To coin a phrase, yesterday “was not a joke,” but apparently a parody on Capitol Hill and Wall Street. 

Rep. Adam Schiff read aloud his fantasy of what the Trump call with Ukraine’s president might have sounded like. The only problem is that what he said wasn’t true, but a lot of people watching television probably thought it was. Schiff said the bit was a “parody,” which is odd since he also contends the transcript speaks for itself and it’s riddled with proof of high crimes and misdemeanors.

Meanwhile, after waiting for a few hours into the trading session, the Peloton’s initial public offering (IPO) made its debut. The stock (priced at $29.00) opened at $27.00 and tumbled to $24.75 before closing at $25.76. Heck, if they could put those moves into an exercise routine, it would outsell those expensive treadmills. Believe it or not, the debut could have been worse. Management crowed that it will be profitable in 2023, which begs to question how they can stay solvent for that long.

• 2018 Revenue: $915 million +110%
• 2018 Losses: $195.6 million +309%

After the close, the next hot IPO in the cue decided it would postpone its public debut. Endeavor, the mega Hollywood agency, has seen declining margins and carries $4.7 billion in debt. There just might be too much scrutiny these days to foist the deal on the very suspecting public.

Pee-Wee Herman Stocks

Two weeks ago, it might surprise some, but I finally watched “Pee-wee’s Big Adventure” for the first time. It had its moments, including that great bar “Tequila” dance scene. For the most part, that scene exemplifies the geeky coolness of the great momentum stocks that have carried the stock market for the past couple of years.

It had that smirk and that swagger.

Fast forward to recent trading, and most of the names below look as if they just flew over the handlebars of a bicycle, barreling into hedges as a gang of pre-puberty boys roll with laughter. Except Netflix (NFLX) has taken a much harder tumble and that is no laughing matter.  

The streaming media company saw its share price top out at $411 on June 18, 2018, before they pulled back. The stock regained its stride earlier in the year and rallied to $385 on April 29, 2019. However, it’s been downhill since then. Let’s call it binge selling.

Big Momentum Names	2019 YTD	Last 5 Days
Facebook	+37.4%	-5.3%
Amazon	+15.8%	-4.5%
Apple	+39.4%	-0.5%
Netflix	-1.6%	-8.1%
Google	+19.9%	+0.2%
Microsoft	+37.4%	-1.08%

When these momentum stocks began to slip, there wasn’t a sense of panic, as money was rotating into beaten-down stocks (even those beaten-down for the right reasons).

Now, I’m not so sure this isn’t part of that same awakening to overpriced initial offerings that has investors refusing to extend outsized valuations.

If that is the case, I think it will blow over upon the broad market breaking out. Of course, there is a real question on whether the stock market can breakout without leadership from those names. 

I don’t think those names have to be the tip of the spear or the only part moving higher, but they must find equilibrium before the broad market can gain traction and go for a breakout.

Portfolio Approach

No changes.

Communication Services	Consumer Discretionary	Consumer Staples
1	2	2
Energy	Financials	Healthcare
1	2	2
Industrial	Materials	Real Estate
3	2	1
Technology	Utilities	Cash
3	0	1

Today’s Session

Economy & Consumers

Consumer income came in at +0.4%, in line with consensus, while spending increased +0.1% against Wall Street consensus of +0.3%.

Some may read this as an exhausted consumer, and perhaps they were, as the month prior Amazon’s Prime Day triggered a huge surge in spending.   I think it’s a more cautious consumer, and it’s not new, although exacerbated by headline news and never-ending talk of recession and Washington scandal.

Comments

Just as years earlier Harry Reid stated on the senate floor that Romney hadn’t paid his taxes, which he knew was false, aided by a compliant press Democrats continue making outrageous accusations with impunity. Andrew McLeod on 9/27/2019 11:21:14 AM

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