Chart of the Day – Brazil Breaking Out
Bespoke’s Baskets Update — December 2023
Bespoke’s Morning Lineup – 12/21/23 – Two Extremes
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“There was no established way for a man to tell his wife he was going to the moon. A man could tell his wife he was going to sea or going to war; men had been doing that for millennia. But the moon? It was a whole new conversation.” – Apollo 8: The Thrilling Story of the First Mission to the Moon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Treasury yields are doing little this morning and equity futures are looking to reclaim some of yesterday’s afternoon weakness. Crude oil and copper are modestly lower, while gold is flat. In Europe, stocks are lower as markets there closed before yesterday’s afternoon reversal. On the economic calendar, there’s a ton of data to be on the lookout for including revised GDP, Personal Consumption, Core PCE, jobless claims, Philly Fed, Leading Indicators, and finally the KC Fed report at 11 AM.
It was a tale of two markets yesterday. In the morning, the S&P 500 rallied to new 52-week highs only to give it all back and more in the afternoon. By the time the closing bell rang, stocks were at the lows of the day and finished down over 1%. There aren’t many places in the world where you can go skiing in the morning and swim in the ocean in the afternoon, but the market did its version of that yesterday.
While yesterday’s reversal was jarring, in the context of a daily chart of the S&P 500 ETF (SPY), it barely looks like anything more than a blip. Even after yesterday’s decline, SPY is more than 5% above its 50-day moving average (DMA) and more than 8% above its 200-DMA.
While yesterday’s reversal doesn’t look like much on a one-year chart of SPY, in the ETF’s history dating back to 1994, reversals of that type have been incredibly uncommon. The last time the ETF traded at a 52-week high on an intraday basis but finished the session down over 1% was back in April 2014, and in the ETF’s near-30-year history, there have only been seven other occurrences before yesterday. In the chart of SPY below, we have marked where each of those prior reversals occurred with a red dot. As shown, none of the prior occurrences marked a significant top for the market. In today’s Morning Lineup, we provided an analysis of SPY’s performance following prior reversals. Sign up to read the entire report.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Chart of the Day – Most Sectors Hit 52-Week Highs
Bespoke’s Morning Lineup – 12/20/23 – Perfect Ten?
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“What good is the warmth of summer, without the cold of winter to give it sweetness.” – John Steinbeck
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s finally starting to get colder here in the northeast, and that coupled with the shorter days quickly makes us miss the warmer weather and longer days of the summer. While the temperature is likely to only get colder from here in the coming weeks, if there’s any consolation, tomorrow is the shortest day of the year which means that the days only get longer from there. Applying the forward-looking nature of the market, winter is over!
Traders are coming in today to the warmth of red on their screens as equity futures and treasury yields are both lower. On the economic calendar, we’ll get Existing Home Sales and Consumer Confidence at 10 AM. On the earnings front, the notable reports since yesterday’s close were FedEx (FDX) and General Mills (GIS). Both stocks are trading lower in reaction to their results after management from each company lowered guidance. FDX is getting hit the hardest, though, as the stock is down over 10% and GIS is down 4%. If the declines in FDX hold through the close, it will be the stock’s worst earnings reaction day performance since December 2019.
Like the warmth of summer, it’s hard to fully appreciate a rally without first going through some weakness, and that made the late summer/early fall correction the perfect prelude to the current year-end rally. Heading into today, the Nasdaq has seen nine straight days of gains which is the longest winning streak since – wait for it – November 8th. That’s right. Since the October lows, the Nasdaq has now had two separate nine-day winning streaks. To find a time when there were two winning streaks of nine or more days in closer proximity to each other, you have to go back to 1979!
In the history of the Nasdaq dating back to 1971, it has had 48 different winning streaks of at least nine days. While they aren’t particularly uncommon, what makes the current streak a little more unique is that it has also come as the Nasdaq closed at overbought levels (1+ standard deviation above 50-DMA) on each day of the winning streak. Of the 48 prior streaks, only 16 shared that same trait with the current streak. In today’s Morning Lineup, we provided an analysis of the Nasdaq’s performance following prior nine-day winning streaks along with nine-day winning streaks that occurred when the index closed at overbought levels on each day of the streak. Sign up to read the entire report.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Stocks vs. Cardboard and a Hunt for Tom Brady
Future Hall of Fame quarterback Tom Brady has been in the news recently, not for anything football related, but for a just-released Bowman baseball card he’s on that collectors are going gaga for.
The quick backstory: After his senior year of high school, Tom Brady was drafted by the Montreal Expos in the 18th round of the 1995 MLB player draft. Instead of signing with the Expos out of high school, Brady chose to take his football talents to the University of Michigan in Ann Arbor, and the rest is history.
Now retired from football with by far the most Super Bowl hardware of any quarterback in NFL history, Brady was approached by Michael Rubin’s Fanatics, which now owns and produces Topps/Bowman baseball cards, to hand-sign a number of super rare “what if” Brady baseball cards that have been inserted in the company’s newest annual set. Who knows, maybe the two came up with the promotion at Rubin’s Hamptons white party this summer…
The elusive Tom Brady baseball “rookie card” can be found in packs of the just-released 2023 Bowman Draft product, which shipped to customers on 12/12 (Brady’s NFL jersey number) and additionally features the first rookie cards of players drafted in the 2023 MLB draft.
