You never leave the office thinking you should have bought more on a day like yesterday. You always leave saying you wish you had gone home short, or had sold everything.
That's the lonely positive that I come up with. That's the straw I grasp at when I think about the bull case, because how many times did you have that feeling in the last five years and then watched the market rally the next day after the early overseas sell orders were completed? The rallies tend even to start like this, with a grim morning and tepid to terrible overseas markets.
Any sort of advance seems impossible right now because it is absolutely certain that numbers have to come down for most big capitalization companies that sell goods overseas. But yesterday's action in General Motors (GM), an international giant, is instructive of what I would worry about if I were short. We all knew GM would be bad. After all, the so-called "much better run" Ford (F) was terrible and it got clocked after its Monday analyst meeting. We all knew that GM has feckless management vs. the much more seasoned and adult Ford.
We all knew that GM is going to owe gazillions of dollars to plaintiffs -- after all, the press says that endlessly, doesn't it?-- even as the damage tallies right now are much smaller than anyone thought just three months ago. Yep, ever since Ken Feinberg, the master of these difficult settlement cases, has gotten involved the whole thing seems to be a lot more under control, although I am the only one that is writing or even, sometimes I fear, thinking that. We all know the estimates are too high...except they weren't. Mary Barra basically beat and raised expectations after a previous quarter that was nothing to write home about.
So the stock goes up 1.72% and would have been up much more if it weren't for the gravitational pull of the market and a short story running around about very high inventories. Oh sure, there were naysayers out all day who didn't really catch what we have known for some time, which is that GM is actually doing incredibly well, and has the models and structure that will allow it to make money from them. That's been the real rap that no one seems to want to champion and everyone seems to want to run from.
Now, let's say you don't care for GM. You could always argue that it failed to go down because it was already down 20% for the year and has a safe 3.6% yield. It has been punished endlessly. That's not a reason to say the worst is over. This stock traded at $20 two years ago. This market's angry. Things are getting worse around the world, not better. I know it has a hideous chart pattern. I know there were people who took shots at it all day. I know the peak auto story.
But in the end, GM may have fallen too much to get hit when the news is good. Consider it a second-rate Nike (NKE), laying out a good case when people presumed it horrid. When we have more companies like GM and Nike and fewer like Ford and, from the looks of things, Agrium (AGU) or Terex (TEX) -- companies that have already said numbers are too high --then the market will be a dangerous short, with the lightning bolt coming from some sort of political redemption no one expects.
It seems impossible. But remember what I wrote at the top. On days when you wanted to leave 100% short, you've not made a great deal of money since the generational bottom. Maybe this time it has changed.
But right now that's not been the way we have seen it happen. Again, thin reed. However, it has held before. It could hold again.