Here we go, back to the new normal even as the torrential rains continue to wreak havoc on life in Texas. What's the new normal? Let me tick it down.
First is that America's not your policeman any longer. Yes, an attack on Japan is like an attack on us. But an attack on Japan must first be headed off and the question is who buys the Patriot missiles to head off whatever North Korea is sending out.
Nevertheless, we have always held that if there is one thing that will be spent heavily on both globally and in this country, it is defense, and missile defense is paramount. After all, what happens if a North Korean missile test doesn't manage to clear Japanese airspace? The answer: Their government has to try to shoot it down.
I think the old days, the days I lived through, where you put your head in the cubby at school in order to survive nuclear war, aren't coming back any time soon. Can you believe we did that? Nor will luxury houses come with a fallout shelter that you stocked with canned goods -- yep, we had them, too, as well as buildings with a scary yellow and black sign that were supposed to be safe. Instead, many countries will have to have missile defense systems, particularly because the North Koreans have no particular aptitude for trajectories but know how to launch missiles with seeming impunity.
Second imperative: Once again the weak dollar is front and center. You can always tell when your currency is weak -- when it fares badly vs. the currency of a country that could be under severe attack any minute now, namely Japan with its very strong yen.
More important, though, is the relentless rally of the euro against the dollar, something I have been all over beginning last year when we bought property in Italy, in part because it's the best way to profit from a currency that has been suppressed too long given the reformation of their financial system and the acceleration of their economies. This rally in the euro is the signal that the central government there is losing control over the trade advantage its exporters have had. That's tremendous news for our companies that thrive on a weak dollar.
Who comes to mind first? It's Apple (AAPL) , on which Warren Buffett should heap endless praise when Becky Quick interviews him tomorrow at 11 a.m. ET. I like Apple enough ahead of a launch for a new phone. I like it after a terrific nod to it from Best Buy (BBY) in this morning's release for that retailer's quarter. I like it for its continued strength in the iPhone 7 Plus. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
Buffett likes it because the average consumer product stock sells at 24 times earnings yet is lucky to have 2.5% growth, whereas Apple could have much greater growth than that with a serious moat vs. all others.
Please don't forget stocks like Johnson & Johnson (JNJ) and 3M (MMM) that have heavy exposure overseas, as does Procter & Gamble (PG) , where there is a not-yet-bitter proxy fight between Nelson Peltz and the board as that engaged investor wants a seat at the table.
All three companies and many like them could have to raise numbers when they report because of the miraculous move in the euro. I know it is hard to remember, but before the Great Recession many companies moved aggressively into Europe to diversify against a slowing U.S. Most moved too soon. If you want to see who did it right, focus on PVH (PVH) , which went in just at the bottom when it bought Calvin Klein. If you want to see the turn in business, look at the European line in Salesforce.com's (CRM) numbers. All I can say is wow. This euro move remains underestimated by Wall Street.
Some of the imperatives of the moment are only accentuated by Tropical Storm Harvey. I am talking about the tremendous backup in oil, particularly from the Permian, which can't get to the market. The oil companies heavily levered to that shale have historically shipped their oil directly to the area that is hardest hit by the storm. That's closed off, so the companies have no way to monetize their product even as they need the cash flow to pay the bills as most have amped up spending this year vs. last, betting, incorrectly, that higher prices are on the horizon.
Both the commodity itself and the stocks remain way too dicey to own. Just the wrong place to be.
The right place to be, though, is technology, which we know from Best Buy is having some banner times. While BBY itself reported a very strong quarter, it forecast competitive and promotional third and fourth quarters that will be substantially below this quarter. Nonetheless, the company called out home appliances including the now myriad devices that control your home's automation as well as mobile phones and personal computers.
That's pretty much a recipe for the Internet of Things, which could use a boost after several days of relentless selling. Remember, any rally in tech that is more than FANG brings out buyers and a level of comfort that there's more than just four companies doing well. I remain adamant that those companies that can capitalize on voice and on Apple's launch remain the best places to be.
But there is one more imperative that is relentless and that's retail itself. Today we saw the outcome of a terrible quarter from Finish Line (FINL) where 71% of sales are Nike (NKE) . The company's collapsed quarter makes you wary of owning anything sporting goods, least of all Nike.
It remains the worst place to be, the oil and gas of the mall, to really mix metaphors and get the concept of the bear market driven home.