Brady appears to have signed 81 cards that have been inserted into packs, and the odds of pulling one have been tagged at roughly 1 in 26,600 packs!
As shown below, what appears to be the first Brady auto (autographed card) listed on eBay just sold on December 18th for $21,200!
In addition to the 81 Brady autographed cards randomly inserted into 2023 Bowman Draft packs, there are also non-autographed Brady “Expos” cards like the ones shown below that are still rare but are much more common than the autographed versions. Even these are selling for more than $1,000 on eBay as of December 19th.
Now that you have the backstory, you may be wondering why Bespoke is writing an article about baseball cards?
While not experts by any means, we here at Bespoke know a thing or two about the sports card collectibles industry (we were, after all, kids once and now have kids of our own), so we thought: “What if we tried our luck and got in on the chase for the Brady auto? Let’s buy a few boxes of 2023 Bowman Draft, open the packs, see what we get, and then calculate how much money we either lost or made on the whole endeavor. We can then compare and contrast the ways that investing in the stock market is similar to and different from “investing” in sports cards collectibles. And if we pull a super rare Brady auto, it will be a very nice Christmas!”
And here we are. Last week we purchased six boxes of 2023 Bowman Draft from BlowoutCards.com. The boxes arrived in a couple of days and we immediately sat down and started opening packs (called “ripping” by collectors)!
Did we pull a rare Brady? Or what about other rare rookie autograph cards inserted in the product? We know…the suspense is killing you…but first, let’s discuss some of the ways we think collecting baseball cards can be comparable to investing in stocks.
While many fans collect sports trading cards as a hobby instead of viewing them as an investment, a large contingent of collectors out there are indeed looking to make money in the process. In simple terms, they’re trying to “buy low and sell high,” just like investors are trying to do when they buy and sell stocks.
We’ll get it out of the way now: many out there smirk at the thought of small, rectangular pieces of cardboard having any sort of value, because after all, the paper these cards are printed on is effectively worth nothing. But, just like precious works of art or even to some degree, the share price of a stock, the value of something is what someone is willing to pay for it, right? And the value of sports cards mostly comes down to three things: the athlete or celebrity on the card, the scarcity of the card, and the condition of the card.
If you’re a card collector that knows little to nothing about investing in the stock market, or vice versa, here’s a good way to break things down:
In the investment world, “blue-chip” large-cap stocks are mature companies that have weathered the ups and downs of multiple business cycles over the years. These are generally companies that are past their peak “growth” phase, but they’re still generating steady profits, and they often pay back their shareholders in the form of annual dividends. While these large-cap stocks may not be likely to double or triple in value in the near term, they can offer slow and steady returns over the years with relatively low volatility. Some examples of blue-chip stocks are names like Apple (AAPL), Coca-Cola (KO), American Express (AXP), and Home Depot (HD).
In the card collector’s world, think of large-cap blue chips as the cards of some of the best players of all time in their respective sports who have already retired or are closing in on retirement. These are the All-Stars, Hall of Famers, and GOATs (greatest of all time) that created lasting legacies with fans during their playing days. Now past the “growth” phase of their careers, the value of the blue-chip cards are no longer going to increase because of player performance, but rather scarcity and condition as the years pass from their playing days. Examples of “blue chips” in the collecting world are the cards of players like Mickey Mantle, Nolan Ryan, Jim Brown, Joe Montana, Larry Bird, Michael Jordan, and Wayne Gretzky.
For the cards of players that didn’t form lasting legacies during their careers, unfortunately, their cards are going to be much less valuable, or even “bankrupt” like a large-cap stock of yesteryear whose profits slowly dwindled to nothing over time. Eastman Kodak is a name that comes to mind here.
Next up in the investment world are small-caps or growth stocks. These are the younger companies out there that may be currently experiencing rapid revenue growth even though they’ve yet to generate any real profits. For these companies, the sky is still the limit as long as their management teams execute and their industry remains relevant. If everything works out, growth stocks can double, triple, or even become “ten baggers” (stocks that go up 10x in value), but the future is still unknown, so they’re typically much more risky and volatile than blue chips. Over time, only a small percentage of small-cap growth stocks will eventually turn into large-cap blue chips, so investors must do their research and choose wisely!
The small-cap growth stocks in the card collecting industry are the up-and-coming “prospects” found in modern-day packs like 2023 Bowman Draft that we wrote about earlier. These are players that are still super early in their playing careers, whether they’re rookies in the NFL or NBA or still in the minor leagues for baseball. Because the sky is still the limit and these athletes could turn out to be Hall of Famers, collectors looking for the “next” Tom Brady or Michael Jordan pay a premium for “potential,” but buying these cards is much more risky than buying “blue chips” since only a small percentage of players ever make it to the top of the mountain. Players who would now be considered “small-cap, growth” stocks in the card world might be quarterback CJ Stroud, running back Bijan Robinson, NBA rookie Victor Wembanyama, or minor leaguers like Jackson Holliday with the Orioles or Paul Skenes with the Pirates.
