With such a lack of seemingly high-quality new issues, it’s hard to get excited about the IPO market these days.  It’s worth remembering, though, that all of today’s largest companies got their start somewhere.  For the largest publicly traded company in the world, that start was 37 years ago today.  That’s right, Apple Computer (AAPL) began its life as a publicly traded company on 12/12/1980, just after Ronald Reagan was elected President and a month before the Iran hostage crisis came to an end.  A lot has changed over the last 37 years, and there have been some major swings for Apple and the US stock market, but at this point, things have never been better for either of them.

The chart below shows the performance of Apple’s stock since its IPO in December 1980.  Not including dividends, the stock has rallied more than 33,500% from a split-adjusted price of 51 cents to its current price of $172 in what has been called one of the greatest wealth-creating engines of all time.  Earlier in this century, as the iPod’s popularity peaked and the iPhone took off, the term “Apple Millionaire” was coined as thousands of investors saw their net worth surge by simply buying and holding the stock.  Where Apple will ultimately top out or what new product they will launch next is anyone’s guess, but even if the returns are good for the next 37 years, they will never match the last 37 years.  The question is, what stock will be the Apple of the next 37 years?  With so few IPOs, the pickings are slim.

While Apple’s 37-year run of gains has been nothing short of breathtaking, bitcoin enthusiasts can’t be bothered with such pedestrian returns.  As just another sign of how out of this world the rally in bitcoin has been, the chart below compares Apple’s performance since its IPO to bitcoin, going back to just 2010. Back in July 2010, bitcoin was trading at seven cents per share compared to today’s price of $17,148.  That’s a gain of 24,497,327%!  You read that right- almost 25 million!  When you compare Apple to bitcoin, Apple just looks like its moving along the zero line.  With a market value of $290 billion, bitcoin is still less than half of the market cap of Apple, but it has done all of this in just over 7 years compared to 37 years for Apple.

There’s a big tide of optimism sweeping the nation’s small businesses.  While individuals seem to hate the current GOP tax plan as much as they disliked ObamaCare when it was first passed, small business owners are the most optimistic they have been since the early 1980s in the days of “Stranger Things.”  In the most recent release today, the NFIB’s Small Business Optimism Index spiked from 103.8 up to 107.5.  That was well ahead of consensus expectations and took out the post-2000 high of 107.4 from November 2004.

The NFIB (known to be politically biased towards the right) summed up the optimism pretty succinctly in the release earlier today:

Not since the roaring Reagan economy has small business optimism been as high as it was in November, according to the National Federation of Independent Business (NFIB) Index of Small Business Optimism, released today.

“We haven’t seen this kind of optimism in 34 years, and we’ve seen it only once in the 44 years that NFIB has been conducting this research,” said NFIB President and CEO Juanita Duggan. “Small business owners are exuberant about the economy, and they are ready to lead the U.S. economy in a period of robust growth.”

In each month’s report, respondents are asked what the number one problem is that they face in their business.  Once again this month, Taxes is the number one problem facing small business owners, but that will likely start to abate once/if Congress passes their current tax reform package.  Behind Taxes, business owners continue to have problems finding qualified candidates to fill job openings, but that doesn’t seem to be as big an issue as it was last month.  Among specific industries, though, the NFIB reported that Labor Quality is the number one problem being faced by Construction and Manufacturing firms.  Government Regulations were cited by 16% of small business owners as their number one problem, while just 11% see Poor Sales as the biggest issue they face.

Finally, the commentary section of this month’s report closed out with the optimistic forecast that “The NFIB indicators clearly anticipate further upticks in economic growth, perhaps pushing up toward 4 percent GDP growth for the fourth quarter.”  4% growth?  Wouldn’t that be nice!

Below is a historical chart showing the annual cost of insuring against default for 5 years (5-year CDS) for three major US banks and brokers — Morgan Stanley, JP Morgan, and Citigroup.  The price is in basis points, and basically the price shown is the cost in dollars per year to insure $10,000 of debt against default for five years.  Large bondholders use credit default swaps (CDS) to hedge risk, but CDS also attract speculators as well.  During the Financial Crisis, hedge funds betting against the banks made billions buying and selling CDS as prices to insure against default spiked.

We’re highlighting this chart today because of how low CDS prices have gotten again in the Financial sector.  At this point, CDS prices for most of the major US financials are at the same levels they were trading at in July 2007.  Back then, CDS prices had begun to rise a bit for the sector as some of the sub-prime mortgage companies were starting to go under, but prices didn’t really start to spike until late 2007.

You can see the moves a little better in the chart if we cap the price on the Y-axis at 300 basis points.

Even though the Financial sector appears to be on better footing now than it was prior to the Financial Crisis, the cost to insure against default remains more elevated than it was in the early to mid-2000s.  In hindsight, the levels that CDS prices traded at prior to the crisis were way too low, and the negative result of those low prices that “the market” experienced during the collapse appears to have lifted the price level that is now considered “normal.”

The S&P 500 is up nearly 20% in 2017 after gaining 9.5% in 2016.  The chart below highlights the annual price change of the S&P 500 since the current bull market began in 2009.

Contrarian investors might be prone to think that the market is likely to fall after a big up year, while momentum investors like to trade on strength one year turning into strength the next year. But if we look at the correlation between returns one year to the next, we find that there is none.

Below is a scatter chart showing the S&P 500’s move one year versus its move the next year. If the contrarian bet were true, you’d see a trend-line in the scatter chart that goes from the upper left to the lower right.  If the momentum bet were true, you’d see a trend-line that goes from the lower left to the upper right.  In reality, the trend line is flat as a pancake, meaning market returns one year have no correlation with market returns the next.