Thoughts {05.26.2015}

Thoughts from Memorial Day Weekend and three weeks traveling back and forth to Indianapolis.

Chic-fil-A is where it's at!  My son put it the best when he said that he could never eat another chicken sandwich after eating there because his was so good.  Stores are mobbed at any time.  According to their website sales totaled in excess of 6 billion in 2014.  Mind you that's with ALL OF THEIR STORES BEING CLOSED ON SUNDAYS!  I put into one of these at noon on a Monday driving back from Indianapolis and was amazed at how mobbed it was.  Lots of families with young kids.  I'm sure Millennial moms see it as healthier than McDonalds.

One of the more entertaining Indianapolis 500's occurred this weekend.  Juan Pablo Montoya who last won the race 15 years ago came back from 30th position to win the race in the final 10 laps.  Montoya seems to be a nice comeback story.  The star that once was the Greatest Spectacle in Auto Racing has noticeably dimmed in recent years, but I'm wondering if were not seeing a comeback of open wheeled racing given how exciting this race was.  Time will tell.  This old Indiana boy would surely like to see the race restored to its former glory.

ISIS takes Ramadi.  Iraqi's called out by US Secretary of Defense for "failing to Fight".  At some point we're going to need a better strategy in that part of the world than the one we have now.  I've long felt that the world is trying to get to some new place as the old Cold War era order has long since frayed.  This part of the globe is becoming more alarming and darker.  

Stocks like a meandering river have mostly trended higher this year, although the gains have not been spectacular.  S&P 500 is up something like 3.5%.  I'm sure the average investor hasn't even noticed.  One month we're up then the next we're going down.  All, however, happens in a channel of higher highs and higher lows.  Volatility has collapsed and it's been something like 3.5 years since the last 10% correction.  People try to conjure up all sorts of meaning to this.  Some look for bears hiding behind every tree and bubbles that must soon be pricked.  Others see things as different and that nothing will derail this bull.  I have for the past several years thought we are OK as long as from an economic standpoint things continue to get better.  All of the evidence suggests that is what's happening.  In terms of a correction, I mean a real one {a decline taking stocks down 10-15% or more) it will come at some point.  Most likely when nobody is looking for one.  That's how these things start.  You usually need an event or series of events to occur that catches the crowd leaning the wrong way.  That's what starts the cascade of selling that often leads to more sales.  That doesn't necessarily mean the end of this bull market when it occurs.  It often is the signal that a period of speculative excess is coming to an end and setting the table for what will likely be a continuation of the advance at some point.  To kill the secular bull market I believe we are in, you need real economic contraction, unemployment spiking higher, collapsing sales, earnings adjusted significantly lower etc.  You're just not seeing any of that right now.  As to when the next correction will come, I like everybody else has no idea.  We'll let our indicators be our guide in regards to what we see when the time comes.  

*Long ETFs related to the S&P 500 in client and personal accounts.  Please note these positions can change at any time.