Look, it's totally annoying. The newfound volatility is driving potential investors to the sidelines in fear, as the American stock market -- but not the American economy -- suffers daily from the machinations of hedge funds darting in and out of stocks with unbecoming recklessness and relentlessness.
Today is just one more day where we have to suffer from the volatility they leave in their wake, a volatility that obscures so much good news in this country. The weak stock market today reflects their collateral damage -- not our fundamentals.
Consider all of the positives and how they are hidden by bizarre moves like the hideous opening this morning, one that had nothing to do with the U.S. economy, nothing at all. Before the opening I was incredibly heartened to learn that consumer spending in this country rose 0.5%, while incomes increased 0.3%, both perfect numbers that show a content and confident consumer emerging, a nirvana combination that should have driven the stock market up not down. It's clear that lower gasoline prices are spurring more shopping and dining out. That's terrific for the domestic economy and shows the importance of all of our new-found oil wealth.
We know that the stores are feeling consumers' love or we would not get such a bullish hiring number from Macy's (M), as the company plans to hire 86,000 part-time workers for the holiday season. I was surprised to see such a strong employment figure given that CEO Terry Lundgren recently made comments about national weakness in consumer spending. Could there be a turn?
You have to be encouraged that Athlon (ATHL), an oil company that most have never heard of, got a huge $7 billion premium bid from the once primarily natural gas giant Encana (ECA), which is starved for oil. Why not? Athlon produces 30,000 barrels per day out of that old, once thought to be tapped out Permian basin in Texas, and that rate is going higher because of American ingenuity and engineering. More important, if oil is going so low why wouldn't Encana wait to do this deal? Perhaps because oil's just in the temporary grip of the dollar-oil hedge fund bandits and it isn't going down as much as the bears think?
Then there is Tibco (TIBX), the customer relations management software company with its hidden gem of Spotfire, a business intelligence company, getting a leveraged buyout this morning. I knew the company was for sale -- thanks to Reality Check's Herb Greenberg, but this is a nice-sized bid from a leveraged buyout firm. Remember them?
In the meantime, the market seems to forget that just last Thursday Nike (NKE) reported a fantastic quarter with worldwide growth, even as sneakers aren't cheap. Oh yeah, Micron (MU) just reported Thursday night and the chip maker told you that the computer and cellphone businesses are seeing increased demand.
The dreadful lack of pin action from either company is so false, so silly. How can you not extrapolate for more than a day those tremendous Nike numbers. They weren't done in some zero sum fashion. Micron's news is good for every single tech parts supplier, but it has not spread beyond Micron itself.
Then we had a quiet but immensely positive deal that a huge utility, Nisource (NI) announced last night. I know nobody knows Nisource except those who pay its bill, but it's taking advantage of our newfound natural gas wealth and splitting into a regular utility and a tax-advantaged pipeline company that will spend billions of billions building pipelines that can tap into the amazing Marcellus shale, the second largest natural gas field in the world.
Oh, and we keep hearing that Apple's (AAPL) doing poorly in the launch of its new phones, but there isn't a consumer products company that wouldn't kill for this launch.
I could go on and on about the kinds of wealth creating moves we are getting, all within the context of our country being the best, most safe haven in which to put your money to work.
But it's precisely that characteristic that is causing the roiling and the upsetting volatility that's now become commonplace. The global set-up right now is so weak that many of the hedge funds who have made big bets in Mexico, Argentina and Brazil or other Latin American countries are getting slaughtered. They are panicking. There are truly no bids worth hitting in the ongoing disaster that is Brazil. We have frightening riots in Hong Kong which, to me, come at a time when the Communist Party seems to have taken a real Communist, authoritarian turn, cracking down on the kind of showy merchandise and spending habits, like going on a junket to Macau, that have driven a lot of the economy's growth. The riots are frightening, but are they really more important than what Nike or Micron or Macy's has to say? Or an Athlon. A TIbco? Absolutely not. Not a chance.
I can't think of a bottom-up reason to invest overseas. Anywhere. Ukraine-Russia tensions, Hong Kong riots, Brazilian upheaval, peso collapse, ISIL gaining steam. You just want to get out of those markets alive. If you are rich, you almost have to wire your money out of your country and go and buy dollars and our bonds. You almost have to. It is derelict not to. Yet all that we hear and see is that a strong dollar is bad for oil and bad for our exports and does nothing good for the nation as a whole. A strong currency is a sign of America's might. I like it. I don't run from it.
What do you do if you are a leveraged hedge fund making big and now foolish bets on emerging markets? What's your choice? You need to raise capital? You do the time-honored stupid trade of selling the good -- the United States -- and keeping the bad, all of those countries that are falling off a cliff. That's just human nature. There are ten thousand hedge funds and I have to ask how many of these managers even know that you are supposed to slam out the bad to have the money to buy the good and not vice versa. They are causing the volatility smokescreen we face every day.
Now, once the smoke clears from the hedge fund selling that has nothing to do with the U.S. buyers come out of their foxholes as they did mid-morning and cause volatility the other way because the forced sellers are done and nobody else is really bailing. So buyers reach for uniquely American situations, restaurants, retailers as well as healthcare, and move them right back up. I think that the retailers and restaurant chains and apparel companies make so much sense. They have nothing to do with the hot spots overseas. They have everything to do with personal income and spending and left over dollars that lower gasoline prices give you. Oh and the average borrower still gets the low interest rates she needs courtesy the foreigners not the Fed. We have to stop talking about the Fed already. It's a classic misdirection play.
Hey, I see worrisome signs for the traditionalists. How about the endless march higher of Mobileye (MBLY) and GoPro (GPRO), two stocks I champion but I recognize have taken over from Tesla (TSLA) and Netflix (NFLX) as the cult stocks of the era. The new GoPros just came out and I understand that orders are double last year's already. Mobileye goes up because they own the space of collision avoidance. Oh yeah, there's Agios (AGIO) up again, too, as it has become the anointed biotech name because of its revolutionary anti-cancer drug.
Still I come back to the idea that there are always going to be speculative homeruns, which is why I am about the only guy in the whole country who blesses speculation; hence why I have been behind all three specs.
So, you have to let these funds lash out with their selling, causing all the volatility that's so unnerving, and then buy what makes sense that has nothing to do with their silly gyrations. Bet with common sense not against it. The problem? Common sense is often obscured by the skittish months that are September and October common sense. So keep that in mind when the volatility drives your stocks up, cut 'em back, and then buy 'em back when hedge funds panic out and drive stocks right back down with the unwinding of their moronic, risky bets that should have never been made in the first place.
