If you didn't know any better, you would think that the analysts who populate Wall Street are a bunch of weathermen. Every day you hear the same kind of chatter: such and such is a tailwind. Or: this or that is a headwind. It's enough to make you take a course in meteorology just to know which way the wind blows.
Right now, at this point, there are enough cross currents to make you think that the wind blows both ways at the same time. That's how you get these days that go higher and that's how you get days that start dramatically lower and then levitate higher, like Tuesday, where the wind switches direction and the headwinds morph into tailwinds.
Of course, we don't care about Tuesday's weather, we care about the forecast, and I want to tell you that it's not easy figuring out what the weather has in store for us, because the winds are so subject to interpretation.
Let's take the winds head on, starting with the vaccine. We know it is a huge tailwind for the economy. We all want a vaccine, so we can re-open America without risk and return to our normal hiring and spending patterns. You get a vaccine, and you know that the marginal places, the restaurants and the retailers, will make it, hence the jubilation that Kohl's (KSS) didn't lose money or that Ralph Lauren (RL) , Lululemon Athletica (LULU) , PVH (PVH) and VF Corp. (VFC) are going to sell more clothes. Malls can reopen. The marginal retailers live! Could Macy's (M) be far behind?
You want to get really aggressive? I continue to believe that the Robinhood types, the young, aggressive investors, are making good bets on the cruise liners. We now have promises of vaccines. We also have tests that allow you to get on ships and be sure that no one has Covid. You know that one of these cruise liners, I would bet it is my favorite, can do a Covid lockdown trip if it can get vials from Pfizer (PFE) and PCR tests like the ones from Visby, the portable, one-shot deals. You can always have a BioReference Lab machine testing people like they have in the NFL. Why not? Let's get cruising. Talk about a tailwind.
Oh, and then there is the enchilada of tailwinds: flying. Can you imagine if the vaccine is produced en masse at the same time that the Federal Aviation Administration approves the Boeing (BA) 737 Max and President Biden gets an order for the whole shebang in order for China's President Xi to get things back on the right foot, after Biden signals that he is no longer going to play the Lone Ranger? That's a virtual monsoon of winds. Do you mind if we consider General Electric (GE) along with it? Why not? They are a huge winner with Boeing engines and a president that likes wind instead of drilling in protected wildlife refuges.
Jeez, I have been thinking, those wind turbines and solar projects are a real headwind for the drilling business. Thank heavens Biden won, he's a real tailwind for renewables.
Tailwind for the oil biz, especially with its expanded drilling program up north. You know that one's got me musing. I wonder which oil exec wants to tell his or her children that he just decided to drill the heck out of the Arctic National Wildlife Refuge. Can you imagine that conversation?
"Hey, kids, I am home. I just wanted to tell you that we killed a couple of noisome polar bears today. We nailed the mommy polar bear with a drill bit. Had to do it. She couldn't stop wailing after we nailed her cubs with some heavy seamless tube pipe. But don't worry, it was for a good cause! Carbon! Yep, we got some really good light sweet crude up there. And you should be so proud of your daddy for making sure that not every car or truck is electrified. Oh, and what do you think zoos are for anyway?"
But wait a second. Are they a tailwind for everyone? No.
Tuesday morning we got two stellar quarters, I mean about the best ever, from Home Depot (HD) and Walmart (WMT) . Home Depot put ups a phenomenal plus 24% comparable sales number. I can't recall any major chain ever able to do such a lap, even the legendary Costco (COST) . Walmart's e-commerce offering shot up 79% year-over-year. I don't even know how that is possible. In fact, I think it's impossible. Or, at least impossible to repeat.
Because the vaccine is a headwind that's why. If we think next year that we are still going to be redoing our homes with materials from Home Depot, if we are still going to fix up our kitchen or build a new den or refurbish a bedroom as an office, then sure Home Depot's going to put up those kind of numbers again.
But how is that possible in a world where Pfizer and Moderna (MRNA) have made it so there is hope that we will be doing something else besides working at home.
Will we really need as much of Walmart's local e-commerce when we can go out and shop. Sure, maybe we have fallen in love with Walmart's e-commerce offering and will never go to another store again. Yes, there is a possibility that people will keep moving out to the suburbs to get away from Covid. They will need new appliances and chairs and sofas from Whirlpool (WHR) , Herman Miller (MLHR) . But will they still need even more tools from Stanley Black & Decker (SWK) ? How about lumber? Flooring? I don't think so. I think if Amazon (AMZN) hadn't decide to disrupt the entire pharmaceutical industry Tuesday, with a drug store disrupter I believe it would have gotten hammered.
Hold it, there's something wrong here. Right now, at this very moment, the pandemic is raging. We aren't going to get that vaccine en masse until the second quarter of next year. So what does that mean if you are a business person?
I think it's a real tailwind for tech companies that help businesses stay online, while they wait for the vaccine -- something that can't be avoided.
Who is most needed when you are operating from remote locations?
First we heard last night on "Mad Money" from Nikesh Arora, the CEO of Palo Alto Networks (PANW) , that cybersecurity hot, hot as both the cloud and the premises have to be protected from billions of threats. He told us he has some new software that allows you to look through the eyes of the attacker, a terrific thing, given that most of us are too honest to think that way.
I know that Palo Alto is wining, as it stock demonstrates, but Nikesh played the role of the meteorologist, causing all of the cybersecurity companies' stocks to soar.
Ultimately, there's one part of the weather report that's a wild card, a freak ray of sunshine: a stimulus bill. That would allow pretty much everyone to win. We'd have the money to keep on shopping at Walmart or Costco. We'd continue to do it yourself with Home Depot. We'd not fear a recession despite the aggregate weak retail sales announced today. We'd be able to justify the three-day record run of the Russell small cap.
Instead, we've got variable winds, sometimes two different kinds in each session where the tail and headwinds create a curious swirl that can't be divined, except by those pessimists with an optimistic bent.