Forget About What We Said About Stocks, Shall We?: Opening Line

If there’s one thing you can rely on in U.S. equities markets lately, it’s buying on dips. Whoever would suggest that things are finally headed south, that this bull market is aging, that we’re pulling over into the slow lane and, heck -- even headed for a bear market -- would look pretty foolish today.

That would be Opening Line.

Actually, we had only been riffing off what we were reading coming into the week -- that’s what we do here: we go a mile wide and an inch deep -- so it’s not like we were making this call. We were just promoting it.

Yeah, yeah -- stocks were lagging behind the rate of gains at this point in the past couple years, P/E ratios are getting a little heady, Janet Yellen’s slowly taking away the jelly donuts.

That was Monday.

Yesterday, housing starts went nuts, inflation stayed meek, Apple closed at a record, the S&P 500 settled a few points below one, gold fell, oil fell, the dollar rose...

What kind of summer sorcery is this?

It was described in Goldilocks-y terms after the market closed yesterday.

“Today’s numbers were solid but not spectacular, and that’s perfect in an environment where really robust economic growth would not be positive,” Mount Lucas Management’s Tim Rudderow told Jeremy Herron and Oliver Renick.

Photographer: NBC/NBCU Photo Bank via Getty Images

Gilda Radner as Emily Litella. Close

Gilda Radner as Emily Litella.

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Open
Photographer: NBC/NBCU Photo Bank via Getty Images

Gilda Radner as Emily Litella.

Which means this market is just right.

Unless you’re short. And why would you be? Where would you get that idea?

***

The Fed releases the minutes from its July 29-30 FOMC meeting at 2 p.m.

A smattering of retailers report earnings, including Target (TGT), PetSmart, L Brands, Staples, Lowe’s, and American Eagle Outfitters. Also reporting are Madison Square Garden and Hewlett-Packard.

Overnight, Japan said exports rose a more-than-forecast 3.9 percent in July.

A short time ago, the BOE published the minutes of the MPC August meeting, revealing the first split among policy makers in more than three years.

***

- Islamic State cements its legacy. - Israel and Hamas resume hostilities. - Holder arrives in Ferguson, Missouri, today as calls grow louder for the police shooter of Michael Brown to face criminal charges. - Another police-related fatal shooting happened yesterday a couple miles away from Ferguson, Missouri, in north St. Louis. Sounds like suicide by cop. - Meanwhile, you know it’s bad in Ferguson when Egypt is calling for police restraint. - A grand jury investigating another death of an unarmed man at the hands of police, Eric Garner in Staten Island, is expected to start next month. - Wade Miquelon was forced out as Walgreen CFO after overestimating pharmacy sales by $1.1 billion, WSJ reports. - Senator Mike Enzi easily wins Wyoming Republican primary, and Dan Sullivan wins Republican nomination for U.S. Senate in Alaska. - Steve “Basket” Ballmer resigns from Microsoft’s board to focus his attention on man-to-man defenses. - Drug clinics in California may have perpetuated a $93 million fraud through Medi-Cal payments, the state auditor finds. - Turkey arrests 25 police officers amid Erdogan wiretapping allegations. - Islamic militants’ terrorism spree thwarted in Malaysia. - High-school boys’ Columbine aspirations thwarted in California. - Doctors Without Borders accuses world of failing to help Ebola in Africa. - Bitcoin is money, judge rules. - Twitter is the news. Facebook is the chatter. - Three members of pope’s family killed in car wreck. - Alan Turing receives full pardon from Queen Elizabeth. - Taylor Swift video about shaking off criticism is roundly criticized. - The Minnesota Vikings and former punter Chris Kluwe settled their dispute without a lawsuit. - The NFL is going to try to make music artists pay to play its Super Bowl halftime show, the WSJ reports. - Mo’ne Davis becomes the first Little Leaguer on the cover of Sports Illustrated. - ’Til death do us part.

***

Argentina has decided to make a break for it.

Desperate to find a way out of the cage it put itself in, the defaulted nation is going ahead with a plan to go native. It will let debt holders exchange foreign-currency bonds for new ones subject to domestic laws and paid through the Argentine central bank instead of the U.S. trustee, Bank of New York Mellon, and allow those opting to keep their notes also to be paid locally.

