Something inside of me snapped Tuesday. Full disclosure: a hand went through a wood door (which is now patched via wood putty). What triggered this emotional outburst? I overhead a financial services human being use the word "taper" four times in a single breath. No joke!
That and preparing for calls with MasterCard (MA), Dick's Sporting Goods (DKS), and today a personal homecoming in JC Penney (JCP) (note: I have to be careful with the tweets on JC Penney off this meeting, so if you want some thoughts send me an email around noon EST).
Taper has become a catchall phrase for anything having to do with Fed tightening, despite that making no sense since a funds rate at 0% has been tapered into the ground. I hate the word taper, and am rooting for it to die a prompt death. I want it to join other absurd financial services sound-cool terms as green shoots, kick the can and an old favorite of mine and yours, decoupling (born summer 2007; died September: 2008).
I am very serious. I hate the word taper now and probably will well into the future because I hate it so much now. Nevertheless, today is the day that allegedly will make or break the market for the next 10 years. If Bernanke even decides to mouth the word taper, the market will tank. It would be an acknowledgement that stock prices were correct in beginning to price in a higher risk free rate back in late-May.
Better still, any variation of taper, such as "scale back", will upset a market that is too overweight equities at the moment on the assumption the Fed continues to electronically debit money into bank coffers at least until 2019.
Since I have demonstrated borderline psyhoticness at the sheer sound of the word taper, there is no reason to get agitated further by continuing to mention it.
Week to date, here are the coolest things I have learned from companies that wouldn't "get" the meaning of taper immediately if I told it to them on the phone (good for them:
- Square and PayPal clearly have it too easy. These mobile payments companies are sitting on huge amounts of funds with next to no card-like regulation/oversight. That will change within three years. Disclosure: Buy rating on eBay (EBAY) for clients.
- Companies are sounding downright depressed on their near-term business prospects. While I understand the concept of under-promising and over- delivering, I just don't hear the enthusiasm on the second quarter of 2013 that supported inflated price-earnings multiples. What the tone does support: caution on forward corporate profit margins, recently brought to light from Hormel (HRL), DuPont (DD), Texas Instruments, (TXN) and Terex (TEX).
- Recognize those big brands impregnating themselves deeper into the ovaries of large retailers; they will be the long-term names to own. Examples include Nike, (NKE) Under Armour (UA), and V.F. Corp (VFC). (specifically with its North Face brand). Dare I say Microsoft (MFST) sort of fits the bill here given its upcoming shops at Best Buy (BBY)?
- Year-over-year sales growth in the first half of 2013 has deteriorated enough to notice as compared to rates in the first quarter of 2013 vs. the first half of 2011. Call me silly but if the global economy was supremely flourishing, companies' sales growth would be nearer, or above, last year's tally. Maybe I am silly in general, look at the Consumer Deflation Price Index.
And in closing:
Taper -- complete de-risking across the board; don't get sucked into grabbing yield plays because they are defensive. The yield plays have underlying companies saddled with debt and probably an abundant percentage of emerging market revenues (aka hot money economies that don't benefit from Fed tapering), which is unattractive in TaperLand.