Hate to say I told you so...
I have The Hives running through my head as I write this column. What we are seeing here, metaphorically, is a dumping of the trash. Graça de Deus, as they say here in Lisbon. As I was running through the majestic (and painful) hills of Lisbon's Parque Eduardo VII this afternoon, I subjected myself to CNBC videos relating to Wednesday's early morning trading via YouTube.
My, that was painful... and I don't mean the hills. There is a once-in-a-generation level of willful blindness in these markets.
Good Lord, Target (TGT) had a bad quarter. Really, really, really bad. Check out my piece from OHM Research if you want the gory details, but here is the headline: Target's Extraordinary Earnings Miss Shows a U.S. Economy That Is Imploding In Slow Motion.
I believe that says it all, so I will drop the macroeconomic lectures about inflationary pressures and influence on microeconomics, i.e. corporate earnings. Now I will tell you what to do next.
What we are seeing here is the market efficiently repricing assets that were extraordinarily mispriced. It doesn't end well. Revisit the urge to buy on weakness. Make sure you are looking at five-year charts, always.
But, again, what you should do.
Buy energy stocks. Now.
Sell cash-burning stocks, especially profitless tech. Now.
Yes, I have been saying that for the past seven months, and, yes, it feels good to be right. But those two extremes still leave quite a bit in the middle. That is where market psychology comes into play.
If you want to own Big Tech, you have to know that November 2021 is not coming around again. This is what I am saying here, in print and on a website that will outlast me: Big Tech stocks are never going back to those levels.
Times change. Read Peter Lynch's seminal "One Up On Wall Street" and listen to him wax poetic about The Gap (GPS) . Gap is still public, actually. And the share price is below where it was 26 years ago. Damn you, Bezos!
Then check out the price performance of BlackBerry (BB) , formerly known as Research in Motion. Yep, those plucky Canucks are still public, for some reason.
This is what happens when bubbles burst. It can take years to recover.
According to Wiki, at the height of the Tech Bubble, March 9, 2000, the Nasdaq hit 5,000. The Nasdaq did not hit 6,000 until April 25, 2017.
I don't have 17 years. I want my doggone money to work for me now!
Don't think of stocks that don't pay you as stores of value. Think of them as leveraged plays. If you don't want to play, leave the table.
Companies that don't pay dividends are not my style. But Apple (AAPL) does. And I checked today and even after this recent selloff, AAPL is yielding all of 0.65%. Just ask yourself if that type of taxable, albeit low, rate of return is suitable for you.
Stocks, like your house, do have a natural inflationary tendency to rise, but hyperinflation just wipes that out. Portfolio managers are people, too. With the exception of Cathie Wood, of course. She's toast. But your average CFA at Legg Mason or some such firm just is not going to risk his or her neck by being a hero. That's how mandates are lost, and asset management companies just can't handle asset under management (AUM) losses and generate enough fees to cover their fixed costs.
So, they sell stocks -- with alacrity. That's what we are seeing. And will continue to see. Better to earn 1% in Treasury bills than lose one's job by losing with profitless tech. It is a very strong dynamic.
Individual investors just don't have enough capital, collectively, to fight it. Consequently, for once, I am telling you to follow the Herd. Go risk-off with energy stocks, fertilizer stocks, natural gas stocks and play inflation rather than be whipsawed by it.
