We went from pricing in a lot of bad to pricing in a lot of good in record time. It's rather amazing. Just six days ago, the big reversal day, we were pricing in another weekend of difficult trade talk and a belief that the Chinese were going to make trouble this past weekend and our European allies were growing restive about our insistence that auto tariffs come down while we seemed incredibly far apart in the NAFTA talks.
What's incredible to me is that nothing's really changed except things have gotten worse. The Iran break has left us more at odds with the EU than ever. The potential collapse of ZTE (ZTCOY) , a 75,000 person Chinese competitor to Apple (AAPL) , based on sanctions put on by the U.S. government, and Qualcomm's (QCOM) announcement of a $10 billion buyback, signaling that the Chinese won't allow them to buy NXP Semi (NXPI) , show me that things have only gotten more grisly.
Secretary of Commerce Wilbur Ross has spoken a real hardline on China in the last few days, which seemingly doesn't bode well for the upcoming talks.
And now we are hearing about how contentious the NAFTA talks are, where Mexico workers make so little versus ours that there is simply no incentive whatsoever besides an angry president, to build a plant here. Remember, both Mercedes (DDAIF) and BMW (BMWYY) built gigantic plants in Mexico in the last year that will begin shipping in volume to the U.S. this year and next. These plants simply can't be built in the U.S. with any competitive advantage.
It gets worse. Rates are higher. Oil's higher.
Only Korea's better.
And that seems to be what everyone's keying on. We know that the North Koreans aren't coming to the peace table because of the United States. They are coming to the table because the United States pressured China to pressure North Korea as it is simply a client state. The president seems deeply focused on getting rid of North Korea's nukes. It is a little difficult to imagine that kind of win without giving the Chinese something, anything, to make it so there's accommodations that limit our demands to intellectual property, aluminum and steel.
I posited last night that the market figured out how strong tech was and the stocks took off when Morgan Stanley delivered a perfectly timed call to buy tech just when, seasonally, you were supposed to sell it. May has historically been a real bad moment to buy tech as the summer used to mean a slowdown. But these days, as the Morgan Stanley research team knows all so well, there is little seasonality given the secular growth cloud adoption story that's' taken the mantle from the slowing cell phone narrative.
There's always the case that people just feel better about everything, the same exact facts that they felt worse about a week ago.
If that's the case, then you have to be careful. If we could sell as hard as we did on this set of facts and then buy as hard as we have on these same parameters there's no certainty that we couldn't swing right back to misery unless something truly does change for the better.
I know that seems fanciful given the facts as laid out, but did anyone envision six months ago that the heads of the two Koreas would sit down with each other? The press is skeptical. But it was skeptical about the talks between the two Germanys.
And then the wall came down.
We need a wall to come down to go to the next level. If another one is thrown up, say between us and China or us and Europe or us and Mexico, the positive perception could be run over by the negative reality.