It will also have a window for the holdouts, Paul Singer’s Elliott Management and Aurelius Capital, should they change their minds and agree to accept the terms that are being dictated to them.

Which will probably not make things go any easier for them in Judge Thomas Griesa’s New York courtroom. Guess they figured they don’t have much more to lose, right?

Citigroup is probably breathing a little easier. This decision appears to help it sidestep the issue of being caught between Griesa’s previous ruling blocking interest payments to exchange bondholders until the holdout bondholders get paid 100 cents on the dollar and Argentina’s demand that the bank proceed with making payments to customers holding the country’s debt.

We wonder if this development is going to pre-empt the commercials we were hoping to see. American television viewers were being pulled into the legal showdown through advertisements -- paid propaganda, to be honest -- from the holdout hedge funds decrying the fate of Argentines who held the country’s debt.

One 60-second commercial focuses on the case of a woman who lost her life savings after buying government notes to pay for the care of her 97-year-old father. “Argentina, these people deserve better,” the narrator intones.

It’s a response to the full-page newspaper advertisements Argentina has taken out in newspapers around the world ripping Griesa and the hedge funds.

We don’t see why they’d pull the ads because the show is surely not over.

***

Yesterday’s installment on the Allergan-Valeant saga -- the resignation of Jeff Edwards as Allergan’s chief financial officer -- brought a few of you out of the woodwork, which was encouraging because we really have no idea whether you people read this for sport or are actually paying attention.

For one day, at least, we got your attention.

One reader pointed out that it’s unclear just exactly what the terms of Edwards’s employment contract are, and that it might be wrong to assume that he’d be leaving money on the table if he walked away just before a change in ownership.

That was the impression that came from BMO Capital Markets’ David Maris in a research note yesterday, in which he also noted that, instead of the resignation being a bad omen, it “may be a sign that a strategic transaction marking a new chapter in Allergan’s growth may be nearing.”

Which certainly got more interesting when the Wall Street Journal reported yesterday that Allergan may be in the hunt for Salix Pharmaceuticals (SLXP), a deal that would add a layer or two of complication to the uber-hostile, $53 billion takeover attempt by Bill Ackman’s Pershing Square and Michael Pearson’s Valeant.

The reactions from the parties’ shares didn’t help much. Salix rose, naturally, which only adds to its market value and thus the expense of Valeant’s proposed buyout of Allergan should Allergan complete that deal.

Allergan rose, probably because the prospect of a defensive acquisition bolsters its defense as well as adds the wrinkle of a possible inversion play: Salix itself is in the middle of trying to buy an Ireland-based unit of Cosmo Pharmaceuticals, the Journal reports. Although there’s no telling whether Allergan would go for the Cosmo stuff as well as Salix.

And Valeant rose because...Why did Valeant rise? Because investors see the Allergan-Salix news as a sign this tractor pull that apparently had started to weigh on Valeant shares might finally be coming to an end? A relief rally?

Anyway, we called Allergan to see if anyone would tell us the particulars of Edwards’s employment contract.

Nope.

***

Thinking about your Christmas shopping yet? Economic forecasters are.

As Anna-Louise Jackson and Anthony Feld report, inbound-container traffic at two key ports in California suggest U.S. retailers are preparing for a busy holiday season. Chris Christopher, director of U.S. consumer economics at IHS Global Insight in Lexington, Massachusetts, forecasts retail sales will grow 4.2 percent in November and December on a year-over-year basis, compared with 3.1 percent in both 2013 and 2012.

This has potentially positive implications not just for big-box retailers such as Wal-Mart (WMT), Target, Home Depot (HD), Lowe’s and Sears. (SHLD), but also for the companies that carry the merchandise, including A.P. Moeller-Maersk, Swift Transportation, Werner Enterprises (WERN) and J.B. Hunt. (JBHT)

Predicting December sales in August seems like one of the more complicated tasks in economic forecasting, combining as it does variability in consumer confidence, unpredictable wintry weather, transportation snafus and, this year, the chance of a labor disruption.

The calendar shows that, with Black Friday on Nov. 28, there are 27 days between Thanksgiving and Christmas this year, one more than last year. So that’s something. On the other hand, it’s still five days shorter than the longest holiday shopping season possible.

