He means it! What do we do now?
That's pretty much the attitude of so many big investors who can't believe President Trump's really going to carry out his protectionist agenda. It's causing stocks to fall because investors are trying to figure out if they need to sell all stocks in a regime where world trade will slow because of a president who is making good on campaign promises, or if they just need to be in a Trump-free zone of stocks that aren't impacted by his pronouncements.
It's mighty hard to thread the needle, but we have to try to figure out how to do it.
First, the president has said he wants to create more manufacturing jobs and bring back others that might be lost. That's a campaign pledge he made to many of the people in states that voted for him.
This should not be a surprise but somehow is a surprise to those who should have figured out that Trump means what he says. After what happened with United Technologies (UTX) and Carrier, where the president made it very clear that he could make real trouble if United Technologies moved 2,000 jobs to Mexico -- he saved 1,000 -- and what happened with Ford F, where he has effectively stemmed that company from putting up new plants in Mexico, did investors think the border tax was for show?
Did big money think it's all bluster?
Are investors really shocked that Trump pulled out of the Trans-Pacific Partnership when he campaigned against it?
Why is this such a shocker?
Let's go back over what the president has said he will do over and over again: In return for keeping manufacturing plants in America, in return for hiring American and buying American, he will fight for dramatically lower corporate taxes, remove red tape that he says has stultified business and push for a repatriation of cash from overseas.
That's been the deal.
What's incredible to me is that anyone would think he would go back on that pledge when he has been true to every aspect of what he has pledged. For someone who is supposed to be unpredictable, he is predictable as all get-out.
So now there's a scramble to figure out, again, what gets hurt in a Trumpian world, what benefits in a Trumpian world and how does that graft on to near-term earnings given that this is the biggest week for earnings.
First, let's get some facts on the table. We are talking about manufacturing here. Manufacturing is $2.1 trillion of our gross domestic product, according to the most recent figures available, but that accounts for only 12.5% of the economy. So let's not give up on the other 87.5%.
Second, to some degree the horse has left the barn. There were 2.4 million textile jobs, for example, in the U.S. 34 years ago. Now there are 130,000. It would take more than just a meeting with Under Armour's UA Kevin Plank, as the president had this morning among a host of CEOs, in order to bring back this once-vibrant industry. Plank has plans to build manufacturing in Baltimore, but if you make textiles here, unless it's totally automated, it's hard to believe it can be competitive.
Third, there's a mad scramble to figure out who is really hurt by all of this talk versus who isn't hurt. This isn't easy because things are so sketchy and because the crosscurrents on a given day are so difficult to fathom. For example, the biggest winner over and over again is the oil and gas industry. It's being deregulated. It can even benefit from trade as we grow more of a surplus.
But the price of oil is down today even though OPEC talked positively about how the cutbacks are working. I think you go the other way on this one and do some buying. However, very few like to buck the daily trend. A driller, a service company, an oil and gas company, I say go against the futures and buy.
Then there's the banks. They are huge winners from deregulation and aren't hurt by the protectionist talk. However, out of nowhere, rates are down big. Banks need higher rates to make more money. However, the traditional playbook says world trade is cut by protectionism and that means rates go down. This one's not as easy as buying the oils because we don't know how long it will be before we get a readjustment of this view. I think economic growth will be on the rebound and the 12% of the economy that is manufacturing won't derail the rest of the economy and its growth from repatriation, lower corporate taxes and deregulation.
Next, we can try to pick domestic winners that fit into this new scheme. What do they look like? I have to crib from my Squawk on the Street partner David Faber, who said this morning a winner looks like Comcast CMCSA, a pure domestic company that would benefit from lower taxes and exports entertainment and imports nothing. How many Comcasts are there, though?
Some are buying housing stocks. They make sense as Trump stocks today because rates are going down, which helps them, and the numbers have been good, albeit not great.
Still others want retailers and restaurants. I say be careful. You are skating on thin ice because retailers are being killed by Amazon (AMZN) and they don't make anything here and often import from over there. (Under Armour and Amazon are part of TheStreet's Growth Seeker portfolio.)
I like Home Depot (HD) , which is the putative winner today, and it sells a lot of stuff that is made here. Still, though, it's no shoo-in. Who knows what kind of taxes will be put on retail for importing anything. Restaurants? The competition is so hard that even if you get it right, as McDonald's (MCD) did today with better-than-expected numbers, it doesn't work because people are so negative about the end of the windfall that came from all-day breakfast.
There's still one other area that investors can turn to: stocks in the Trump-free zone. What are those? How about the ones that don't need Trump, aren't on his bad side and do well when the economy slows, which is what the takeaway has to be when we consider that oil and rates are down.
It's hard to be more clichéd about this, but that means FANG: Facebook (FB) , Amazon, Netflix (NFLX) and Google/Alphabet (GOOGL) . Fortunately, though, that's not all it means. Skyworks Solutions (SWKS) gets new money in after that incredible quarter. Fortunately, CEO Liam Griffin is on Mad Money tonight. The semiconductors and semiconductor equipment companies are qualifying as Trump-free, too; think Nvidia (NVDA) and Lam Research (LRCX) . Cloud's working: Adobe (ADBE) and Salesforce (CRM) come to mind.
How about Apple AAPL? That one remains a tough call. It's suing Qualcomm (QCOM) , the cellphone chip licensor, and even though that wouldn't amount to a huge amount of money, it's crushing Qualcomm, which is reported to have at least 25% of its revenues on the line. (Facebook, Alphabet, Apple and Comcast are part of TheStreet's Action Alerts PLUS portfolio. Ford and Qualcomm are part of the Dividend Stock Advisor portfolio.)
So, the waves are high, the riptide's vicious and the navigation difficult, which to me means two things: first, take trump at his word; two, you might want to go Trump-free and stick with tech or find more Comcasts, stocks that don't seem to have earnings risk that can be owned; or three, take the other side of the trade and use the strength in rates and the weakness in oil to buy banks and crude and crude-related stocks at a discount. The latter requires bravery, but sometimes that's what makes for the best investments.