Blog Posts by Jeff Macke

The biggest under-performers in 2013 have been those who invest according to hackneyed market truisms.

The Hindenburg Omen: Stocks are up 9% since the first sign of the dirigible of doom on April 5th. The sell signal has appeared many times since over the last six months, each of which coming below where the market sits today.

Sell in May and go away: The S&P500 (^GSPC) is up just under 7% since May 1st.

Sell Rosh Hashanah, buy Yom Kippur: Not this year. Stocks rose more than 2%

September is terrible for stocks: Again, not this year. Despite weakness into the end of the month, stocks rose more than 3.5%.

So here comes a double whammy for markets. October is legendary for the crashes of 1929, 1987 and a month-long deluge of pain that was September 2008. Add to that the notion that government shutdowns are bad for markets and many investors are battening down the hatches.

Simon Baker of Baker Ave Asset Management would be happy to buy whatever stocks you'd care to sell. "The big mistake everyone has been making the last 18 months is not being long the market" Baker points out in the attached clip. Baker isn't going to strenuously argue against the notion of some profit taking here but he's running out of the frying pan and into the fire on the risk side.

With the government shutdown in effect, Republicans and Democrats continue digging in on the budget and the battle centers on the controversial Affordable Care Act. As a result, frustrated investors seeing red may be missing a chance to make green. When it comes to investing, emotions and profits are seldom a healthy mix.

"People have a tendency to invest with their own emotions," notes Barry Ritholtz, CIO of Ritholtz Wealth Management and editor of the Big Picture blog. "It's a terrible mistake. Every trader knows it every investor should know it."

Democratic leader Harry Reid says any bill that modifies the controversial health care program will be dead on arrival. The Republicans vow to shutdown the government before they sign off on any hike in the debt ceiling. The numbers for investors are simple: The health care sector is going to win no matter happens to the specific details of Obamacare.

Related: Obamacare Is GREAT for My Business, But Awful for America! Says Funk

He's been putting money into the Health Care Select SPDR (XLV) ETF and big pharma names like Johnson & Johnson (JNJ) and Pfizer (PFE), as well as "almost any" hospital company. If Obamacare happens, which is still the odds-on bet, "about 45 million Americans with little or no insurance are going to be able to consume medical care," Ritholtz notes. In countries where government health care is the norm (most other industrialized nations) those numbers work to the benefit of the hospital sector companies.

You can be forgiven for thinking this already happened but Apple (AAPL) has officially surpassed Coca-Cola (KO) as the world's top brand, at least according to Interbrand. It's the first time in the 14-year history of Interbrand (a creator and manager of brands) that Coca-Cola has not been in the top spot. The beverage maker actually fell to third behind Google (GOOG), IBM (IBM) and Microsoft (MSFT) round out the top five.

In other Apple faux-news, CEO Tim Cook is rumored to be meeting with activist investor Carl Icahn in Manhattan today. Icahn revealed a position in Apple shares in a Tweet from his @Carl_C_Icahn account. The message triggered a more than $22 billion market cap increase for Apple. If a tweet is worth $150 million per keystroke one can only imagine the value of a lunch between Icahn and Cook.

Hedge fund manager Simon Baker of Baker Ave Asset Management expects Cook and Carl to have a pleasant lunch but doesn't think there will be much in the way of fundamental developments. "I think it's really good PR for Tim Cook that he's really listening to someone," Baker says in the attached clip. There isn't likely to be much beyond a nice chat and perhaps a cup of coffee.

As far as matters other than artificial rankings and Tim Cook lunch plans, Baker likes shares of Apple about as he has in his prior visits to Breakout. Even with all the buybacks and dividends Apple is sitting on a ton of money and more is coming in every day. The iPhone 5s was a big winner and there are expectations for a new iPad Mini in the works but Apple needs to keep the ideas cranking out if the shares are to break above resistance at $500.

Stocks around the world are Breaking Bad this morning.Weak global markets and the realization that the U.S. government may actually shutdown tonight are putting pressure on the U.S. indexes. The Dow Jones Industrial Average (^DJI), S&P500 (^GSPC) and the Nasdaq (^IXIC) opened down roughly 1%, but are slowly paring initial losses.

Global markets are also feeling the heat with the Nikkei 225 (^N225) closing down 2%, the Hang Seng (^HSI) down 1.5% and Europe's FTSE (^FTSE) is trading off nearly 1%. The FTSE hit its lowest levels of September with miners getting smacked after the HSBC Chinese Manufacturing PMI was revised down to 50.2. Anything below 50 marks economic contraction.

The selling marks a prevailing shift in attitude from last week and the apathy of the last couple weeks. The S&P closed last week at 1,692; just 2% off all time highs and up strongly for the month of September. "If they're going to shoot at me and that's all they've got then bring it on," says Scott Nations, founder and CIO of NationsShares. "But that's a really dangerous view to have when we're talking about Washington because it could really get ugly."

Related: The Upside to a Closed Government

For the most part traders are still banking on the looming shutdown in DC ending in a similar manner to the debt ceiling debacle of 2011 and the fiscal cliff lunacy of last year when the steep sell-offs proved to be buying opportunities. In 1995 and 1996 brief government closures had no meaningful impact on the markets according to a report sent out this morning by the Lindsey Group.