A recent Gallup Poll found that 45 percent of Americans report spending more today than they were a year ago, versus 18 percent spending less. On the other hand, the poll found we’re spending our money on utilities and health care, rather than on the activities and items we actually want.

And what will we want, once the Thanksgiving turkey is in our bellies?

Yet more singing ice princesses, it appears. Or maybe a monster with gas issues. Better soundproof that playroom.

***

Tomorrow is the start of the Kansas City Fed’s three-day economic policy symposium in Jackson Hole, Wyoming, and you know what that means.

Not much, probably.

Janet Yellen’s speech is likely to track well-telegraphed themes, and by the sounds of this handy guide by Matthew Boesler and Simon Kennedy on what to look for, Mario Draghi will have more to talk about.

Yellen will be all about wage growth and persistent slack in the labor market and about the seemingly never-ending need to continue stimulus, even though things are looking up, generally, with scant inflation.

Draghi, however, has some issues on his hand, with stagnating economies and the lingering risks of deflation that aren’t being helped by the euro -- or Yellen’s dovish stance.

Meanwhile, we would kill to be there with, say, a 9-foot, 5-weight Sage rod, a floating line and some grasshopper patterns.

***

Sure, some people may say the immediacy of a Scripps Networks (SNI) takeover is slim, but you can’t tell that from its price.

We tend to jump for anything Tara Lachapelle writes because the smartest stories make our job easier, and she finds that in the days following 21st Century Fox’s aborted attempt to buy Time Warner Inc. (TWX), Scripps has risen to match Time Warner’s multiple based on expectations it’s going to be a target.

She writes Discovery Communications (DISCA) had been kicking the tires last year, and throws Viacom (VIA) and Disney (DIS) in the discussion, while citing Wunderlich Securities as saying price might be an issue.

With those potential pockets, we don’t see how.

***

Seventy percent of pay-TV subscribers in the Los Angeles area have been missing a great season because Time Warner Cable has been holding them hostage in a contest over what it wants to charges competing TV services for airing the games to which TWC has the rights.

Then again, it could get worse.

That’s the concern voiced by those who see the pending $42.5 billion acquisition of TWC by Comcast as having the potential to take those subscribers from the frying pan to the fire, and it’s why the deal could risk foundering.

Todd Shields and David McLaughlin report that amid regulatory scrutiny of a deal that will only concentrate ownership and power if Comcast wins TWC, this is exactly the kind of power authorities worry about when reviewing a deal.

Especially when the power’s about to shift into the hands of a company that’s been found to employ the same tactics. When Comcast bought NBC Universal, it had to agree to arbitration in pricing disputes because it had “cut the satellite-TV share in its home market by withholding professional baseball, basketball and hockey programming,” Shields and McLaughlin report, citing the FCC order.

Writing as we are from Comcast’s hometown, we can tell you that there is cause for concern. Moreover, the cost of sports programming now is officially insane. Because of player salaries.

***

More and more, golf looks like the new tennis.

For a while the two country-club sports were moving in opposite directions, like bond prices and yields. Tennis was in decline as an American pastime, be it at the local park or on television. Golf, with a Tiger on its side, was soaring as if it were hit by a 9-iron.

Now golf is struggling too.

The latest indicator: Dick’s Sporting Goods, the chain of choice for many a weekend warrior, is getting out of the game. It took a $14.3 million impairment charge on its golf trademarks and wrote down $2.4 million worth of clubs, balls and apparel in the most recent quarter and laid off almost all of its in-store golf pros in July, Kyle Stock reports at Bloomberg Businessweek.

The moves were inevitable, given the decline in participants, the lack of interest among millennials and the closing of courses around the U.S.

As for the 560-plus Dick’s stores around the country, squeezing out golf will presumably make more room for equipment related to ascendant activities, such as yoga, or kettlebells, or for those fold-out chairs with a spot for your beer.

To contact the reporters on this story: C. Thompson in Wilmington at cthompson1@bloomberg.net; Laurence Arnold in Washington at larnold4@bloomberg.net

To contact the editor responsible for this story: Marty Schenker at mschenker@bloomberg.net

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