Will the real U.S. economy please stand up?
In the one corner there is tech giant Apple (AAPL) , whose products are the favorites of free-spending millennials and 40 somethings. To this crowd, the U.S. economy is doing just fine so why not plunk down $1,000 for a new iPhone X in digital cash? And from Apple's perspective, why not come out with bullish revenue guidance? Business is good around the globe, no material slowdown for products that in some cases cost people a year to save up to buy.
If you believe in Apple's quarter and momentum, then the FANG stocks are now must buys after a vicious rout. Caterpillar's (CAT) growth slowdown call-out on the earnings call is irrelevant and the stock will be 20% higher when third-quarter results hit the wires in the fall.
But folks there is another U.S. economy out there starting to emerge. You know, the one that is being hit by tariffs from the Trump administration. The one where the selloff in FANG stocks underscores the cooling mood in Silicon Valley. To that end, I was darn lucky to chat with scores of community bank CEOs at the annual KBW banking conference on Tuesday.
Want to know things about the economy (and market) that most will be discussing six months down the line? Chat up a community bank CEO.
Here are two quick observations from my talks.
Tech Bubble Letting Out Some Air?
Bank of Marin Bancorp (BMRC) CEO Russell Colombo tells me he is starting to see a leveling off in residential and commercial real estate prices in San Francisco. For those of you living under a rock, that's the tech capital of the United States. Bank of Marin is a key player in San Francisco. Colombo adds that property prices tend to ebb and flow with the amount of venture capital flowing into -- and out of -- the Bay Area.
Suddenly the FANG stock selloff seems justified, no? Remember the market is looking out six months.
Capital Investment Taking a Hit?
Perhaps Caterpillar mentioning a slowing order growth rate in the second half of the year wasn't so silly. German American Bank (GABC) CEO Mark Schroeder tells me customers are growing more cautious on capital equipment purchases amid the Trump tariffs.
Schroeder's bank is a key player in the heartland of America, Indiana. If farmers are beginning to delay purchases of a shiny new John Deere (DE) tractor on trade war fears -- and early impacts -- that will show up in second half 2018 growth.
The question is whether investors will be prepared to see that growth slowdown.
Real Money Bonus Analysis
Sitting across from First Data Corp. (FDC) CEO Frank Bisignano (watch full interview below) at the conference, I left with the impression that the company is not yet done making big deals amid a push to de-lever the balance sheet. Bisignano's last big purchase was payment processor BluePay in October 2017 for $760 million. In May 2017, he gobbled up fellow payments processor Card Connect for $750 million.
Look for First Data to potentially make a play to boost its fraud protection/security business, which notched about high-single-digit core revenue growth in the second quarter.
Start running your stock screens.