You try swimming in these crosscurrents. To me, you have to be Michael Phelps to get to the other side of the pool.
Take this morning. We saw interest rates tick down for the first time while oil went up for the first time since the election.
What do people buy when interest rates tick down? They buy the fast-growing techs, the FANG stocks. Why? Because the average hedge fund says that when rates go down, the economy must not be on fire and perhaps we don't even get a rate hike.
So they sell the stocks that are rate-hike beneficiaries -- in this case the banks -- and they buy Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) , Alphabet, née Google (GOOGL) . They pick up some Splunk (SPLK) , Salesforce.com (CRM) and ServiceNow (NOW) . They do so because they know you do not need the cyclical wind at your back to make these work and hit the numbers. (Amazon is part of TheStreet's Growth Seeker portfolio.)
Because there is no new money coming in, the only place to get it is what's been up. So it is totally zero sum. I do fear for FANG here only because, as the banks come down given the rate hike so many are not expecting, FANG will again become the de-facto source of funds to buy Wells Fargo (WFC) , JPMorgan (JPM) , Bank of America (BAC) and the like.
At the same time, oil's up, which means, remember, in hedge-fund speak that the economy is stronger than expected, not that there might be some positive OPEC chatter, although behind the scenes we hear about it. When oil rockets, you buy the airline stocks, aided by the fact that Warren Buffett's been a buyer.
Normally, people would buy the retailers off higher gasoline. I know, remember, this is portfolio-speak, not actual speak, and you don't ever want to confuse the two.
But on the downside, Home Depot (HD) was a little more conservative than would have been expected in its guidance and the numbers were aided by Hurricane Matthew. So profit-taking from the post-Trump rally has come in. Same with Dick's DKS, which has had a remarkable run from when the company's stock soared at the closing of the doors of The Sports Authority.
Those companies as well as TJX (TJX) all did well; guidance is what matters. And we know that from the monster move in Advance Auto Parts (AAP) , which reported minus-1% comp sales, typically disappointing unless, of course, you are looking for minus-3.5% and revenues of $2.25 billion when the Street was only looking for $2.2 billion.
Those kinds of numbers signal the turn that so many were waiting for. I remain committed to AutoZone (AZO) , which I believe has a chance to go into the high $700s just as a spillover on how well Advance Auto Parts is doing.
So the crosscurrent of tempered guidance from the great ones and better guidance from the beleaguered ones trumps the gains that you would get from higher oil signaling a better economy.
The oils themselves, though, have rallied in what amounts to a kind of business-as-usual move, which doesn't require Michael Phelps to navigate. At last something's working as it should! I think this may not last for oil because it's really about rumors again, rumors of a deal that will be so difficult to cobble together given that Iraq and Iran don't want to play ball with a freeze. However, as I have said over and over, when you get oil down to the low $40s, the rumors come out and they save the day. Always until one day, of course, they don't.
Always, though, if you want crazy, go no further than the drug and health care stocks. Teva (TEVA) pre-announces a bad quarter because of a branded stock's weakness -- not generics -- and Allergan (AGN) gets crushed again because it owns so much Teva from the deal where it sold its generics to Teva (once again, it is the Copaxone profits, the multiple sclerosis drug of Teva, that are in peril). Allergan, which has gone from universally loved to universally loathed after a bad earnings miss and a dumping by Carl Icahn of his holdings and a price target cut by Morgan Stanley based on generic competition to some of its drugs, gets hammered for the 10% of Teva that it owns as part of what looked like a brilliant deal to sell its generic drugs, except its stock acts so horribly. The trust owns it and we have said it is going to $180 where, on a reduced $15.50 earnings per share number, it is now the cheapest of big pharma. (Facebook, Alphabet, TJX, Wells Fargo and Allergan are part of TheStreet's Action Alerts PLUS portfolio.)
It's all a mess and difficult as all get out. Where is Michael Phelps when you need him!
