What a tug of war between calmness over a British rejection of the European Union vs. the further collapse in oil.
It's titanic and everything else is of little to no importance. We live in a world where stocks are playthings for the hedge funds -- too small to matter. But Brexit and the price of oil? They are the real deal, palpable to all the super-rich trigger pullers, and good news on Brexit -- a sense from recent polls that it might not happen -- battled mightily with a dive in oil. In the end, instead of paroxysms of oil-related pain, we have non-Brexit-related gain.
One of the more tedious aspects of my job is to have to examine the same trends every day and look for minute differences that could have big impact.
Right now, there's almost universal fear of Britain pulling out, with central bankers around the world uniting in readiness to provide liquidity in case things go haywire.
Liquidity, so you know, is code for propping things up in any way possible if things go wrong. The collapse of Lehman and Washington Mutual and AIG and Fannie Mae and all sorts of other institutions is still recent enough in time that bankers know that even the firmest of financial institutions have feet of clay.
So when I hear they are ready for the prop-up and there's a hint the U.K. may stay in, I know I feel emboldened. The unexpected "bad" hurts a lot more than the expected "bad," and Brexit has certainly become as expected now as it was unexpected a couple of months ago.
How about oil? It's getting interesting here. When we got to $50, there was a level of optimism, led by oil cheerleader-in-chief Harold Hamm, CEO of Continental Resources (CLR), that we were about to be headed to $60 to $70.
We've seen unrelenting pressure in oil ever since. Straight-down pressure. There's plenty of reasons why this is happening.
First, $50 is break-even for a lot of the oil patches around the country. That means when oil hit $50, companies that had drilled but capped wells, including Continental, uncapped them and let it flow. Other oil companies sold futures at a premium to $50 to raise cash and pay off banks.
But something happened today that really freaked oil people out: Pioneer Natural Resources (PXD), considered one of the smartest operators out there, shelled out $435 million to buy the rights to 28,000 acres in the Permian, the lowest-cost oil in the country, from Devon Energy (DVN) and immediately announced it's going to increase its drilling by 42% to 17 rigs.
Given that oil goes down when we hear about three new rigs coming on, as it did last Friday when the Baker Hughes (BHI) index showed that ever-so-minor increase in drilling, this news cut the legs out of anyone who thought oil could indeed be going where Hamm suggested.
Worse, Pioneer came to the stock market and raised $827 million with a 5.25 million share offering at $157.52 per share. Sellers sold that stock faster than oil can gush out of uncapped wells, and anyone who held on got pasted.
Oddly, though, I want to take the other side of the trade. Hamm's been bullish the whole way down and has been a contra-indicator the whole way. Devon, the seller of these acres, hasn't been known as the sharpest operator either, as anyone remembers from its February earnings report where it touted its financial strength, saying it didn't need money, and then the next day sold 69 million shares at what turned out to be the bottom for its stock.
So my take is different from the take in the oil futures pits. I think Pioneer's opportunistic move implies that its stock's expensive but oil's cheap.
Given that the rest of the stock market only cares that oil rallies, not that Pioneer's stock has broken down, that makes me bullish that oil won't break down much further. That should make investors more bullish, something that, when combined with a no vote against the U.K. seceding from the Union, should give this market a chance to rally.
As usual, though, the solution of the market's overall direction doesn't answer the question of which stocks are worth buying.
For that, we have to go way back, I mean way back when it comes to this market, and think of yesterday and what the Federal Reserve had to say about the economy.
First, remember it pretty much took the notion of a bunch of rate hikes off the table. Second, it confirmed a vision that the economy's gotten softer. Third, because the Fed just spoke, we don't have to fret about a consumer price index that came out today showing a rise in inflation. Remember, I have been telling you, because of a dearth of housing and rising medical bills, we are going to have some inflation, but higher rates won't build more houses or lower health care premiums. Fourth, without higher rates, we don't have broad pressure on the dollar to go higher. If you can't get a better return on short-term bonds here then you shouldn't expect a rush to buy bonds, something that drives the dollar higher because you first have to buy greenbacks before you purchase the bonds.
What works in that environment? First, you want classic growth where you aren't that concerned about a soaring dollar. That means you have to go back to Johnson & Johnson (JNJ) or Bristol Myers (BMY) or even Merck (MRK), which had some impressive news on a key anti-cancer drug this morning.
You want to buy higher-yielding tech stocks with clear growth paths that don't have all that much risk. Think Microsoft (MSFT) now that it bought growth with LinkedIn (LNKD), or Cisco (CSCO), which is buying up shorn unicorns and moving to a more-software-less-hardware networking mode. (Cisco is part of TheStreet's Action Alerts PLUS portfolio.)
And you want the growth utilities, like an AT&T (T) or a Verizon (VZ) that will give you triple the 10-year Treasury rate and some very good growth because of continually more aggressive use of your cellphone for everything that you used to use your landline and your television for. (AT&T is part of TheStreet's Dividend Stock Advisor portfolio.)
Why this more conservative bent? Why not go for the high-growth gold? Because this Brexit stuff changes minute to minute and if we go back to worrying about it -- and I've got the one and only Wilfred Frost on this show, CNBC's in-house Brit expert, to assess the risk tonight -- I want you to have stocks that you can get bigger in if the polls start swinging wildly in favor of leaving and oil can't hold the $45 level because of a big increase in the Baker Hughes rig count.
How about all those juicy retailers with the fat 4% and 5% yields, the Macy's (M) and the Kohl's (KSS)? Too risky, because of the power and notoriety of Amazon (AMZN). Play it out, if we get a Brexit and we find out that June's sales weren't that strong, you will have ended up buying low but then selling even lower, the exact opposite of what I want with an AT&T, a Verizon or a Bristol Myers or Merck. (Amazon is part of TheStreet's Growth Seeker portfolio.)
So we don't know Brexit but feel better about it not happening, and we don't know oil and I am saying don't give up the pipe. But most important, don't take on a lot of risky stocks. The reward may not be as great as the penalty if oil slices through $45 and this weekend we hear of some new poll that says the Brits are erecting walls and giving Europe the boot.