You'd have to look long and hard to find someone who has been as bullish as I have been for the last couple of years. But there have been moments where I have cautioned that things aren't as good as they were and I suggest that you could get lower prices for some stocks even as others could surge.
In other words, I do not say "time to sell the market, or time to buy it." I am not about "the market." I am about trying to find investable stocks and holding them in addition to an index fund, of which I prefer the S&P 500. Now I have only once urged selling that bedrock position and that's before we had the big downturn in 2008 -2009. I was concerned back then that we might be having a real credit crisis, a gigantic hole in the economy led by housing.
I mention that because I want everyone to know, specifically, that I am not expressing the kind of caution that I did back then. I am not counselling selling those index funds now. That would be a huge mistake. There's no better investment in this world than a diversified portfolio of stocks for the long run.
But I totally acknowledge and, yes, welcome, individual stock picking because you can find stocks of companies you like, do the homework, meaning go to the website, read some research and have a real good idea of what the company does and how it does it. We would not have isolating FANG on my show if we thought those stocks wouldn't outperform the market. We would not have said, endlessly, own Apple (AAPL) , don't trade it. We've had a ton of other favorites along the way, the stocks that help you on board to the cloud, the humanization of pets theme, the secular growth of aerospace and the best of the best of the medical device and health care stocks.
Sometimes, though, we have to take a breather and say, wait a second, what's really going on in this market and does it transcend the growth path of many of the terrific companies we talk about all of the time.
Right now is one of those times. I have been talking to you about the notion of the different camp followers, the ones who fear inflation, the ones who think the Fed is going to crash the economy and the ones who think that everything will be just fine and dandy and that rates have peaked already. Wouldn't that be something?
Even though the Fed is in a tightening cycle we didn't have to worry that much about it because the Fed was very data dependent and if the economy slowed we knew that, especially under Janet Yellen, the Fed might take a pause before raising rates.
I liked that. It meant that you could buy all sorts of stocks.
But last week new Fed Chairman Jerome Powell threw away the Yellen book and started talking about how it was important to just keep raising rates regardless, to overshoot even, to cool the economy. Powell doesn't want wage inflation and the thesis is pretty stark: full employment has its consequences and Powell knows those consequences include inflation and inflation can erode long term purchasing power.
I don't like this view. I think when I hear that the Fed is going to keep raising rates until the cows come home, or, more likely, the cows are in the slaughterhouse, I grow concerned. That game plan sounds curiously like the one the Fed put into place before the Great Recession.
All day today I got the vibe that I am dead wrong, that the economy is so strong that I am way off the reservation. Let me say this about the reservation - I am not about what the Fed says or does or tells me. I am about what the bottoms up tells me, what the CEOs of different industries tells me and I sop up the info they give me like the biggest sponge in the world. I would like to think that is speak to more CEOs than just about anyone in the world.
And here's what I know. These CEOs are worried. They see many things slowing, some rather dramatically. We heard from Lennar (LEN) , the biggest homebuilder, that there is a pause in housing. I always point out that housing punches above its weight in terms of impact. I don't like what I am hearing about loan growth and I bet we will be more concerned than we are right now when the banks start reporting Friday. That could impact the whole construction business. I don't' like how the airlines are trading because they are being squeezed by higher fuel costs. There's a sense that the data center might be slowing, something I disagree with but I can't ignore the chatter. I don't like the way the stock of one of my best bellwethers, FedEx (FDX) is acting. I am appalled at how poorly the linerboard stocks trade and that's because there is too much supply and not enough demand. Think about it; if you have something to ship you put it in a cardboard box. It's not a good sign when these stocks take out their 52 week lows in violent fashion.
And then last night we got the real punch to the kisser: PPG Industries (PPG) preannounced that it was going to miss the quarter big and that's because the company that makes so many of the luxury car paints worldwide sees softening demand pretty much everywhere. Now I was assuaged a bit when CNBC's Phil Labeau reminded me that as long as consumer confidence remains high we should be okay to put up another really good year.
That said, the stocks of the industrials literally fell apart today off the PPG preannouncement as portfolio managers shot them first and then will ask questions about them later. Ford (F) and General Motors (GM) hit new 52 week lows and many auto-related manufacturers saw their stocks pummeled from dawn til dusk.
Which brings me full circle to where I am more concerned than most about the Fed. If all of these industries are having issues, if we are to believe PPG and there is no reason not to, what the heck is the Fed doing with this autopilot nonsense? What are people doing talking about how strong the economy is without getting their hands dirty and speaking to CEOs in all industries to get a pulse that isn't top down from the government or the Fed but bottoms up from the CEOs themselves.
I can tell you they are plenty worried that the Fed has stopped doing its checks. No, again, this is not a They Know Nothing moment where the Fed is dead wrong about raising which is what I shouted from the roof tops 11 years ago. It is a moment where the universe of companies that are doing well is growing smaller.
I wouldn't be so concerned if we were not retaliating against the Chinese for years of trading abuses, something I wholeheartedly support. But if the world is slowing, something the IMF said is the case last night when it cut its growth rate forecast from 3.9% to 3.7% for this year and next, I think it's a wake-up call that what is strong now - employment - may not be as strong six months from now, when the Fed is still busy jacking up rates.
Remember what I said about how I am not talking about being cautious about the market. There are plenty of areas that can do well. We saw the stock of Starbucks (SBUX) go up today when we learned that hedge fund manager Bill Ackman took a stake in the company. The truth is, though, the stock's been going up for a while. It's doing better and it has a huge buyback. I would not chase it here now though, Let it come in as I think the U.S. is just doing okay. I see that the stock of McDonald's (MCD) is doing well. As are the stocks of the major drug companies. But that just, again, plays to my fears. Those are stocks that do well when the Fed overshoots, something that Chairman Powell says is a real probability.
So call me a little cautious. We can go higher. But the stocks taking us higher are the "wrong" stocks if you believe the economy is so strong. They are the right stocks if you believe, well, that I am right. I sure wish I won't be right. On a day like today, a PPG-gets-crushed-day, I am feeling right as rain.
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