The market can be a brutal task master. You must be worried every day. In fact if you aren't worried, you can't call yourself a professional. Don't even bother to invest. You are much too blithe.
If you aren't worried you dismiss days like today. No day can be dismissed. Everything could augur disaster. Yes, there could be a major breakdown lurking.
But I want to point out something before I get into what does have me worried because as I said, you aren't a pro if you aren't worried about something.
I got in this business when the Dow was at 1100. That's right 1100. The Dow is now at 21,390. Back then the Dow had just run 300 points over a series of months to get to 1100.
What did I hear back then?
First? I had missed the move. It was over. It was based on nothing anyway. So forget about it.
Two, there was no reason to believe that the future would be any better than the past which had been pretty bad. Remember this is the early 1980s before we realized that the Reagan era would be good for stocks and right after the Jimmy Carter era which was horrendous for stocks. In fact the only thing it was good for was roaring inflation which brought treasury rates to 14%.
Three, the phrase I heard the most? "I have seen this movie. It ends badly."
Last night I said that I felt that the move in many of the best non-FANG tech stocks was totally justified if you thought longer term. As soon as it came out of my lips what phrase did I see twice in my Twitter feed?
"I have seen this movie and it ends badly."
To which I say, what movie are you watching? The Honeywell movie? The United Technologies movie? The 3M movie? Tell me, tell me? What movie?
You see, the stock market is definitively NOT a movie. It is a collection of stocks of companies some of which are doing well and some of which are doing badly and if more are doing well than badly it tends to go higher.
To paraphrase F Scott Fitzgerald in "Last Tycoon," there are no second acts in the stock market. Nor third acts, either. Because it isn't a play. It's an ongoing supermarket of stocks where you try to buy stocks of companies that don't fully reflect the value of the entities underneath and avoid stocks of companies that are much more expensive than can be justified by the future of the company's business.
Which brings me to what I am worried about, so you can hear my bill of particulars that I think could hurt even the good stocks of good companies that you may own.
I give you the list not because I am a bear. And not because the market is down. I give it more because I want you to know I have it and I check it and mull over it and I do so because I am both an investing coach and a manager of a charitable trust where I like to give a lot of money away from my winnings but won't have a lot of winnings if I am not worried about the losers. I can't be valuable to club members of actionalertsplus.com if I am not concerned and I can't be glib on "Mad Money" and represent myself as carefree, because when I leave here I will obsess on what went wrong and what I should have been more worried about so I could have avoided it.
First thing I am worried about is North Korea because it is going to be solved one way or another and I can't think of a one way or another that can be good for the market or for our health for that matter. It's a pretty existential issue because a crazy man with an ICBM can to a lot of damage unless you do damage first and that's not going to be easy. But the placating is done. While I don't share my wife's insistence that we need to have a game plan for when his ICBMs can hit New York, as grisly as that thought is, I know every minute this one could be something that's not being worried about enough. Witness the fact that the South Korean market is having a banner year and that gold's not running. Shouldn't it be the opposite? To my mind there are two ways to look at this issue: go long Apple (AAPL) and short Samsung, or be prepared for the unpreparable. Suffice it to say we should all be more worried.
Second worry? That there is too much competition everywhere and it is not allowing us to pay more for the shares of companies that are doing well. Last night Costco (COST) reported a number that was twice what I was expecting and yet the shares, after spiking before trading then couldn't get out of their own way. I like Costco. A membership is one of four things I am willing to pay more for: Netflix, Amazon Prime and Apple service stream are the other three.
But it doesn't matter if the shares of Costco trade at 25 times earnings. That's too high versus what Amazon (AMZN) can potentially do to it down the road.'
Which brings me to my third worry: July 11, a day that will live in Retail Infamy. July 11 is Amazon prime day and we are going to hear that it's up 20% versus last year and the day after every retailer out there is going to take a header except Amazon. We have to get past that day.
My fourth concern? The breakdown of some very big stocks that represent the market to many people, particularly those that seek income. I am talking about Verizon (VZ) , General Electric (GE) and any of the food companies with big dividends. It just doesn't feel safe out there and the 52-week lows we saw for GE and Verizon are, indeed, worrisome because they need to do something to right their ships yet they don't even think their ships need righting. That's always worrisome.
Fifth worry? Is Washington now the enemy? If there are only 60 more working days in Washington until the end of the year and they are going to be devoted to healthcare reform and it fails, then we are going to have to accept that even though President Trump proudly talks about the $4 trillion in market capitalization gains that have occurred since the election, there won't be any assistance from Washington. In fact, the only thing coming out of Washington is rate hikes, not exactly a perfect elixir unless you are a bank CEO.
Sixth worry? We lose the prop of mergers and acquisitions. I was all excited about Vantive VNTV buying WorldPay and QVC (QVCA) buying HSN (HSNI) , but other than David Faber, who covers mergers and acquisitions, I think I am the only one who was. The fact is without more deals the market lacks a natural defense against the bears. There is no penalty to being short right now, even being short Tesla TSLA, and that makes for a very worrisome situation.
I have lots of other worries, a real laundry list that we could list over a couple of cold coronas but suffice it to say that other than a thermonuclear war, you could have had a similar laundry list back when I started at Dow 1100.
Maybe that's the ultimate takeaway though, If the list is always there, you are always prepared. Remember, preparation for the worst is always part of the game. It just isn't the only part, despite what the twitterati might try to tell me.