Thoughts {06.13.17}

High flying stocks have been taken out to the woodshed since last Friday.  Some names lost 10% over a two day trading period.  These same stocks and markets look to be up big at least at the open today. Many are calling for a change of trend in these names, citing valuation, relative value, and the usual etc when analysts try to make a call.  They may be right but to me  thing to watch for over the next couple of days is how these stocks react to the sell-off.  If we say any attempt at a rally fail or these stocks are unable to get back on track then there might be something to that argument.  For us right now it's wait and watch and let our systems be our guide.

We wrote last week about Chicago's financial problems but the state of Illinois is also in trouble.  In regards to Illinois' debt, S&P recently lowered our state bond debt and put it on "CreditWatch negative," warning  that we here are at risk of entering a "negative credit spiral, where downgraded credit ratings would trigger contingent demands on state liquidity, further exacerbating its fiscal distress."  I'll remind you again that Illinois is entering its third year without a budget and has over 14 billion dollars of unpaid debt.  That next debt downgrade will likely place Illinois' debt in junk status.  My guess is that in a few years Illinois has a very high probability of joining Puerto Rico in bankruptcy.

CNBC noted yesterday that growth strategies are lapping value strategies.  Year-to-date growth is up over 13% and value around 4%.  

We are now definitely in summer as we're going to see 90 degree temps here for a 3rd day today and likely have two more just like it coming up.

Back Thursday.