Sunday Morning Coffee

As the quarter is ending the market is sending mixed signals on a couple of fronts. The two best performing sectors were staples and healthcare which are both traditionally late cycle outperformers (and they do also typically hold up better on the way down). On the flip side, small cap outperformed large cap and large cap out performed mega cap–as measured by iShares Russell 2000 ETF (IWM), the SPDR S&P 500 Trust (SPY) and Guggenheim Russell Top 50 ETF (XLG).

If it was late in the cycle then it should be the other way around, mega cap should lead the market. This is not normal market behavior although I can’t imagine it is unprecedented either. It could be a distortion caused by the ongoing Fed action or not but I do think it is worth pointing out as a sign of confusion within the market internals.

Of course this could turn out to be nothing but the history of both indicators makes this worth paying attention to, in my opinion.

I haven’t said anything about the NCAA tournament this year but it has been a great so far. All season long the “experts” talked about parody in the college game and obviously they were right given how poorly the one seeds have done and that Wichita State, a nine seed, made it to the final four–they’re no George Mason but still.

Ditto with NCAA hockey; it seems like Boston College and North Dakota make the Frozen Four every year, or at least one of them but not this year. Wow.


  1. Parity, not parody.

  2. David Stockman, former US budget director from 1981-1985 had a long, detailed, dire warning editorial in the New York Times today. At the very end he states: “The United States is broke…and the Fed has incited a global currency war that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is.”

    I’m not convinced he is correct but he is a very smart guy and his multi-page indictment of our financial system should be read carefully and discussed. He isn’t talking about a normal Bear market coming at some point, he is predicting “this latest Wall Street bubble inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode…

    Food for thought.

  3. Stockman’s heart is in the right place I think, certainly a far cry from the Stockman who once promoted ‘voodoo economics,’ and there are some important insights in his screed but there are also a host of zombie ideas and confusion WRT cause and effect which makes it too difficult to tease out the good from the bad.

    Jared Bernstein thoughtfully walks through the wreckage at


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