Obama administration officials are expected to propose roughly $300 million in aid to Detroit later today. It’s a paltry amount for largest U.S. city to ever declare bankruptcy and comes nowhere near the $18.5 billion of debt obligations Detroit has on its books.

This latest cash infusion is being made by a motley assortment of federal, state and private foundations and is ear-marked for improvements to the transit system and “blight improvements.”

Investing in transit while demolishing vacant buildings nicely encapsulates the process of “creative destruction” at work in Motown. At 138,000 square miles Detroit is a massive, increasingly desolate place. Over the last 60 years the population has dropped more than 60% from 1.85 million in 1950 to 700,000 today. It’s the kind of city where gorgeous buildings are stuck in desolate, dangerous locations.

One of the people in charge of saving Detroit is Michigan Governor Rick Snyder. A Michigan native who built a net worth in the vicinity of $200 million as a Gateway executive and venture capitalist, Snyder is a self-described “nerd” with a pragmatic, tech-friendly approaching to remaking the city.

Speaking to Breakout from a packed tech conference last week, Snyder insists Detroit is already on the mend. “This isn’t about starting from scratch,” Snyder insists, “It’s already been going for several years.”

If you're going to dance among the hedge fund elephants you better be nimble. That's the basic thinking of Allstartcharts.com and founder of Eagle Bay Capital J.C. Parets as he tries to make money for his clients by trading shares of Herbalife (HLF).

A quick refresher course on Herbalife might be in order. Last December billionaire investor Bill Ackman announced he was shorting the shares of nutritional supplement (?) company Herbalife. Ackman maintains the company is a pyramid scheme and believes the stock will go to zero. Putting his money where his mouth is, Ackman announced that he was short 20% of HLF's float and wouldn't cover a single share.

Ackman has plenty of enemies on Wall Street and they were quick to pounce. Among those enemies is billionaire Carl Ichan who famously went on CNBC and suggested Ackman was exposing himself to "the mother of all short squeezes." With Ackman sitting on so many shares on the short side, Icahn and other Wall Street "whales" pounced, buying up Herbalife shares and "squeezing" Herbalife higher while Ackman squirmed.

Whether or not Herbalife is corrupt is debatable. For Parets what matters is that all those buyers create an upward pressure on the shares. As a technical trader Parets is indifferent to the fundamentals. "They sell vitamins?" he scoffs in the attached video. "Who cares what it is. It's a stock."

JPMorgan (JPM) CEO Jamie Dimon met with Attorney General Eric Holder on Thursday morning as rumors swirled about a possible $11 billion settlement to end criminal and civil charges against the bank. The Justice Department has a minimum of seven different probes into JPM and they're reportedly trying to settle as many as possible in rapid fashion.

According to several reports JPM made a $3 billion settlement offer connected to alleged abuses in residential mortgage backed securities. Mr. Holder is said to have rejected the offer. Last week JPM paid $920 million and "admitted to some wrongdoing" to settle regulatory charges connected to the "London Whale" losses.

Related: Is JPMorgan Stuck in Perpetual Defense Mode?

Once JPM and Eric Holder finish horse trading over the size of JPM's kickback... er... settlement, the bank will move on to addressing federal probes into its debt collection practices and its role in rigging Libor rates.

Regarding JPMorgan's settlements and charges and degrees to which the bank is willing to concede guilt, two things are clear. One, JPM has a ton of money. Earnings estimates are pegged around $22 billion for 2013 and the company has a market cap of about $200 billion. The other is that it will always be politically expedient for young prosecutors on the make to attack Wall Street banks. JPM is going to be in a constant state of legal defense for the foreseeable future.

Ritholtz Wealth Managment CIO and Big Picture editor Barry Ritholtz says JPMorgan has shelled out about $11 billion in fines and spent around $16 billion in legal fees in the last few years. "This is just the cost of doing business for these mega banks."

J.C. Penney (JCP) may not be dying but they sure do act like it. In response to shares dropping more than 25% on rampant speculation that that the company has severe liquidity problems, J.C. Penney announced the following in a press release this morning:

In response to inquiries, JCPenney said today that it is pleased with its progress thus far in the Company's turnaround efforts and the traction its initiatives are starting to achieve. Moreover, the Company said it is starting to see greater predictability in its performance across many areas.

The Company continues to be encouraged by improvements in purchase conversion both in store and on jcp.com, primarily due to being back in stock in key items and sizes the customer expects to find at JCPenney. Overall sales on jcp.com continue to trend double digits ahead of last year.

The Company still anticipates it will experience positive comparable store sales trends coming out of the third quarter and throughout the fourth quarter of 2013.

There's been quite a bit of chatter regarding J.C. Penney over the last few weeks, but none of it has been about the online sales performance of JCPenney.com, which was highlighted in the press release above. What Wall Street has been debating is whether or not J.C. Penney has enough money to survive through Christmas. Concerns were sparked yesterday in response to Goldman Sachs (GS) issuing an "underperform" rating on existing J.C. Penney debt.

Recall that Goldman had helped J.C. Penney raise more than $2 billion already this year. Leaving aside Goldman's involvement in both the selling and subsequent downgrading of J.C. Penney debt, it's fair to say investors think Goldman has a good grip on J.C. Penney's fundamental condition.

Related: Tragic J.C. Penney Story Gets a Touch of Disney Magic

The question on the table isn't whether or not JCP.com is having a good quarter. The question is whether or not J.C. Penney the corporation is going to be able to avoid bankruptcy.