Bracing For A Month To Remember By Charles Payne

Sep. 03, 2013 10:02 AM ETNOK
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Long/Short Equity, Portfolio Strategy

Contributor Since 2008

Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political, and general opinions by several prestigious news organizations. Currently, Mr. Payne is a contributor to the Fox News Network and Fox Business Network. He also hosts his own radio show on KFIAM 640 every Saturday from 2-4pm PST. Mr. Payne recently released his first book entitled Be Smart Act Fast Get Rich. Our all-star analytical team is called first when the media needs to know. We are regularly featured on several well respected finance-oriented radio and television programs such as Fox, CNBC, BNN, WSJ to name a few and widely recognized in the media as a leaders in the analyst community. In addition, Wall Street Strategies is part of Factset, Jaywalk, and Thomson-Reuters Consensus Estimates. Meet our analysts: Brian Sozzi is an equity research analyst specializing in the softline/hardline goods sectors of the retail industry for Wall Street Strategies Inc. Mr. Sozzi graduated Summa Cum Laude from Dowling College, receiving his Bachelors of Business Administration with a concentration in Finance and Accounting. Routinely sought after as a trusted point of reference for opinions and insight on the global economy and retail sector stock evaluation, Mr. Sozzi is a frequent on air contributor to CNBC, Fox Business Network, and Bloomberg, and is cited regularly by online/print publications that include Forbes, Bloomberg, The Wall Street Journal, Thestreet.com, CBS Marketwatch, Reuters, Seekingalpha, Associated Press, Crain’s NY Business, Fortune, Barron’s, AOL Finance, and the Financial Times. In 2009, Mr. Sozzi became recognized by Starmine as a top-ranked equity research analyst for stocks under coverage in such categories as EPS Estimate Accuracy and Industry Excess Return. David Silver is a Research Analyst for Wall Street Strategies. He is a graduate of Tulane University’s A.B. Freeman School of Business where he received his Bachelor of Science in Management with a dual degree in Finance and Accounting. David actively covers companies in the Transports, Autos, and Beverage sectors. He is routinely invited to appear on business oriented television and radio shows including CNBC, Fox News, Fox Business News, the Business News Network of Canada, WCBS Radio, and the Wall Street Journal Radio. In addition, David has been quoted in major business publications such as the Wall Street Journal, Forbes, Marketwatch, CNN Money, and Autoweek. David Urani is a research analyst with concentrations on the homebuilding, staffing, medical devices, and logistical services industries. Along with providing institutional clients with up-to-date reports of individual stocks within his industry coverage, David assists the rest of the Wall Street Strategies research desk with timely analysis of vital economic data. A graduate of the A.B. Freeman School of Business at Tulane University, David earned a Bachelor of Science in Management while majoring in finance. With prior training experience running small businesses, he has an eye for key fundamentals that keep Companies running efficiently. David’s insight has been featured in several outside sources, including the Fox Business Network, MarketWatch, and SeekingAlpha. Carlos Guillen is an Equity Research Analyst providing coverage of the technology sector for Wall Street Strategies, Inc. Mr. Guillen has had experience working in both the sell side and the buy side. Prior to working as an analyst, he was a Design Engineer for Lambda Electronics. Mr. Guillen holds an M.B.A. from NYU’s Stern School of Business, and he has a B.S. in Electrical Engineering from Manhattan College. Conley Tuner is a Research Analyst with Wall Street Strategies Inc. He is a frequent contributor to a number of media outlets including MarketWatch, Bloomberg, BBC news and Xinhua news. Conley holds a Masters in Business Administration and a Masters in International Affairs from the George Washington University. Jennifer N. Coombs is an Equity Research Analyst at Wall Street Strategies. She previously worked on the buy side as an Associate Equity Research Analyst covering the transportation subsector of the industrials sector at AIG SunAmerica Asset Management Corporation. Jennifer also covered Real Estate Investment Trusts (REITs) and has done broader research for the industrials, financials and consumer sectors. Prior to joining their research department, Jennifer worked as a Trading Assistant for SunAmerica’s index funds. She also worked briefly in the client portfolio management department at Dwight Asset Management Company – a fixed income subsidiary of Goldman Sachs. Jennifer graduated with distinction from Clarkson University where she earned a B.S. in Financial Information Analysis and Political Science, with minors in Economics and Law. Jennifer specialized in international markets, and briefly studied East Asian Economics at Sungkyunkwan University in Seoul, South Korea. Jennifer is currently a member of the New York Society of Security Analysts (NYSSA).

After a month of lackluster involvement that saw the worst performance for stocks since May 2012,
everyone is back and ready to wait around and see. Probably, there is some pent up demand for stocks, and there will be money applied from fund in-flows, but this September will be all about reaction rather than action. That being said, there are a lot of important economic reads this week that should sway the needle, but the biggie comes on Friday. To set the table, we have to guess at the mindset of the market.

Watching the reaction to news of late it seems the Street has come to grips with the Federal Reserve tapering its bond asset purchases, although I'm not sure why the Fed would alter this form of accommodation if their goal was to fund the government's relentless spending and to spark the housing market. Be that as it may, the sooner the Fed pulls back on the program the better. You must remember or understand Fed tapering is not the same as the Fed raising rates. The ultimate sign the economy can operate on its own comes with the Fed hiking rates, and there is no doubt by the time that happens inflation will be a problem.

