What happened? Did it finally dawn on people that the president is willing to sacrifice profits on the altar of workers doing better? Did people figure out that semiconductors can be leaders but that doesn't mean anyone follows?
Did it finally occur to investors that the president means business and not every nation will want to do business with us now that we are trying to build physical walls to Mexico but financial walls to Europe and Asia?
From the looks of things that's exactly what might be happening.
How else can you explain that Micron (MU) , the commodity semiconductor maker led the market and only a handful of companies, all related to Micron, followed the stock higher.
The losers? Almost everyone who needs world trade to advance, hence the endless selling in companies like United Technologies (UTX) , Caterpillar (CAT) , Honeywell (HON) and Boeing (BA) , the latter down ten points in a truly dispiriting session for the bulls.
First let me just say that the declines in these kinds of stocks reflect a decision by the administration to go after every company from every country to see if it is dumping on us, with tariffs on steel and aluminum being the beginning of the new tariffs that are coming.
There's a definitive sense that the president is a lot tougher on China than we realize.
I think that's wrong. When I learned today that Larry Kudlow might be named the chief economic adviser to replace Gary Cohn that was the signal to buy these stocks not sell them. Could the market be that wrong? Sure, it can be. I am troubled by the sentiment that says sell these stocks because Kudlow would find a way to scale back the rhetoric but still be tough. I understand Kudlow to be the front runner and he was my partner for four years on Kudlow & Cramer and there is no way that he would ever do anything that would make it so our international companies did poorly.
In fact it is the opposite. Larry is the master at arguing his view and he will be able to get the ear of the president who might be bombastic going forward but would have the ruckus cleared up in his wake by Kudlow.
Therefore I would think that the call to sell, which many institutions are following might be misplaced. I do not believe these companies will be closed out of large markets and I believe that their raw costs will not be blown out by small tariffs on the aluminum and steel they buy. No wonder they rallied as they day went on. Their businesses won't be hurt from anything I am hearing and, instead, business is strong enough to merit buys in every single case of these hard hit names.
No matter, let's talk about what is winning and why.
It's a simple answer and it is tech. These stocks are so on fire we have to examine why they are going up for their seventh straight week of gains.
First, the stalwart, Micron, got the kind of research report that many investors dream of. Nomura Instinet came out with a report headlined "Buy the Breakout. $100 target price."
I have been telling you that something like this was on the horizon. Micron is the backbone of everything from the personal computer which has gotten a second wind to the data center which is the strongest portion of the entire food chain. It was just a matter of time before an analyst made this call.
I want to go over it for a second because this Nasdaq stock has wallowed in the forties seemingly forever and when it took out the $50 level the excitement grew palpable.
Why? Because nobody believed coming into the year.
You see Micron is one of those companies that makes products that are thought to be easily mimicked making it so it is just a matter of time before there is a glut in the two principal business lines: Dynamic Random Access Memories, or DRAMs and flash memory.
Micron has been telling pretty much everyone that this time is different, that their chips are now more specialized and proprietary. However, as I so often tell you, the graybeards simply refuse to believe that anything can be different. The cognoscenti has basically created a whole cottage industry of saying that the four most expensive words in the English language are "this time it's different."
In the case of Micron it turns out they couldn't be more wrong. Not only is there not a lot of mimicking going on but Micron's chips -- both kinds -- are in short supply. That's because the personal computer has made a comeback, something quite unexpected in the era of the cellphone. It often appears that the only company that has figured this out is Micron. At the same time, there's not enough flash memory given that it's a product integral to the development of the data center, where the cloud resides.
Now you are not going to see strength in Micron be reflected in most of the S&P 500. There just isn't enough overlap. But boy oh boy is there overlap in tech land.
These two companies' stocks like Micro were trading as if it were all over except the crying. That's the "this time it is no different crowd believing that the DRAM and disc drive cycles always come to an end and it comes to an end with these stocks trading at absurd multiples because those multiples are about to be cut in half.
Nope, instead, we are getting accelerating earnings which couldn't be worse for those betting against these stocks. It's a rout.
If these companies have good cloud business then two companies that dominate the cloud, Amazon and Alphabet can have a run. And they are totally off to the races as are the cloud kings-the stocks the software companies that have harnessed the cloud and if you stay tuned you will hear about all of them as I reveal the names one by one that will work their way higher, maybe much higher.
You want to know what else is in that data center? Yep, Nvidia (NVDA) , which has the chips that are both the fastest and use the least energy.
So what's not rallying but has become integral to the physical cloud infrastructure? Intel.
I think that the rumors that Intel is going to buy Broadcom, rumors that we first heard last Friday are total poppycock.
I will go one step further. Intel sells at 14 times earnings and it is a much better company than Micron. That doesn't mean that this $51 stock is going to $100 like the Nomura Instinet piece says can happen to Micron because Micron is selling only at five times earnings. It does give you a chance to buy one of the best companies in the world with a stock that is being held down by the "this time it's different" crowd as well as the people who are gullible enough to believe that Intel's about to launch a hostile bid at Broadcom and Hock Tan the man who built the company.
I hesitate to dignify the convoluted trajectory of this bid but I will go there for a second: the idea is that if Broadcom gets Qualcomm (QCOM) , the combination would give Intel the leg-up on all things Apple, including cellphones.
What's the matter with this reasoning? Hock Tan doesn't want to sell, that's what matters and it is foolhardy to wager that this deal will come to fruition. Which leads me to the one Micron related stock that's at a discount that I would buy tomorrow: Intel. Everything else in that segment is up except Intel.
That's the buy.