In so many ways, this is a traditional market. It's just traditional to markets in the late 1980s and early 1990s. Those were markets where each week you would check various spot prices of various commodities and try to make trades based on the best available information and services.
We are back in that kind of market. For example, this week DRAM prices rose by almost 2% after being about unchanged for the month, according to an outfit called inSpectrum Tech. That means: buy Micron (MU) . Earlier this week, a producer of linerboard, the most basic form of cardboard -- call it corrugated, like what your Amazon (AMZN) packages come in -- jumped $50, so go buy International Paper IP.
Next, we will be checking on Poly and Ethyl, my two favorite plastics, and we'll be thinking about buying some commodity chemicals companies. I would say Dow (DOW) but the new Dow's hooked up with Action Alerts PLUS charity portfolio holding DowDupont (DWDP) , and isn't the play on commodities that it sure used to be.
Now, I am sure that most people who have started in this business in the last 20 years have never seen a market like this. They don't know about markets that react to week-to-week or daily pricing. That's because they have pretty much never seen any material inflation. And if they have, it's just copper. Everything else has been tame.
But these days you have to follow the pricing of a whole bunch of yardsticks, whether it be aluminum or linerboard or DRAMs, because demand is up and spending to meet that demand is down. That's why, for example, you can keep buying the stock of Lam Research (LRCX) . It makes equipment to make DRAMs, and that stock is literally trading off the day-to-day price of DRAMs, even as it shouldn't because there is so much more to the company.
Doesn't matter.
That's where we are right now.
Some will question whether this means we are in a "good" or a "bad" market. Others will say we are now in inflationary times and they will want to short bonds.
That's all nonsense these days. Every market is unto itself. There's no broader theme that comes out of this kind of nitty gritty.
But you need to be aware of this undercurrent if you want to try to trade vicious stocks like Micron, meaning stocks that can drop on a dime. If we get pricing pressure for DRAMs, Micron's going to roll over for a long time. If you are in the stock, you have to follow pricing by the day, now. The guy who follows it by the hour will beat you, though.
I was at one point the king of this kind of market. Did I have inside information?
No.
My father sold linerboard. We had the daily price list. It was a killer.
These days now you have outfits like MScience checking receipts, calling stores, having credit card reports, whatever. They try to come up with a matrix that works. They felled McDonald's (MCD) this week. They hit The Children's Place (PLCE) , where the redoubtable CEO Jane Elfers took them on. They went to individual franchises to try to call the top in Domino's Pizza (DPZ) .
And we have companies with satellite trackers that examine mall parking. We've got ship counters and nat gas readers.
But what I am talking about is a market where I think it is treacherous to trade certain stocks without up-to-the minute knowledge like I used to get from my father -- the kind of markets where if you don't know the linerboard and DRAM prices you just have to stay away.
It's a brave old world out there.
