The Daily Dose: Don't Buy the Bullish Hype

 | Feb 05, 2014 | 12:00 PM EST
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It's been a pretty depressing couple of weeks for us strategists and investors.

Equally depressing to me are the market cowards wearing black-rimmed glasses and Gucci loafers, sporting an Excel keychain next to a Benz keyless-entry remote. Without fail, the bullish Wall Street wizard brigade has emerged from its January hibernation only to advise, "Don't panic" -- that folks should take a "disciplined approach" and a focus on "dividend growers, not high-yielders." $LOL.

After pontificating on these areas, these people proudly reiterate their uber-optimistic S&P 500 year-end price objectives. These, in turn, are underpinned by this misnomer that a great household consumption boom is lurking -- one that will coincide with the unlocking of corporate balance sheets.

I can't stand these unaccountable market cowards, and I would love to debate them one by one. Their musings are not guidance but, rather, straight-up ignorance, and their ideas are coupled with a deep disdain for any admission of being wrong. Being wrong, after all, would require acknowledging their conflicts of interest in constructing strategy guides -- be bullish, have to win new business -- that lead to understating the near- and long-term risk factors in macroeconomic and individual stock calls. The truth is, the Dow and S&P 500 have been hammered in the past five weeks, so something must be changing off in the distance that deserves to be respected and articulated today.

How will you know the moment is right to once again believe the hype being sold by the market cowards?  Here are a few things, near-term and long-term, that I am looking for before I'll become more opportunistic on the market:

1. There should be more earnings stories in the next two weeks that resemble Chipotle (CMG), rather than Best Buy (BBY), J.C. Penney (JCP) or even the top names in the railroad and trucking spaces. Feed me more broad-based earnings blowouts, as opposed to a one-off share-gain story. One example is in how Michael Kors (KORS) is destroying Coach (COH) (see more on this below).

2. Boards of directors should be announcing new dividend and share-repurchase programs ahead of proxy-filing season.

3. Companies should reiterate their lackluster outlooks in the upcoming analyst conference season.

4 With cash vaults high and stocks off the peaks, can we get a bit of deal activity?

5. High-beta names with struggling businesses shouldn't see their shares shed 5% on a day with no firm-specific news. Sears (SHLD), for instance, has lost 10% in the past five days alone. (I have a long-term Sell rating on this name, as I firmly believe the company will cease to exist by 2020.)

On the Monster That Is Michael Kors

Michael Kors squeezed the life out of Coach during the holiday season, taking its sales and its margin. Coach has now woken up to the realization that it must reinvent itself, and quickly -- and Michael Kors is singlehandedly responsible for that. At the core of Michael Kors' attack was bright product, better-made product, better store windows and snazzier-looking associates that drove excitement for non-discretionary purchases.

Here are two things that especially caught my attention. First, Michael Kors is taking share from higher-end luxury brands by opening stores in the latter's markets in Europe. Second, here comes a big push into men's products. Good luck buying that "attractively valued" Coach.

On the Disaster That Is J.C. Penney:

J.C. Penney was higher premarket Tuesday, but then the company released holiday-sales numbers that spooked investors -- and the stock finished lower by a double-digit percentage. I am astonished by how the market continues to react strongly to each piece of news this company releases.

Also on Tuesday, I reiterated my Sell rating on the stock with no price target. If you require added insight on the company, please reach out to me via email.

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