We used to call it the Santa Claus rally. But it's been ages since we have had a good one. It's been more Grinch than St. Nick for ages, and I've come to believe that we're just getting some coal in our stocking and that's about it.
But in this insanely terrible year for so many, the market's enjoying a Scrooge metamorphosis and we are all a bunch of Bob Cratchits getting some good cheer from the most unexpected of places.
What's happening? Did the market see the ghost of Christmas future and decide to be more gracious and accommodating?
It's just that we have bets being made from all directions. Sure, someone has to be wrong. Right now, though, Christmas joy abounds as the wagerers move up their stocks with their buying. It's almost like a horse race, where the ponies are in the paddock, headed to toward the gate, all lathered and fractious and ready to go.
So let's just own it and see what the horses are getting the biggest money down.
In the pole position we have vaccine. Those who believe that Moderna (MRNA) will soon join Pfizer (PFE) with a vaccine that's easier to transport and can be made even more quickly than the Pfizer formula. I think vaccine takes it if Johnson & Johnson's (JNJ) the jockey. I know you are never supposed to bet the jockey, but I think that if we get Pfizer, Moderna and JNJ shipping vaccines, we will have a first quarter glut in this country and we are going to be in a situation where we can live without fear, even if not everyone takes the darned thing. Vaccine is about a four-to-one shot. It's not a two-to-one shot simply because Pfizer and Moderna do not have enough vaccines to do the job. If JNJ jumps on the horse, it's two-to-one, no problem.
Second position, is, lockdown. I hate the lockdown position, but if we get it then you are going to be in a recession, because we cannot handle another lockdown. A lockdown might be selective in that it would allow some retailers to live, but others would die. We don't want lockdown to win if we are at all caring about working people. But if the New York lockdown of restaurants works, then other states may join. I am putting this as a five-to-one shot.
Third is no lockdown. Tuesday, for some reason, we got heavy money coming in on no lockdown and you can tell that by all of the secondary retailers, the non-essentials, that are flying. There's not enough money to go around to bet on no lockdown, so there's selling of garden-variety tech to fund these bets. This one looks like a two-to-one shot today. But I think that's too optimistic.
Now, here are the trickiest bets. We have those who are betting that there is going to be a stimulus, which could be an interesting parlay with no lockdown and vaccine. Then there's no stimulus, which when paired with lockdown, is just disastrous. Long shots all around.
Now let's get away from the horse race and think about what the stocks are really telling us.
First, there's a ton of money on the sidelines with investors who can't wait to get in. I know we hear that cash levels are low at mutual funds. But I think what really matters is the cash that's on the sidelines, now as much as $5 trillion and building.
It's building because no one's doing anything, no one's going anywhere, and people want to get some return. Stocks are giving you a return.
I talk to a lot of investors and the sentiment I get is, enough already, I want to own more stock. I am sure that a lot of the sages out there are thinking these people are way too late. The fact is, though, if we get enough vaccines and we keep interest rates low, and there is no inflation, and we get a ton of stimulus, we are going to have a boom and you can't wait for the boom to invest in it.
Second, the most important stock in this market is and always will be Apple (AAPL) . Not Tesla (TSLA) . Not Amazon (AMZN) . Not Microsoft (MSFT) . But Apple. The stock has been treading water forever. We heard an Asian publication of some repute that Apple's boosting iPhone orders some 30% from a year ago. You have to understand that, if that is the case, there are so many companies that are going to be better than expected that it's enough to move the entire tech complex. If the story is true, you can buy pretty much anything in tech; that's how important smartphones are.
Third, U.S. Sen. Mitch McConnell did something that some thought was the unthinkable: He congratulated President-elect Joe Biden. I think we underestimate how important this is, because the real wild card for a lot of people who have money on the sidelines was the two-president scenario, in which President Donald Trump never concedes and literally chooses to not give up his challenges. Hate Trump or like Trump, the endless challenges have sapped the strength of those who want to own stocks and not sell them.
It may not be such a big deal to some of you, but if you can take the existential risk out of Washington, then it is more likely that we get a stimulus package and the people who are about to lose their unemployment benefits or the small businesses that are about to close might be saved.
Fourth, we are finally getting to the point where we have an at-home test that is considered serious. Right now, we have all of these difficult ways to stop the pandemic, chiefly masks and social distancing and not going out. That's not the American way.
How about taking a q-tip, putting it in your nose, taking that q-tip and streaking in on a piece of paper? We got some approval today of a home product that doesn't need a doctor. It's a start. Slovakia is using a paper strip method and it has seen its cases plummet as people who test positive stay home. Austria and Poland are going in that direction, too. Right now, we have a pretty silly way to test. Once a week or when you don't feel well, you get tested and you find out your results a couple of days later. By that time you have infected your colleagues or schoolmates. If you take a test every morning, though, you will catch the disease before you are infectious. That's how you stop a pandemic. When you combine at home testing with vaccines and some therapeutics that cut the death rate, you can see that we might be closer to the end than most think,
If you believe that rosier scenario, as I do you, need to own tech, you need to own industrials, you need to own retail and you need to own travel.
With vaccines galore, with therapeutics, with at-home testing, with stability and maybe a deal in Washington with stimulus with low rates, you shouldn't be thinking, we might have a winner, you should be thinking Secretariat. You should be thinking Triple Crown.