Yesterday's drama over the Fed's decision not to raise rates really got to me because the whole thing was a lot like a classic misdirection play. Yep, the entire episode was like a play-action fake, with you, the reader or viewer or listener, being the one who got faked out.
It goes a long toward explaining why we have had such a terrific rally since the news about no hike, one that wiped away the losses of what's historically the nastiest month of the year, and we only have six more trading days of this miserable month to get through.
First, there is the pre-game leading up to the decision. There were a plethora of bets placed and statements made, all of which got credence everywhere that there could be a September surprise, an out-of-nowhere rate hike that could really send the market tumbling. You read and heard them and so did I.
Then the moment the Fed announced that it was keeping rates pat and would wait for more information before it moved, all those who predicted the surprise rate hike were not mentioned again. Scot-free. I scoured all the wires, the boards, the Twitter world, nothing. As if they hadn't made the statements at all. As someone who has had every word scrutinized from day one, I found the way they got off as totally unjustified.
It reminded me, once again, about the asymmetrical way we treat money managers and prognosticators. If they are bullish and we get a bearish outcome, they are ridiculed endlessly, the tape played on a continuous loop over and over. But if they are bearish, even right before the event, when the whites of their eyes are in sight, there will be no accountability. They will still be called on. They will still be valued commentators. The incredibly wrong call never sullies the record. Plus they will never admit to being wrong. They are simply early, or slightly off, or pretty close. Hey, chief, "almost" only counts in horseshoes and hand grenades. You aren't tossing either.
If that weren't enough of a fake-out, almost 100% of the commentators immediately veered not to the positive implications for the equity markets -- of which, you stick with me, there are many -- but to the parlor game of whether we will get a rate hike in November or December.
I was spellbound. Can we at least for an afternoon digest how this decision to stand pat is going to help people make money? Why do we have to play the "well, if not now, when" game? How about the "this could be amazing for the bond market-equivalent stocks"? Or how about "this could ignite the flagging industrials"? Or how about the simple recognition that a lot of money had been bet wrong at the last minute while other money had been sidelined waiting for the event and now, with so little time left in the year, the reluctant buyers would have to start buying.
I am not going to play this game. I had set up my thinking last week in my game plan to embrace stocks both before and after the meetings, betting that we would have some terrific quarters, like those of Red Hat (RHT) , which will be on Mad Money later, or Adobe (ADBE) , with its classic cloud initiatives, or FedEx (FDX) because of the pervasive nature of ecommerce, or KB Homes (KBH) because of the red-hot California market.
But even if you didn't choose to participate, let me fill you in on what I am seeing and what can happen next.
First, we have had a serious rolling over of all the consumer packaged-goods stocks because, for the most part, they didn't report great earnings and at the same time their stocks had gotten so high that the yields weren't attractive.
By the time we got to the meeting, stocks like Kimberly (KMB) and Clorox (CLX) were in total rollover mode, toxic to all. The moment, though, the Fed went on hold, you had all of these high-quality companies with stocks that had been crushed. They were and are still buys even if you want to play the "when's the Fed moving next" game.
Why?
Two reasons. First, if rates aren't going to go higher immediately, their newly fattened yields are much more attractive. Second, many of these companies have huge overseas exposure. By keeping rates low, the Fed ensured that the dollar would not skyrocket vs. other currencies. Given how late it is in the quarter, that's fantastic news for these companies because we are now annualizing easier comparisons vs. a red-hot dollar.
Next positive? Remember, I keep telling you that you must keep one eye on oil because oil is so important to the direction of the market. Given that oil trades in dollars, you needed more dollars to buy a barrel of oil, which therefore forces the price higher. Dollar weakness can, at times, overwhelm supply-and-demand considerations. In this case, we got an inventory number yesterday that showed a big decline but it was obscured by the Great September Rate Panic. You marry that, though, with the weaker dollar and you've got a home run. Oil, which had been written off at $43 last week is now at $46 and screaming.
You want something else that should have been talked about? I want you to consider what's been going on at Capitol Hill these last two days. First, Wells Fargo (WFC) CEO John Stumpf went before Congress and I haven't seen this group of disparate angry lawmakers be this united since, well, forgive the hyperbole, but how about Dec. 8, 1941? I mean they were trying to outdo each other, piling on in a horror show of indignation. But how did the banks do? They went higher. That's because this market's looking for stocks that haven't really run yet and are cheap now that the big bad event is past. (Wells Fargo is part of TheStreet's Action Alerts PLUS portfolio.)
Then how about yesterday, when it was Heather Bresch's turn on the hot seat. The Mylan (MYL) CEO probably rues the day she ever heard of the EpiPen, there was such anger and hostility. You would have thought she was The Third Man selling bad penicillin to children in postwar Vienna. But did it impact the drug stocks? Not one bit. They were a terrific group to own.
When you have some of the worst stigmas I have ever seen, when you have direct opprobrium, an oral lynching of execs, some of the ugliest gang-tackling I have seen since the late Buddy Ryan coached in the NFL, and the sector gets off unscathed? That's when you know it is time to stop guessing when the Fed is going to move and start thinking about where to do some investing.
Of course, it would be one thing if we were mired in earnings hell during the period and it didn't matter what the Fed did, the waters were treacherous. But this has got to be the single most positive week for earnings in 2016. Almost every stock that reported went up big. Even the misses, like the serial disappointer Bed Bath & Beyond (BBBY) , saw its stock rally.
In other words, those who decide, once again, to find ways of paralyzing us, both before and after the Fed news, were the stars. They got the mikes, the ink, the online videos, the headlines. Their remonstrations ruled the rhetoric roost.
And those who tried to figure out a way to profit from the moment? Let's just say it didn't really matter because, I mean, hey, it's all about the Fed and soon Fed dissenters will be on the road talking about the need to tighten. Surely it's more important to be scared than it is to try to make money, right?
Yes, if you are a billionaire. Otherwise? It's just a lesson on masochism and as perturbed and, at times, crazed as I can be, that's a category even I know it ain't worth reveling in.
