Why do we always stall out after we've developed a head of steam? Why are days like the one earlier this week, where the market rallied, so lacking in follow-through as we see today?
There's plenty of gremlins at play in this market that seem to counteract the items that work in favor of any advance. Let's tick them down.
First is the president. When he is on prompter, the stock market goes higher. When he is all caught up in the enthusiasm of the moment and without prompter, he says things that get in the way of his economic agenda. Then he blames the Democrats for getting in the way instead of saying he's sorry he got sidetracked. Legislation isn't like love, where you never have to say you're sorry, and Trump loves to campaign even after he has won. You are real media if you agree with him and fake media if you don't.
So let me be real, Mr. President: I like your economic agenda and would you mind being kind enough to emphasize it when you extemporize? It could be fun! Instead, anything about the wall, or repeal-and-replace or about protesters or about the media that is not Fox creates a distraction that pushes out the agenda. It is no coincidence that the market could rally hard after the president read the prompter.
Because of this new spat, we have to worry about the debt ceiling again. While stocks have rallied into and after debt-ceiling controversies, except for 2011 when the S&P downgraded our debt, the economic agenda will be done in by this issue and the acrimony it produces.
Second is a total lack of interest in the stock market other than FAANG. I don't know who convinced everyone to be in index funds or CDs and I don't know how the stock market became some tarnished asset -- probably because of the ability for it to wipe out capital so quickly -- but new money just doesn't come in at the pace it did during the great advances. Without that firepower and with the diminished buybacks, it's very difficult to simply levitate as we did during some of the great advances of our time.
We know stocks have gone out of style as a method of investment and it's possible that, at this stage, the baby boomers are pulling money out in record numbers. Still, with no transom money coming in after big gains as there used to be, there's a tendency to ring the register, not buy more. Oh and it's unseemly to champion stocks. I think I am the only one anywhere who says, "You should buy some." In the '80s, so many people embraced stocks and made fortunes holding on. But stocks feel like vestiges of an earlier day. Wall Street One.
Third, there is FAANG itself. So much of the advance depends on Facebook (FB) , Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX) and the former Google (GOOGL) that unless they rally, nothing seems to matter. Yet those are the only stocks that strike people with spare cash as compelling. Otherwise the brainwashing of single-stock risk has made it so we don't see any real interest in any other stock beyond the day that it rips or trips. (Facebook, Apple and Google are part of TheStreet's Action Alerts PLUS portfolio.)
Fourth, the endless bearishness of hedge fund managers does weigh on us. Earlier this week we heard from Ray Dalio, another hedge fund genius, saying things are risky.
You almost never, ever hear some hedge fund manager say, "This stock market's a screaming buy." And before you laugh at that, think about it like this. If you took every single "this market is risky and overvalued" comment that we have gotten endlessly from hedge fund managers and you changed the wording to "this market isn't that risky and is undervalued," then that manager would be right and I would certainly respect him more.
But we live in a world where we quote managers who are and have been wrong and there's no harm, no foul. So, if you aren't ostracized or chided by making a comment about how risky and dangerous the market is, then why wouldn't you always say it is risky? What's the percentage in saying it's undervalued and attractive? None! None whatsoever! No one ever plays a tape of someone who says it is "risky and overvalued" when the market goes higher. But we would hear a tape endlessly of someone who said it is safe and undervalued. Nonetheless, every time a new "fantastic" manager is taped disparaging the market, it's always noted. Thank heavens for Warren Buffett, who is being interviewed next week. Odd, isn't it, that the world's greatest investor isn't afraid to say stocks are cheap? Maybe he's known as the world's greatest investor because he's been right?
Given how much we revere big money, this asymmetrical approach to hedge fund jeremiads is appalling. I guess they all think the only way we can really advance in life is through Powerball. I guess I have to move to Massachusetts.
Fifth, the analysts and this better-than-expected ethos has been the bane of so many existences. What moves stocks up short term is so different from what moves them up long term that it makes it so if you like something they don't, and their orientation is that of a mayfly, you feel like a dope. This is the "own Apple, don't trade it" view that I have. Only on Wall Street could this view be some sort of outsider, counter-intuitive concept.
It plays out every day, though, in the analyst/journalist financial complex. Don't believe me? Let's take Salesforce.com (CRM) , which reported earlier this week. I had done a ton of work before the quarter including a view of what I needed to see to like the stock. I got it in spades. But there were some shortsighted people who seized on the notion that there was some gross-margin line that was not as good as expected and the stock sold off. That begat dozens of articles about how the quarter wasn't good.
I was aghast and said so, but when the stock didn't initially go up I was viewed as a houseman and a crank.
Now it is up big. Do those who sold it and their acolytes have to pay any price for their shortsightedness?
No. In the meantime, though, tons of people fled the stock.
Sixth and final: An obsession with the Fed has kept out so many investors that it sickens me. Do you know how many times we have had to wait for the Fed to signal "all clear" before we buy? Guess what. They never have. We play this endless parlor game of what are they going to say, including this week with the venue at Jackson Hole. A moose is going to tell us more than these people. Still, my thesis is that because we have been told endlessly that when they raise rates or when they sell bonds, many people fear investing. The mindset this nonsense has created is so counter-productive to making money with your money that it should be a financial crime. Has anyone noticed that in the end it hasn't mattered what the Fed did? Some would say it is just lost opportunity. I say it borders on criminality. It ought to be a video game: Grand Theft Portfolio.
So we have no follow-through, as one of these six negatives always seems to surface to kill things. Why can we go up at all? Because this is a market of stocks and stocks represent the future longer-term prospects of companies, and despite all of these six sideshows, the main event keeps going ever higher because most CEOs work hard to create value for their shareholders despite the never-ending restraints on those who would like to own them.