â€” maybe it was all for the best, but even if it was â€” are there going to be longer-term ramifications that we may end up regretting later?"
On Wednesday the Fed boosted its assessment of the economy and repeated its pledge to be "patient" on raising interest rates. The word patient is commonly considered as a code word for two meetings. As long as they keep using that word it will be at least two more meetings before they raise rates. The committee characterized the economic expansion as "solid" rather than the term "moderate" they used in December. Interesting that economic reports are weakening but the Fed is upgrading their outlook.
The problem is that the Fed wants to raise rates. They realize the long term problem of very low rates and they really want to raise them. Unfortunately the U.S. and the global economy are not cooperating. Oil prices are too low and the dollar is too strong. This is going to prevent them from raising rates long into the future until those conditions change. Once the Fed hikes rates the dollar will spike even higher and further harm U.S. companies doing business overseas. A stronger dollar will further depress commodities and increase deflation pressures.
The Fed acknowledged the problems overseas when they said they would take "international developments" into account when considering a rate hike. That language in the Fed statement helped send treasury yields even lower. The last time the Fed mentioned "international developments" was in January 2013.
The Fed is in a box and the spring under the low rates is being wound tighter as every month passes. Like Plosser mentioned in the comments above, if the Fed waits until it is forced to raise rates then the speed and severity could be very harmful to the market and the economy. They need to raise rates soon but they can't. They are trapped by economic conditions. This is an economic time bomb and the clock is ticking.
The economic recovery is far from solid and if the Fed raises rates they could knock the economy back into a recession. If they don't raise rates the current asset bubble could end up being worse than the 2008 financial crisis. There is no easy button for the Fed.
Be glad you are watching the Super Bowl from the comfort of your home. Ticket prices averaged about $3,900 a week ago according to ticket search engine SeatGeek. On Monday they rose to $4,500. On Wednesday they rose to $5,140 and on Friday they hit $6,191. As of Saturday the cheapest ticket on SeatGeek was $8,000. Since brokers sell tickets to customers without actually owning the tickets the race is on to fill those orders. They get a quote first, sell the tickets to customers, collect the money and then attempt to buy the tickets to fill the order. This is the Super Bowl version of a short squeeze.
Add in plane tickets, hotel rooms, taxi fares or car rentals, meals and drinks and this is some very expensive entertainment. So set back, order some pizza and have some friends over. You will still be saving a lot of money by staying home and the weather inside is always perfect and you can pause the TV while you go for drinks or a pit stop down the hall.
The new Prime Minister of Greece Alexis Tsipras is invoking the nuclear option in dealing with the EU, ECB and IMF otherwise known as the Troika. Tsipras said "Greece will not seek an extension of the bailout agreement" and "We don't plan to cooperate with that committee." Greece has already accepted 245 billion euros in bailout aid from the Troika in exchange for progressively stronger austerity programs. Tsipras told his cabinet he would not abandon his campaign promises to the Greek people and would no longer agree to a policy of submission to the Troika. His campaign promises halt all the austerity measures and have started a democratic revolution. Tsipras is betting the Troika will not let the outstanding debt breakup the monetary union over the bailout funds. If Greece refuses to repay the debt the EU has no options other than ejecting Greece from the EU. However, they will not want to see the EU fractured by a Greek exit but they also can't be seen as giving into the demands of the newly elected government. Tsipras knows this and as of today he is holding all the cards. Eventually a "mutually agreed" settlement will be made because there is no other option.
Are you planning on retiring soon? Every day more than 10,000 baby boomers turn 62, the average age where people actually retire according to a Gallup Poll. By 2030 one in five Americans will be over the age of 62. Fidelity Investments found that a couple who retires at 65 needs an average of $220,000 to cover out of pocket medical expenses over the course of their retirement. This includes things like hearing aids, eye exams, glasses, dental care, nursing and rehabilitative care. That does not cover nursing homes or assisted living facilities that cost from $42,000 to $77,000 a year to start. Gallup said senior citizens retiring now are in denial over the cost of their future healthcare. They assume Medicare will cover everything and that is the wrong assumption.
The stock Trader's Almanac pointed out that when the markets lose ground in January the month of February is down more often than not and the average performance was solidly negative. When Santa fails to call bears will come to Broad and Wall. Santa definitely was a no show this year and that brings us to another market adage. As January goes, so goes the year. With January down an average of -3% across all the indexes it sets up a test of that adage. With economics and earnings declining the outlook is negative for February.
Enter passively and exit aggressively!
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