It's not just time. It's not just price. It's events and events just aren't playing ball with the bull.
When people ask me what makes me so cautious, why I continue to recommend a high cash position, why I am reluctant to say buy to almost anything mentioned on the Mad Money Lightning Round, why we pull the trigger on almost nothing for Action Alerts PLUS and just keep trying to sell down positions if and when they get unrestricted, I cite a litany of upcoming events and signposts that create a gauntlet that makes it almost impossible to be more positive about stocks until they are traversed.
Here's the upcoming worrisome, often White House-led steeplechase. When you finish you will no longer wonder why I am not particularly bullish or sanguine at this moment:
- Tariffs on $100 billion in Chinese goods. Remember, the president dropped this particular bomb out of nowhere and while there might be $500 billion worth of imports to target, who knows which ones will be targeted? You want to buy a retailer only to find out that everything in a half-dozen of each store just went up dramatically in price? How can you afford to use the weakness to buy a stock of a company when that company's imports might rest entirely on parts or goods on some giant containers coming at you from China.
- China's retaliation. Once we get the list of tariffs, you think the Chinese are going to say, "no problem?" They will then target or boycott a whole new set of imports and goods, even those made in China jointly. Nothing's off limits. You want to own Apple (AAPL) if China's hopping mad? I know, no pain, no gain. But if the only forecast I can give you right now is that of Mr. T to Rocky - Pain -- why shouldn't I wait to see their response?
- NAFTA. I keep hearing the negotiations are going smoothly. Hate him or like him, the idea that anything President Trump wants to do with Mexico will go smoothly is something that seems like a true long shot that has only been made worse by happy talk that things will work out. Our relationship with Mexico is the worst I have ever seen it. Maybe that will make them bend to our will. Do you might if I see first?
- May 1 Tariff date. We will find out how serious the president is about the steel tariffs when we get clarity on who is really going to be banged by these tariffs and how they will be implemented. Keep in mind that some steel prices have been jacked up about 50% year over year according to the conference calls I heard Tuesday.
- The president's attempts to put tariffs on European cars because of their tariffs on our cars. The president is not letting up on his goal to change the ratio of tariffs right now: we place a 2.5% duty on European imports while they have a 10% duty on ours. We do have a 25% duty on foreign trucks and commercial vans, which is why you almost never see EU trucks and fans here.
- The European retaliation after the president put on his tariffs on autos. They won't sit by idly and take them, of course. They will retaliate.
- Iran. What can I say? The president wants the Iranian deal scrapped. The rest of the world is happy with it. But in an era of putative American hegemony the rest of the world doesn't matter. Should it? Maybe not, but the stock market does better if you let these kinds of issues alone. That's not what the president cares about, though.
- Syria. Remember Syria? A few days ago we got a severe reaction to the market when the president launched missiles to strike some chemical weapons plants in Syria. The next day Bashar al-Assad, the president of Syria, was seen laughing with his Russian advisers. Are you kidding me? You know how easy it would be to target the presidential palace? Until chemical weapons are renounced and verified, Syria will be with us. Stalking us. Skulking ...
- Inflation. It's undeniable. It's on every call. Some of it is mandated, like aluminum and steel. Some of it has to do with shortages from strength, notably lumber and transport. The latter, the cost of freight, is being bid up pretty much everywhere, trucks, planes, trains. I think the explosion of e-commerce and the need to ship more things to your house rather than you picking them up is a real culprit. Oil? We have a bottleneck in the Permian, we have a global synchronized growth moment where more oil is needed and we have many OPEC nations running flat out while others have dramatically underinvested. We just can't pump fast enough and only the Saudis and the Russians have enough spare capacity to help keep oil down. You can't reason with the Russians and the president hasn't called the Saudis, perhaps because he thinks that OPEC's behind the rise?
- Peak earnings. Until Tuesday's ridiculous Caterpillar (CAT) conference call where they told you how early they were in the turn in their business and then let you know how late it is in the turn of their business, I didn't hear a lot about peak earnings. But when you say that you are at the high-water mark for earnings and you are one of the largest manufacturers on earth, you are going to start a spate of "peak earnings" chatter that will not die down until, literally, the next quarter. We know we have hit peak autos -- that was ages ago and the stocks reflect it and tariff concerns. Peak housing? Who the heck knows? We are trying to put up as many houses as we can but space is limited, and zoning's tough. I don't know how we will ever get back to the levels we were before the Great Recession now that the zoning laws seem so much tougher and the independent private homebuilders seem to have just plain disappeared. Look, after what CAT did it doesn't even matter.
- Tech arms race. FANG's become an arms race. You are Alphabet (GOOGL) and you want to take share from Amazon (AMZN) Web Services, you have to spend like mad. You are Amazon and you want to be free of potential Post Office issues, you have to build out resources to do it yourself. You are Netflix (NFLX) and you want to stay ahead of Amazon Prime movies, you spend more on content. You are Facebook (FB) and you want to have enough server space to get the job done, you need to build endlessly.
- Rates. OK, that's what everyone else is worried about so the one thing I don't need to do is worry about it myself. Higher rates from these levels aren't the end of the world even though they are up dramatically from the 2016 lows. But the algorithms say they are and the higher-yielding consumer packaged-goods stocks are being decked because of comparative value and raw costs, or else I would be simply saying "go buy Procter & Gamble PG at 4% yield."
Now it doesn't take a genius to figure this list out. It is plain as the nose upon my face. But the fact is, the list can't be undone by time or price. You can go lower from wherever you are if any of these flares. So short-term there a need for caution. We are going to get through this, but it isn't as easily navigated as any other gauntlet we have faced in many years' time.