Blog Posts by Jeff Macke

To the vast majority of the movie going world The Great Gatsby is a fantasized glimpse of a bygone era seen through the lens of a star-struck protagonist. The opulence is overwhelming and serves only as a metaphor of nation's corrupt dreams.

To hedge fund managers operating in a bull market the movie just looks like summer in the Hamptons. Nick Colas of ConvergEx Group says the steep price hedgies are willing to pay for the right to gaze wistfully at the green light is flashing a red light for investors.

Colas says the cost of renting a house in the Hamptons is an indicator, not just of how well New York is doing financially, but also how the big money ballers are going to spend their summer. Spoiler alert! It's going to be lonely in the canyons of Wall Street.

"Let's face it, a lot of hedge fund managers are the guys who rent these houses," Colas explains. "If they're spending...$600,000 or more to rent them, where are they going to be this summer? At their desks churning the market or out in the Hamptons trying to relax a little bit?"

Hedge funds famously underperform the broader market but this year a 10% gain has almost been a lay-up. If you're running a billion dollars and still getting away with taking 20% of the upside that's $20 million of income, a pretty good year by most measures.

The problem with having a "buy the dip" strategy is that sell-offs are the scariest time to put money into stocks. People sitting on the sidelines have spent nearly 6 months telling themselves they were going to get long as soon as they got a meaningful pullback. Now that the most serious drop of 2013 is upon us the question is whether or not it's a good idea to be getting long when China is contracting, the Fed might taper, and stocks are still arguably way overbought.

Todd Schoenberger, managing partner at LandColt Capital, mocks the idea of taking profits and hitting the beach. "No Way! Are you kidding me?" he shouts in the attached clip. "If the markets go down 2 to 5% it's a great entry point for your viewers to get back into the market. Dow 16,000 by the end of the year."

The Dow Jones Industrial Average (^DJI) topped just over 15,530 on Wednesday morning. For those not carrying a slide rule at the moment, a 5% correction would put the Dow at 14,750, give or take. From there a recovery to 16,000 would be a gain of 8%. That's just the arithmetic, not a trading thesis.

Schoenberger's idea on the sectors that will do well into a pullback and during a subsequent recovery are oil and gas, travel and leisure, and almost anything multinational. As he sees it the DC ineptitude and geopolitical risk are priced into the tape.

Earlier this week, Apple (AAPL) CEO Tim Cook went to Washington DC to discuss the company's use of tax loopholes. It seemed like an outstanding opportunity for political leaders to discuss tax reform with the head of the most well-capitalized company in the world. Instead most of the Senators chose to attack Cook for, in the words of Sen. John McCain, violating the spirit of corporate tax laws.

Naturally Cook made the Senators look out-of-touch with reality. Americans have a natural distrust of the rich but the entire country was founded as a mass protest against "taxation without representation." Despising taxes is part of our national DNA. The only conceivable way Tim Cook and Apple could appear sympathetic is being attacked by Senate for not maximizing their tax bill.

By the end of the ordeal the Senators were falling all over themselves praising Cook, Apple and iPhones. Ironically it was Apple's worst moment. Having a 78-year-old man swooning over your newest product isn't the kind of PR Apple needs. Making matters worse, Cook's command of arcane international tax code showed him at his very best and worst. He came across as an incredibly capable CPA running a company in desperate need of vision.

Todd Schoenberger, managing partner at LandColt Capital, isn't sweating it. In his view, the testimony reignites the bullish case for Apple.

"What it brought to the attention of everybody is how much money this company is actually saving and how much money they have in cash," he states in the attached video. "That's why you want to be long this stock."

Sony (SNE), Nintendo (NTDOY) and Microsoft (MSFT) each spent the better part of eight years and hundreds of millions of dollars developing hardware for the next generation of gaming consoles. Individuals at each of the companies have spent significant portions of their lives eating, drinking and breathing chips, pixels, ergonomics, resolution and God only knows what else, trying to divine where the game market would be at the end of this year. Remember, when they started these projects the iPad hadn't been invented and "mobile gaming" was largely conceptual.

Perversely, the person who's going to make the most money off all that work is apt to be Dan Loeb, an American hedge fund manager with a huge position in the company that's going to finish in last place. Loeb has a 6.5% interest in Sony. Last week he hand-delivered a letter to Sony CEO Kazuo Hirai suggesting that the company separate its lucrative entertainment interests from its moribund electronics division.

Normally when American investors try to exert influence over Japanese companies they are met with stony silence. That was the initial response to Loeb as well. Then yesterday Microsoft demoed its Xbox One and everything changed.

The cool kids at Microsoft work in the Xbox division. Unlike virtually everything else out of Redmond, Xbox products are invariably slick, ambitious and at least somewhat customer friendly. It's hard to believe the people who created the Halo franchise have ever even met the guys behind Windows 8. The Xbox One is a realistic stab at creating the long-dreamed-of central "hub" in the living room.

