Patience (or forbearing) is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without acting on annoyance/anger in a negative way; or exhibiting forbearance when under strain, especially when faced with longer-term difficulties. Patience is the level of endurance one can take before negativity. — Wikipedia
If ever there was a situation where the participants display the very characteristics which are opposite of the ones they are reacting to, the past weeks sell off would be it. If you are not familiar with my reference, the topic de jour in the investment world is 'Patience Panic.' You see, investors observing most of the macroeconomic data in recent weeks have come to the conclusion the Federal Reserve Open Market Committee is going to be raising rates sooner rather than later. In fact, most believe 'lift off' will now be in June rather than in September. As a result, stocks have sold off pretty sharply during the last few weeks in anticipation of Mrs. Yellen taking 'patience' out of her written remarks next Wednesday.
In looking at the situation, what is noteworthy is how traders are making decisions primarily based on information which is macro based. Currency, oil, and fixed income markets have experienced heightened volatility over the past few months, especially last week. In these kinds of environments, leveraged entities become far more vulnerable to liquidity issues. We saw the same thing last October and November when the price of oil fell out of bed. The volatility in currencies, oil , and the bond market may continue for a while, especially in oil. The next three months certainly will be difficult for investors in black gold, but help is on the way. Rig counts have been trending down since October and they were slashed again last week. For equity investors, to ignore the relentless onslaught of global macro trends and the markets reaction is tough. Which is why the term patience is so, shall we say, appropriate. Profitable investing requires the ability to stick with positions which may not necessarily show an immediate gain. In many instances, it takes months, or maybe a year or more, to have a successful outcome. In the meantime, monitoring macro events and using it to your advantage seems to me a patient, and potentially satisfying, approach.
Elsewhere in the market, Intel (NASDAQ:INTC) guided down for the year because of weakness in the PC space. Intel (NASDAQ:INTC) was a solid performer last year, but it's revenue base is still very much tied to the Wintel complex. It has made some progress in the mobile space and until it can show greater penetration in these areas, it remains a slow growing, but solid company. On the opposite side of the equation is Apple (NASDAQ:AAPL), which had its coming out party for the I-watch. If you are in the market for the latest fashion accessory, unless you are willing to pony up a cool 17k for the gold model, the price points will be in the $300-$1100 range. The Swatch Group SA (SIX:UHRN) and Fossil Group Inc (NASDAQ:FOSL) have to be breathing a little heavy right about now, wouldn't you say? April 10 is the first day to the watch can be ordered, so get your mouse or finger ready.
As expected, the banks mostly passed the CCAR exam with flying colors, and low and behold, the government even let them pay increased dividends and allocate a few more shekels for buybacks.Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), JPMorgan Chase & Co (NYSE:JPM), and Morgan Stanley (NYSE:MS) all raised their dividends. Typically, Bank of America (NYSE:BAC) was given the stop sign to wait for a later date. The more things change, the more they stay the same. Still, the banks seem interesting on the face of the ever impending lift off.
Lumber Liquidators (NYSE:LL) proved to be a unique battleground this week as the company tried to respond to a negative piece on 60 Minutes about it's elevated use of formaldehyde in flooring products. The genesis of the piece came from a very good investor, Whitney Tilson, who took a page out of Bill Ackman's playbook. Shock of shock, they both are good friends from Harvard, the bastion of ethical behavior. Tilson has been short the stock for a long time, and now is quoted as saying he is absolutely positive it is going to zero. Ackman, whose underlings have been contacted by the FBI about his Herbalife dealings, says the exact same thing about his well known short of the nutritional supplements company. Both Ackman and Tilson are great investors, and have been for a long time. They don't need to feed the press stories for their short ideas to work. Maybe Harvard could have taught them that in the ethics class.
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