But, that's a 2015 problem.

Many market observers speak of the Fed hiking rates as akin to taking off the training wheels, but the fact is any parent will tell you that kids still fall when those wheels are initially taken off. My daughter took to bike riding quickly and needed the training wheels for a couple of days. Her first big push around the park with the basketball and handball court in the center went well except for one corner-a sharp left-handed turn. She fell three times, cried just a little but got back up and soon was zooming around the park making all the turns with the newfound liberation of controlling her own destiny. The Fed is very reluctant to let the US economy tumble through any turns even though it's part of a natural process.

But taking the Fed out of the equation for stocks is the best thing that could happen for investors even if it means we take a few early tumbles from money only parked in stocks for the cloak of Fed safety. Like any weak link, it's best we shed such investors and find true holders and a true bottom. From what I can see, that bottom is near and those weak links are fewer and far between. Still selling begat selling, and the thing the market might dislike more than the notion of the Fed putting risk ahead of reward with its mindless purchase program-uncertainty.

A Month of Question Marks

September 6 jobs report-forget about the Fed and hope for 200,000+ on Friday. The consensus calls for a lot fewer net jobs created, which means the best case scenario is better-than-expected joy over yet another mediocre jobs number.

September 9th Congress reconvenes and there are a ton of fireworks and landmines laid out in front of these guys and gals. First up is the war in Syria. The Obama Doctrine is clear; we will not fight protracted wars or put boots on the ground but will sway and manipulate outcomes by lobbing bombs from destroyers or using drones.

You rack up a lot of kills that way but don't win wars. Moreover, it's very haphazard, creating excessive civilian casualties but that's for people like the Nobel committee to consider, not bleeding heart Americans who apparently go into hiding when there isn't a Republican in the White House. We are simply going to teach Assad a lesson.

Friend or Foe?

In the process, we are aiding an eclectic bunch of interesting bedfellows, many of whom do not have our best interests at heart. Of course cynics say this whole thing is a distraction away from scandals that were heating up and not going away. In fact, some see a direct connection to bombing Syria and the phony scandal of Benghazi.

I'm not sure the GOP will green light Syria, which boils down to mitigating the embarrassment of President Obama.

Then there are very real wars over the battlefields of continuing resolution (must be resolved before October 1st) and the debt ceiling which gets hit mid October. The wars will rehash sequestration and giving White House a blank check. Then there's Obamacare, which kicks in amidst an array of hiccups and false starts.

Then it's back to the Fed, which holds a two-day meeting on the 17th and 18th when they'll have to really make a case for a new normal. If they're taking a victory lap, then it has to be this is the new economy of 2.5% GDP and not enough job creation to cover job entrances let alone the millions that lost their jobs or their will to work.

While America dithers with trying to get government to stop spending money it doesn't have and move out the way so private enterprise can make investments with money it does have there is more evidence that belt-tightening in Europe is beginning to pay dividends. I never liked high taxes that came with so-called austerity on the continent but there was a dose of heavy spending restraint medicine that seems to be working.
The global economy is coming on just in time to prop our sluggish economic recovery.

Watch Economies Not Markets

While global equity markets were melting down last month, actual economies were picking up momentum. Manufacturing data out yesterday points to robust growth in the most unlikely places. The Euro Zone saw overall PMI expansion with the reading at a 26-month high. Note: Greece bringing up the rear but coming on strong and tax-happy France the dog of the bunch.

The sooner all markets can get away from central banks money-printing and focus on the economics of people getting it done in a disciplined yet aggressive manner the better for investors all over the world.

In the meantime, even as global PMIs came in well above consensus (China's 50.1 reading first time in expansion in four months) Morgan Stanley lowered its global GDP estimate to 2.9% for 2013 and 3.5% for 2014 from 3.1% and 3.9%, respectively.

Move Over Bale Boys

It's been a tough week for parents looking to get their children interested in a career other than acting or sports. The Bale boys (no relationship) have it all, and that was underscored when Christian Bale turned down $50.0 million to play Batman again and Gareth Bale got $132.0 million to play soccer (he'll make more in endorsements and is a handsome dude on top of it all). For parents worried their kids are too narrowly focused on future career options you can bring up the name Stephen Elop.

Elop left Microsoft in 2010 to run Nokia (NOK). His tenure at Nokia in my mind was uneventful at best yet Microsoft is paying $7.2 billion to acquire the handset business from the company that was once the world's leader in the space and sported the highest market cap in Europe. Nokia bet it all on the Microsoft operating system so I'm not sure why the company was bought other than as a way of bringing Elop back into the fold and perhaps to elevate the once head of hardware to the role of CEO.

If that's the case then his value exceeds the Bale boys by millions, heck exceeds by billions!

I've been a proponent of Microsoft using its huge cash hoard to make acquisitions rather than higher dividends, but this deal is too expensive and a reminder of the dire striates the company is in and the desperate moves it must make to get back its groove. Of course the move makes more sense than Ben Affleck playing Batman, I would have taken Gareth Bale or maybe Stephen Elop (get him a screen test) before that selection.

Today's Session

Looking at early bump will be interesting to see if it can build momentum. There are still a lot of traders out until Friday morning. Economic data has been upbeat.

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