Ya gotta keep pushin' for the fortune and fame. The lyrics from Guns N' Roses' seminal 1987 track "Paradise City" are pulsing through my head while writing this column to the background of a beautiful sunrise in Auckland, New Zealand.
Axl Rose's lyrics summarize the gist of investing. It requires discipline and constant work. I was looking at a chart of Salesforce.com (CRM) the other day and I realized the chart of Marc Benioff's CRM looked the same as every other chart from the Tech Titans. Just a smooth uptrend from the Brexit Friday through Donald Trump's election and then a pronounced jump to all-time highs less then a month ago. Look at the charts of CRM, Apple (AAPL) , Alphabet (GOOG) , Microsoft (MSFT) , and so on overlaid on top of each other and the pattern is extremely similar.
So, that was laziness. That was, as Axl would say, not "pushin'." It was also, as he said on a different track on the same album, so "eeeeasssy." But everybody is not trying please me, or you or anyone else in the markets right now.
Portfolio managers are going to cash. Cash has awful returns from any sort of historical perspective. But it has positive returns, except for some large depositors in Europe who are warning negative interest rates on demand deposits, but really, risk-off is risk-off.
I have noted in my Real Money columns this week that it is much simpler for individuals to liquidate stock portfolios than fund managers. Remember, though, there are three types of fund managers. I used to market to all those people in my days as a sell-side analyst, and let me tell you they are quite different.
Mutual fund managers at fund complexes that offer actively managed product (Fidelity (FXAIX) , Vanguard (VTSAX) ) are liquidating stocks and moving to cash. Heavily. This week. Fund flow data is released with a lag and please don't listen to any reassuring words from those same managers on CNBC. They are going to cash.
Hedge fund managers are supposed to be the ones benefiting from these types of market moves, but my intel is that they are not. At some point during the market's relentless run-up your average loafer-wearing hedge fundie became a closet-indexer just like the folks they tend to mock at places like Fidelity. This market action is not good for the largest of hedge funds. I believe the Fed's Thursday announcement of up to $1.5 billion in additional funding was designed to effectively bail those funds out.
Finally, there are exchange-traded fund managers. You haven't met them, because they don't exist. They are computers. Those computers bought more AAPL and MSFT because they kept having to redirect constant investor inflows into the most liquid names. Thus the concentration of stocks in the S&P 500 grew to levels not seen in decades. Now, they are going the other way.
So, honestly, I wouldn't trust any of them right now. In the spirit of full disclosure, I don't have any of my money or the assets of my firm, Excelsior Capital Partners, invested with any fund manager, human or otherwise.
Instead, I keep pushin'. I published an estimate for Tesla (TSLA) deliveries for 2020 of 360,000-400,000 (vs. 367,000 in 2019) when the Street was coalescing around Elon Musk's prediction that Tesla deliveries would "comfortably exceed" 500,000 units this year. Morgan Stanley's Adam Jonas, an old competitor of mine from my days as a London-based auto analyst, brought his prediction down to 452,000 units Thursday, and that is still very optimistic.
I bought out-of-the-money TSLA puts for Excelsior after I crunched those numbers and they are deeply in-the-money today.
So, that's how investing is supposed to work. Do a little research. I take no solace in the spread of Covid-19, especially as it is spreading rapidly in my home of NYC, but again, a little research is useful here. It was obvious to me from late-January that this was not "just a flu" and I aligned my investments accordingly. It was so easy for traders to downplay events when the virus was only evident in China. But when Wuhan became Wantagh and Hubei Province became Houston Street, fear had to come into play. That's exactly what we are seeing this week.
So, you can time the markets, if you pay attention to all of them. The bond market called this rout in the stock market and if you just checked your portfolio of AMZN, MSFT and AAPL once a day you would have missed that.
Keep pushin'. It does pay off.