Target (TGT) shares are getting smacked in early trading after reporting first-quarter earnings results that missed expectations and reduced guidance for the full year. America's second largest discount merchant reported earnings of 82-cents on revenues of $16.7 billion. Wall Street was looking for earnings of 85-cents on revenues $16.82 billion. For the full year Target also said it expects to report $4.70 - $4.90 a share compared to prior guidance of $4.85 to $5.05.

Shares of Target were at all-time highs heading into the morning and are still up more than 15% for the year, even as estimates have come down. Wall Street seems willing to look past light numbers in the medium term and will apparently forgive fleeting hiccups on EPS. What hasn't been discussed much is growing evidence that it's not just Amazon (AMZN) eating into Target's market share.

Related: Look Out Wal-Mart! Here Comes Amazon

"In 2012 and 2011 the three major dollar stores out there actually increased their square footage by 5% whereas Target and Walmart (WMT) remained flat," claims Todd Schoenberger, managing partner at LandColt Capital. "The only hope for Target is that the economy is improving because that's going to give people a little bit of 'oomph' to go out and spend some of that discretionary income."

Target was once impervious to share threats from the Dollar General's (DG) of the world. Dollar stores were rundown flea markets located largely in areas too small to support big box stores. Over the last few years the line between which socio-economic group shops at a particular retailer have been blurred. Walmarts and Targets can now be found right down the street from one another, usually with a small footprint discount store stuffed in between.

Marc Chandler, head of global currency strategy at Brown Brothers Harriman, has both good news and bad news for the legions of Ben Bernanke haters. The good news is that Chandler expects Bernanke to obey the "informal rule" of two term limits for FOMC chairman. The bad news, for the haters of current policy, is that nothing is going to change if and when Bernanke leaves at the end of his term next January.

Conventional wisdom is that vice chair of the Board of Governors, Janet Yellen, will take the helm next, but that's of little consequence. What matters is policy and, more specifically, when the FOMC starts weaning the markets off years of Quantitative Easing (QE).

With economic data coming in slightly better than expected and junk debt yields dropping below a somewhat preposterous 5%, the market is starting to toy with the notion that QE may be coming to a halt sooner than expected. Chandler says the Fed is going to see more than just another "phase" of stronger data before calling a halt to the most controversial economic stimulus program since FDR was in office.

Related: Bernanke Must Come Clean on 'the Big Lie' Says Whalen

No one uses the term anymore, but Chandler describes the Fed as being in a box. They want to stimulate to assist job creation but can't do so at the expense of savers or those currently being baited into high-risk investments by the Fed's perversely low interest rates. Pushing investors out on the risk curve and then burning the bridge behind them is bad form and bad policy. The Fed only has "blunt tools" with which to work, Chandler maintains. It doesn't matter whether QE ends abruptly or with tapering, it's going to hurt when it happens.

Best Buy (BBY) reported earnings with a little something for everyone. For the bears there were shrinking revenues, declining margins and diminishing sales on a comparable store basis and just about every other numerical measure of results. The company pronounced the reported 32-cents non-GAAP and 29-cents GAAP profits to be "better-than-expected" but said more about expectations than Best Buy's quarter.

Noting that the stock is up 125% in 2013, my Breakout co-host Matt Nesto is unimpressed. "Now the question is, do you believe these guys?" Nesto grumbles in the attached clip. "Why would you get on board the ship at these levels?"

The answer depends on where you look. Last March BBY CEO Hubert Joly laid out the six focus areas of his Renew Blue turnaround plan. As discussed on Breakout at the time, those measures would be the appropriate way to gauge Best Buy's progress, particularly since the company itself suspended financial guidance. Applying these metrics to the results released this morning shows BBY making some degree of progress.

Best Buy grew online sales 16%, struck a deal to establish Samsung Experience Shops, "negotiated overall rent reductions at a number of stores," ripped another $175 million of annualized SG&A expenses out of the supply chain and sold off its European operations. While the turnaround remains very much a work in progress, the company has a plan and is sticking to it — even if they aren't absolutely certain what the end result will be.

As is the case with grief, there are five stages of bull markets.

Stage one is residual fear of the prior bear market.

Stage two is denial that a bull market exists at all.

Stage three is anger at having missed out on enormous profits. This has been the most hated rally in market history since at least October of 2009. That qualifies as anger.

Stage 4 is when strangers ask me if it's too late to buy Tesla (TSLA). Last weekend the bull market entered Stage 4.

If you're still deciding whether or not to buy stocks it's safe to say you missed the bottom. What matters is where we go from here and how investors can dip a toe into stocks without feeling like the unwitting sucker at a high-stakes poker game.

In the attached video, Greg Troccoli, co-founder of ChartLabPro.com, suggests giving the market room to run but not without a backstop. Troccoli, who suggested stocks could be poised to rally when he joined Breakout in March, says the 1,700s aren't outside the realm of possibility now that resistance has been broken.

Related: The Last Resistance Level Before a Major S&P 500 Breakout

Troccoli is a technician; he takes the stages of bull markets and all other emotion out of the equation and lets the charts guide him. Right now he's dispassionately rolling up his stops to avoid giving back his gains. At the moment Troccoli's sell signal is a close below support on the S&P 500.