Look, sometimes a decline makes sense. Today's decline makes sense. It's logical and expected periodically. And because we are in the thick of the playoff hunt, you have to view this market like the NFL.
Sometimes a real good team gets beat because, well, it doesn't execute well. Individual players fail to play up to their potentials and the backdrop is what you get when you are on the road facing a vicious 12th man of a backdrop. Today's an on-the-road loss and even the best suffer them.
What do I mean by on the road? OK, let's start with the backdrop.
The Chinese market's had a huge run, but last night it was hammered, down 5%, and while their weakness can be our strength, a 5% decline is pretty jarring.
But not as jarring as a 12% decline in Greece, the worst in 27 years. That's a sit-up-and-take-notice number, as we had all but put Greece in the rearview mirror. Now, I am not going to ascribe any prolonged downturn to Greece. We played that game in 2011 and where did it get us, other than a fabulous buying opportunity because, alas, what does the downfall of a Greek government have to do with the price-to-earnings ratio of Bristol-Myers (BMY)? But when you wake up at 3:30 a.m. and it's pouring out and you're predisposed to not having to focus on Greece and to figuring that China's doing better given the recent rally in the market, you do feel like today's game is going to be played in Seattle, you are anything but the Seahawks and the joyous Richard Sherman, the cunning Russell Wilson and the sullen Marshawn Lynch are going to kick your butt to Kingdom Come.
Looks like we picked the wrong day to go to Seattle.
But it's the individual players that didn't execute well that really rankles. One thing we know is that Verizon (VZ) always delivers. It's just a slow plodder with a good dividend that never seems to move in big increments, kind of like a bond with a big wireless kicker.
Well, it gave you a good swift kick in the butt today, kind of like missing a field goal from 20 yards out, and it has taken almost three points off the board.
Verizon, we thought, was always above the fray of the scrum, the cutthroat pricing that Sprint (S) and T-Mobile (TMUS) seem to engage in at all times to take Verizon's business. This is one where, anecdotally, I should have seen it coming. Two of my closes friends just switched to Sprint to save what they think could be as much as $1,000 in 2015. Verizon confessed to the price war today and the market's down there giving it the business for a greater-than-4% loss. We're just not used to seeing this happen and because the Verizon statement came within the last 24 hours and analysts haven't had a chance to process it we have to expect some downgrades tomorrow so we can't even yet take advantage of the decline. It's got a 4.7% yield. Why not wait until it gets to 5% anyway?
Then there's Merck (MRK). What can I say about Merck other than it threw the equivalent of a pick six right at Richard Sherman, right into his arms. I am talking about the stunning decision to buy Cubist 24 hours before it lost an important lawsuit that would have protected its most important patent for its only really big drug. This buy, which I praised last night, was a timing play gone awry. I figured there's no way that Merck would pay $8.4 billion for this company unless it was pretty sure that there were no short-term patent issues. Twenty-four hours later and it's clear that Merck paid maybe as much as $2 billion more than it had to. It's tempting to say they are dumb as a bag of hammers over at Merck, but that's a total insult to Stanley Works Black & Decker (SWK) and I am too big a diplomat and Home Depot (HD) fan to commit such a grievous error.
Then there are the banks. Jeez, these have been terrific stocks, stocks you want to buy when you hear rates are going up because then they make huge amounts of money as rates go up. Billions. The key to this kind of thinking is that the companies themselves say nothing, they don't tell you what plays they are going to run, because these are big-think stories, Xs and Os on the board. Sure enough, though, the banks are speaking at some sort of conference and the news is that October wasn't so hot. The actual business was weak. Well, why don't these banks just say, "Look, we are doing an end-around to the left side and you can tackle us for losses behind the line of scrimmage."
Both Bank of America (BAC) and Citigroup (C) tell us that it looks like all is not well short term, as if the market cares about 2015 right now when 2014 numbers have to be cut. Fortunately, not every bank's stumbling and the demand remains. Still, it's not the kind of action that inspires.
Then there's McDonald's (MCD). When I think of this company, I think of a hapless quarterback about to be sacked again and again by blitzing safeties from Europe, blitzing linebackers from Europe and, of course, defensive tackles who are just mauling the company forcing it to put up horrendous numbers. When I think of McDonald's I think of Kesha and Pit Bull, singing "It's going down, I'm yelling timber, you better move, you better dance." But McDonald's is like a quarterback that can do neither. I don't even know if you can call it blindsiding when every side is blind.
Or how about Spirit Air (SAVE), one of my absolute favorites, which reported a traffic number of 15.7% growth, but a 17.9% traffic increase, enough of a so-called shortfall to merit a downgrade from Raymond James. That's sent the stock down 9-10%. It felt like the safety the 'Hawks put on Peyton Manning to start last year's Super Bowl. Something that happened to an airline, a group that you least expected to be hammered given the endless decline in jet fuel prices. Of course the whole airline group got crushed on this one.
Finally, there's Conns (CONN), a home appliance specialty retailer based in Texas that pulled off a quadruple whammy: big miss on earnings, gigantic increase in customer bad debt, a withdrawal of its forecast and the departure of its CFO immediately. When I saw this one I just said this is gonna be a beatdown to end all beatdowns. This isn't a game, it's a Call of Duty rousting with the stock falling an astounding 41%. Of course it doesn't help that Conns has a Texas address because it made you think that the oil apocalypse that comes with the fall from $100 to $63 is already upon us and Texans are defaulting on their big-screen TVs, mattresses and stoves.
Now, I don't expect a gigantic decline and I like the fact that tech has been turning delightfully, like some sort of regrouping and adjusting that comes after the half. After all, the Nasdaq just went positive. But there's a lot of time left in the game. A fumble and the Legion of Boom beckons. Give it some time.