Welcome August, where you been? For as long as I have been in the business, August is a month where we have unexplained or inexplicable selloffs, selloffs like today where we can pin the tail on a host of donkeys, and believe me I would say bears if they had them.
First, can we stipulate that we have plenty of reasons to selloff? Let me tick down the various reasons I heard and then give you my reaction to them.
I would say the most obvious reason has to do with the president. If you thought that the move up in stocks since Trump was elected has everything to do with Trump's economic agenda, as the president has often claimed, you might have been jarred into selling by the events of the last few days.
That's because part and parcel with the economic agenda comes the notion of the CEO President, specifically a CEO president who has mobilized economic chieftains to work with him to create jobs and make American industrial might stronger.
Oops, as of yesterday that's out the window. The president misjudged the CEOs badly, confusing loyalty to him and loyalty to American values, which clearly clashed over Charlottesville.
I talk to a lot of CEOs and I want to make this clear: most of the ones I talked to believe the president implicitly backed the KKK and the neo-Nazis against a group of Charlottesville natives who found the values of these white supremacists repugnant. The CEOs pretty uniformly took that view because the president chose to be pretty even-handed about the two groups.
Why did they think this even as the president insisted in his impromptu Tuesday conference -- the one that really went off the rails -- that he looked into Charlottesville and decided that both sides bore the blame for the riot and, by implication, the death of an anti-Nazi protestor?
One of the key reasons, I have learned is that some of the CEOs watched a 22-minute video "Charlottesville: Race and Terror" a presentation of VICE News on HBO. One look at this documentary, would disabuse you of the notion -- and disabuse some CEOs of Trump's notion -- that there were "very fine people on both sides."
That's because the documentary, however, skewed you think it might be, showed unequivocally that a large group of neo-Nazis descended upon Charlottesville to demonstrate their hate bona fides. The documentary begins with an eerie torch-carrying parade on the eve of the events, one that any student of the Third Reich would identify with a Triumph of the Will Nuremberg rally.
Then I guess what you would call an embedded VICE reporter spent time with some of the leaders of the supremacists and it was pretty clear that they were anything but peaceful.
Needless to say, some of them weren't, and if you watch this documentary you know you simply can't be on the wrong side of history even if it is the side of the president of the United States.
It's my belief now that the disbanding of the economic counsels marks a pretty abrupt end to any joint efforts by business to assist the president in getting his agenda passed.
But if you are selling because this matters, I have a newsflash for you: I think you need a better reason. The economic agenda's stalled because Congress doesn't seem to show much interest in it. The Republicans are too busy squabbling over anything but economic reform. You should have gotten off that bus ages ago.
In case you haven't noticed, the president's kind of a go alone guy. Of course the CEOs are in favor of tax reform. It raises earnings estimates. But they are against burning their stakeholders and backing the president on this Charlottesville issue is akin to doing just that.
I have heard some really craven accusations that many of these CEOs quit or were about to quit because they feared customer or employee wrath if they stayed. I am sure they did, but the events in Charlottesville were seen very differently by them than by the president. Believe me when I say they some were looking at the VICE video and others were infuriated at what they regarded as a cheap shot at Ken Frazier, the widely respected CEO of Merck (MRK) , who was the first to resign. I still can't believe that the president of the United States would tweet that Frazier is basically another Martin Shrkeli, the hedge fund manager and drug CEO who truly did gouge consumers.
It's extraordinary that CEOs, often viewed as being sheep in the face of the almighty U.S. government, turned on the head of that government, but that's a statement about how they regarded his actions.
But it wasn't a reason to sell.
Next? I think there's a belief that there are people in the White House that are regarded as important who could quit, namely Gary Cohn, the chief economic advisor, who is trusted and respected by every CEO I deal with, and I deal with more than just about anyone. I hated the reason I that I heard behind his potential departure: that he's Jewish, as if somehow Jews are the only ones who are repulsed by neo-Nazis. We are not in Berlin circa 1936. It's the United States circa 2017 and I would believe that anyone in that administration has a pretty good reason to resign after this abominable moment.
That said, I do think Cohn's important enough that you could be coaxed into taking some profits if he were to leave. I do believe that he is worth a great deal to the stock market given how savvy he is and how he might be the bridge to CEOs now that the big one's been burnt.
But then again, the White House issued a statement saying he's not going anywhere, so, in retrospect, that's not a real cogent reason to sell. Remember, Cohn's been anti-tariff and Steve Bannon, who seems to be everywhere, was out bashing the Chinese -- not that I am against that -- and there's a belief by some that Cohn's all that stands between us and Smoot Hawley even as I think that we have to be much harder on the Chinese, than even Bannon, whoever he really is, may want us to be.
Then there's the earnings. We got a pretty tepid earnings report from Cisco (CSCO) , which is at the backbone of the Internet. Some could say it is a reason to sell Cisco. But the reasons would be limited to how you feel about the execution at the company -- I actually thought it was pretty good -- not because there is a lack of demand.
Or you might have thought that the earnings from the nation's largest retailer, Walmart (WMT) , are a reason to sell given the stock's decline in the wake of them. Once again, though, the quarter was an excellent one. The stock simply expected a really excellent one given that it was the lone retailer at its high before it announced earnings.
The Fed statement about how it may not raise rates because things are weaker? Sorry, other than for the big banks, that's a reason to buy not sell.
Oil's continuing and, I think, unrelenting decline? Bad for 6 percent of the S&P, good for the rest.
Terrorism in Spain? With 13 dead and at least 50 injured, it's always something that merits pause. However, if we sold on every terrorist incident, sadly we would be below zero.
Does that exhaust the list? It sure did if you are conventional alt left or right thinker.
But how about this one: it's August. It's slow. It's time for vacation. Stocks have had a big move. Why not sell some? This is precisely the reason why I have told club members of Actionalertsplus.com to lighten up on stocks and raise cash. You are going to get a bunch of these kinds of selloffs in the next half-dozen weeks because we always have and you need some cash to buy stocks. If you haven't done so, please sell your least favorites so you can buy your most favorites as they come down.
One last reason: your fellow shareholders are not to be trusted. When I got off the elevator down at my office on Wall Street today, two guys saw me and said "what the heck is wrong with Apple, it's doing terribly, should I sell?" If a 1.2% decline in a stock that's up 37% for the year is the definition of terrible than you can't bank on others to hold on to their shares if we get another day down.
Yep, the calendar and the momentum holders are coalescing to produce selling. Now, will the president seize that as an excuse to deflect anyone who now wants to link the decline to the White House?
Why not? Beats blaming the CEOs who broke with the president. But then again, perhaps if you are this president, that's a better reason?