In the card collecting world, you can either buy individual cards of players, which are called “singles” in the industry, or you can buy boxes or packs of products like 2023 Bowman Draft. When you buy packs of cards, the contents are unknown, but there’s a chance you could pull a rare card of a player you’re looking for. Buying an individual card of a highly sought-after rookie or prospect is much more expensive than buying a pack that simply gives you a chance to pull the same card. By buying a low-cost pack, you have a chance to pull a really valuable card, but there’s also a very good chance that you’ll buy the pack and NOT pull anything valuable; essentially losing your money. That’s what makes opening packs the riskiest part of the trading card industry. More often than not, you’re going to lose money, because the companies producing the packs have to make money! In this way, opening packs instead of buying singles is like trading options instead of buying individual stocks. Trading options costs much less than buying the underlying stock, but the payoff can be huge even though your option can also just as easily expire worthless.
Hopefully you enjoyed some of the comparisons above!
We mentioned that opening packs is the riskiest part of the trading card industry, but that’s exactly what we did when we bought and opened our boxes of 2023 Bowman Draft in search of rare cards like the Tom Brady auto. To find out how we did, check back tomorrow! We’ll highlight everything we pulled (did we pull a Brady???) and then see if their combined value based on recent eBay sales gets us anywhere close to back to even!
Is there a Brady auto in one of these boxes…
Chart of the Day – US Still Leading But Losing Its Lead
Bespoke’s Morning Lineup – 12/19/23 – Like Oil and Water
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“It is always the person not in the predicament who knows what ought to have been done in it, and would unquestionably have done it too” – Charles Dickens, A Christmas Carol
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The Dow and the Nasdaq are both on pace for their ninth straight session of gains, and this morning’s data on Housing Starts and Building Permits hasn’t done anything to change the direction. Building Permits were ever so slightly weaker than expected, but Housing Starts came in significantly better than expected coming in at 1.56 million compared to forecasts for a level of 1.36 million. If these pre-market gains in futures hold, it will further reinforce the point that good economic news is good again now that the Fed has pivoted away from rate hikes.
The energy sector was always the fuel to power the industrial economy, but in the digital economy, it has taken a back seat to technology. An example of the shifting role of each sector is the fact that in 1990, Energy accounted for 13.4% of the S&P 500’s market cap or more than twice the 6.3% weighting of the Technology sector. Today, Energy accounts for just 4.7% of the S&P 500’s market cap compared to Technology’s 27.9% weighting.
While most stocks are positively correlated with each other, there has been little correlation between Technology and Energy in recent years, and the last two years provide a perfect example. The charts below show the annual returns of the Energy and Technology sectors since 1990. In 2022, Energy had its best year since at least 1990, rallying 59.0%. Technology, meanwhile, cratered 28.9% for its worst year since 2008 and its fourth worst year since at least 1990. This year (through 12/18), we have seen the opposite pattern playout as Energy has declined 4.3% while Technology has rallied 56.3% for its best year since 2009 and its fourth-best year on record.
Looking at a comparison between the performance of the two sectors a little more closely, the chart below shows the annual performance spread between Technology and Energy for each year since 1990. Last year, Technology underperformed Energy by the largest amount since at least 1990, but this year it is outperforming Energy by the fourth largest margin on record. Additionally, there have been more years (6) in the last ten where the direction of Energy was the opposite of Technology than there were in the prior 24 years (5). Like oil and water, Energy and Technology just don’t mix.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Chart of the Day: Revisiting Two Trading Topics
Bespoke’s Morning Lineup – 12/18/23 – Global Rally
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Why pay a dollar for a bookmark? Why not use the dollar for a bookmark?” – Steven Spielberg
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After seven straight weeks of gains, US equity futures are modestly higher to kick off what bulls are hoping will be the eighth week of gains in a row. Along with the higher equity futures, treasury yields are lower, and crude oil is modestly higher. On the economic calendar, the only report will be the 10 AM release of homebuilder sentiment. With Christmas less than a week away, look for volumes and newsflow to steadily slow as the week progresses.
Besides the US, the rally over the last several weeks has been global. Of the ETFs that track the G7 countries around the world, all seven were up in the latest week, and they’re all starting the week at overbought levels. With its gain of nearly 2%, the S&P 500 tracking ETF (SPY) was the second-best performer last week trailing only the 2.54% gain in the Canadian ETF (EWC). On a YTD basis, the US is one of four ETFs with a gain of over 20% YTD, and only Italy’s 27.8% topped the S&P 500.
Looking at the charts of all seven ETFs representing the G7, they’re all right at or near 52-week highs. One key difference between the US and the rest of the world, though, is that while other countries are still testing or only marginally higher than their summer highs, the US handily took that level out over a week ago as it has been a leader.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.