In a bull market, things go right. That's just what happens. Worries are quashed. Objections are rebutted. Fears aren't stoked, they are quelled. Most important, bull markets emphasize the positive, eliminate the negative and don't short Mr. In-Between.
Let's start with some big winners. Last night we learned that U.S. officials were investigating a rigging of the gold market by some very large banks. We're all used to what happens after that news, right? Immediately the targets are hit, and as is too often the case, one of them is JPMorgan Chase (JPM). Just when the stock looked like it was going to break out, we get this investigation and like chutes and ladders, this one looks like it is headed right back down into oblivion.
But not in this market.
In this market JPMorgan convenes an analyst meeting and tells people it is going to charge for deposits because under the new capital rules, the bank is penalized for having too much capital.
So, the stock doesn't go down at all and looks flat before the market opens. Some had hoped that JPMorgan might split up the bank into easier-to-manage morsels. Nope, in a session that should have been accompanied by Al Green's Let's Stay Together, the bank's CEO explained why a split up would not be advantageous. The stock then goes higher still!
Step back for a moment: Here's a bank that's being investigated for allegedly rigging the gold market, that's kicking out depositors by charging them fees no one else is charging and is insisting on not bringing out value by shrinking to grow. The result? It has one of the biggest gains in ages. Now that is true bull-market action.
Or take Home Depot (HD). When I got up this morning I read "Home Retailers' Shares Off Their Foundation," an Ahead of The Tape piece in Monday's The Wall Street Journal that made me feel as if Home Depot was ready for a fall because its share price had become "untethered from the rebound in home sales and construction." The stock, the article suggests, has "begun to price itself out of the market."
In a bear market, you see this piece yesterday and you short the heck out of Home Depot. Then, when it reports, you clean up when it disappoints and tumbles right into the opening bell.
But this is a bull market. While I am reading this "Home Depot is too pricey and untethered from reality" piece, I am also watching the Home Depot earnings crossing the tape. They are sharply better than expected, maybe even incredibly better than expected, as in magnificent. In a bull market you get the good fortune of reading this article after Home Depot blows out the numbers so even though it is very wrong in its slant, it can't hurt you. The deed's been done. Think of all the money you saved because you couldn't take action and sell the stock as the article suggested. No harm, no foul Mr. Ahead of the Tape!
Three months ago Toll Brothers (TOL), the terrific homebuilder, reported a quarter that analysts didn't like. That's because the company told you that its earnings didn't yet include a lot of good news to come from some apartments it was going to put on sale around New York. I got the sense that the analysts simply didn't believe them. Today, the company reported everything that it said would happen, especially the incredibly good pricing of its New York area properties. So the stock soars.
In a bear market, Toll promises and then under-delivers. In a bull market, Toll says not to worry and then blows the projections away. Looks like housing and Home Depot aren't untethered after all. They are both going higher.
For the longest time we have been pushing for First Solar (FSLR) to split up its assets to give us a yield vehicle of finished solar projects and a growth vehicle that manufactures solar products. The company seemed to be dragging its feet on it. Until today when it does a joint venture with another solar company and then sets up a yieldco, that's exactly what the market asked for. That's how your stock rallies 14%. Total bull market action.
In a bear market, things that make sense don't work. In a bull market, they work -- writ large.
Take Cracker Barrel (CBRL). I said last week that this company, which is uniquely levered to interstate highways, would blow the numbers away because its restaurants are a natural place to stop for travelers saving money at the pump. Today the company reported a fantastic number and cited that it is the natural place for on-the-go travelers who are saving money at the pump to stop. It's textbook bull market.
Or how about Shake Shack (SHAK), the burger chain brainchild of uber restaurant and hospitality guru Danny Meyer? A month ago it came public to tremendous plaudits and more than a doubling in share price. Today, analysts rolled out coverage and it was tepid at best. Of the seven firms writing on it, only one recommended it -- one for seven! Ouch.
In a bear market, those six holds would have hammered this stock into oblivion. But it's the lone bull that gets listened to and the stock flies a couple of bucks higher. Why? Because the piece articulates a view that Shake Shack is like no other, in fact, it's a category unto itself: fine casual dining. Could this be the Tesla (TSLA) of burgers? A burger so good that you have to own shares in the company? It sure seems that way.
Of course, not just individual stocks are getting things roaring. Last week we were supposed to be brought low by an intractable situation of Greece failing on its bailout. The new Greek leadership, which said it would renounce any onerous terms, meets with the Germans and agrees to onerous terms! I know, it sounds bad. Then the leadership meets with the Greek Parliament, agrees to nothing onerous at all and the Germans go along with it. Kabuki Bull Theater!
Or how about Fed Chief Janet Yellen on the Hill today? In the old days, we would wait with bated breath as the Fed chief dropped some sort of bombshell that would cause the stock market to swing wildly. You would be shocked, angry, miffed, confused and upset because of the testimony.
But Yellen? Let me give you the subtext of what she said. "Look, nice people, I am not going to say anything different than I have already said. And I will be polite and you will trust me and let me do my job. Then I will go back to work when you are done with me. Thank you very much." She came, she said nothing and she conquered. Believe me that only happens when the bullish stars are aligned and Ursa Major is obliterated by Alpha Centauri.
OK, usual caveats. There can be things that sting. Why can't Macy's (M) do better than it has? How did Dillard's (DDS) and Nordstrom (JWN) become better at making their numbers? When will the communists start up those junkets again to take gamblers to lose money in Macau casinos? What are they, Maoists when it comes to the earnings per share of Las Vegas Sands (LVS) and Wynn Resorts (WYNN)? Come on, commies, get with the darned better-than-expected program.
Still, overall, you have to understand that things go right in a bull market; and when they don't go right, people find reasons to cheer and buy anyway. Ultimately, that's how markets really go higher, and this one knows how to go higher better than any I have seen in ages.