The power of negative thinking. That's the phrase I keep repeating over and over -- because the negativity is overwhelming the facts. But no one is interested in the facts right now, for fear that the facts may change -- and change for the worse. We know from John Maynard Keynes, one of the greatest economists and thinkers of all time, that when the facts change, you have to change your view, too. So that means everything you might want to buy could turn into a sale, or even a short, or the tariffs and rate hikes could keep going higher.
Right now, for example, we are all transfixed by the FAANG. They are all, we know, over-owned, meaning that there are plenty of funds that have huge gains in them and, theoretically and ironically, at least, the prevailing thinking is that unless these funds sell these stocks now, they will give up all their gains. They are going to have to give up all of their gains. That's why the stocks can't bottom.
I totally get that. I regularly check my Twitter feed and it is filled with people who think I just recommended Amazon (AMZN) for the first time at $1750. Like I fought it all the way up or something. I did recommend it at $1750. Guilty, your honor. But, how about if I recommended it at $75 or $175, does that count against my transgressions?
Apparently not, because the facts have supposedly changed and all who liked it at $1750 are now dead wrong.
That's the current storyline -- and I wish it were true. That would make me feel a little more certain. But it isn't. The company's crushing it and even the sellers would agree with that. They are just more fearful of their other shareholders than they are of their own work. The miss was minuscule. The reaction gigantic.
Some may have been sanguine about the story after Thursday's earnings blow out --oops, after Thursday's revenue miss -- but because Red Hat (RHT) has now teamed up with IBM (IBM) to "get" Amazon, I guess Amazon is no longer investable. Forget that Red Hat was disliked because it had missed the last quarter. Forget that IBM did the same. You put them together and they are supposed to beat Amazon? I like the deal, but let's not go too crazy. AWS is the undisputed king of the cloud.
I believe that if you loved Amazon at $2050 you have to worship it at $1500. But that's not how this new, very bearish, game works. We find a chink -- a minute revenue miss -- and we decide that Amazon is no longer any good and that Target (TGT) and Walmart (WMT) are great and not only that but now that Red Hat and IBM have teamed up to defrock Amazon it is double game over for the colossus that ruled the world a few weeks ago.
That's what I call the power of negative thinking.
I am seeing it everywhere. I got a call last night about Northrop Grumman (NOC) . The caller couldn't believe that after its amazing quarter, the stock should be shelled. The lightning round is fast. You don't have time to hem and haw. But I had been on the amazing NOC call and I have followed this company and loved it since BEFORE Ron Sugar was CEO -- and he left a decade ago. He's now chairman of Uber, so it is top of mind.
So, what could I do? Should I have joined the throng who are hurtling out of it -- as they are Raytheon (RTN) , a company with shares that my charitable trust, which you can follow along by joining the Action Alerts Plus club, owns?
I stood there for a moment, music blaring in the background, the clock ticking and I realized that, at this point, with the stock down more than 100 points from its high and off 16% for the year, it was too late to bail. But did I say buy? No. Too much selling. You'd be down a great deal before you even got your report.
The power of negative thinking.
In truth, Amazon is most likely a buy down here if you ask those selling it, but who has that kind of chutzpah? Even if the Democrats take the house, is Northrop still a good sale? I don't think so. I think it is a buy. But I am loath to just come out and say it. Too much blowback if it doesn't bottom today and rally big.
So, while I don't join the selling exodus, I, too, won't swim against the tide. That's because I, too, have been infected by the power of negative thinking, even when I believe that the facts haven't changed and the negativists at this juncture, with these lower prices, may actually be wrong.
So I wait until the selling stops. Like everyone else. Which is why they can fall so fast. Which is how bargains are created. Or at least will be, one day. Right now, though, I'm thinking negatively. And it's powerful as all get out.
