Let's all get negative. Let's forget about the vaccine and just think about how we are headed into the toughest part of the pandemic, and it's going to be much worse than feared. Retail sales were weak. The Fed can't help -- it said as much Wednesday. We have to sell stocks.
Now, I know that's not what I think. To me, we are the Jordan River, which is deep and wide, but there's milk and honey on the other side and in the interim the federal government is about to give us not one, but probably two stimulus packages to help get us there.
But on down days, people forget why they owned stocks. They immediately fear the worse and they bolt, as if a sell-off is something monumental, rather than something that's due. That's what it was like before the Fed said some good things near the end of the day. It looked like we could have a huge rollover.
And that's why I believe we can still go higher. As long as we have doubters, we can go rally. As long as there is money to be had, that's the most likely course.
Let me explain.
This Santa Claus rally is based on the assumption that the move is chimerical. We can't possibly be having anything sustainable, because of how bad things really are in the economy. We had dramatically weaker retail sales. We know that unemployment is about to spike, because restaurants and bars are perceived to be epicenters of the illness. Unemployment benefits are about to end. Evictions are going to start soon.
It all seems a little Armageddon like, so why would you ever buy stocks?
And that's precisely the negativity the bulls need to continue the rally. That negativity and skepticism is what fuels any sort of turnaround.
I know that many of you have lost faith in Washington and feel that whatever the politicians are going to do is too little, too late. It's no time to be sanguine.
To me, however, it is really a "best of times, worst of times" situation. I know, I did some Dickens earlier in the week, "A Christmas Carol," I promise I won't do "Bleak House" next. But it is the best of times for both the wealthy companies and wealthy individuals and the worst of time for smaller, indebted companies and the poor who are jobless or living on a subsistence wage.
It's so hard to even say this, but if you are in the stock market, if you want to make money, then you want exactly that scenario. Or, let me put it another way, if you are buying stocks, you're not a profiteer, you are not Cal in "East of Eden." But you are taking advantage of the great divide.
That's because the stimulus package we are going to get, $900 billion, is going to benefit both the well off and the not well off. It will not help those who are very down and out.
But it will be surplus money for those who are employed, living at home, doing nothing because of the pandemic, and are eager to do something with the found money they are getting from Washington.
And you know what that something is?
I think it will be renovating, rehabbing, and investing. The people who are living hand-to-mouth continue to live hand-to-mouth. The companies that need more to stay in business will not get enough to do so. So the rich will get richer and the big businesses will get bigger. Not only that, but because the Fed is saying that we will have zero-interest rates until 2023, those who are doing well can get loans galore at low prices to buy cars now that public transit isn't on tap, and can go buy dividend stocks to get some income.
For real life it's terrible. For stock life, it is real and extremely positive and it won't be taken away any time soon, because the Fed chairman Powell, unwilling to give any ammo to a recalcitrant Congress, told us repeatedly how uncertain and perilous it could be. He made it clear that he would not lose sight of the millions who are out of work. I don't think Congress can afford to, either. They would be a combination of Scrooge and Scrooge McDuck, if you want to get a visual that can stick for a few minutes.
So, the less well-off will get their $600 per person and put Campbell's (CPB) Soup on the table and pay some rent.
The well-off beneficiary of government largesse goes to Best Buy (BBY) , buys a 72-inch screen, puts some Trex (TREX) down for new decking and figures out what stocks there are to purchase into the weakness generated not by his situation but by Covid-19.
While I am not a profiteer, I am willing to tell you want I would buy under this scenario, so get ready to write these down:
First, on Wednesday morning we learned that Stanley Black & Decker (SWK) looked at its book of business and realized that it was far better than it thought. The great tool company had guided to 3% to 5% organic growth. Instead they are looking at 10% organic growth.
Given that it is a surprise and no analyst was ready for it, that means on Thursday we should get some upgrades and some price target bumps. You might think you have missed it. But where do you think they bought those tools? At a bakery?
Au contraire, at Home Depot (HD) and at Lowe's (LOW) . If Stanley Black & Decker is doing 10% organic growth, who know what the heck kinds of numbers that those two big box stores are doing, especially given that so much of the competition to these two has been or is in the process of being wiped out by the small business people who are on the ropes because of, yes, the pandemic.
They are all buys.
Second, given that we are not going to be able to go right back to work, once again, that we are now in hybrid home mode, where we accept that one day we have to return, but not right now, you have to buy Lululemon (LULU) . We just heard how well they were doing last night. I don't know how you can get a better snapshot of a how a company is doing than when they come on "Mad Money" and tell you business is good.
Third, I think you have to buy Boeing (BA) . We are going to hear from the CEO on "Mad Money." I know that he can't yet talk about it, let's call it pure speculation on my part. But put yourself in the shoes of China's President Xi. Comfy? Let's say that President-elect Joe Biden presents an olive branch of some sort -- that he says that diplomacy, not Tweet-macy, will now be the way we will act as a nation going forward. He shows he will be firm and tough, but not in a way that he thinks is untoward or unappreciated by our allies. That's the clarion call for you, 'cause you are in Xi's shoes, not to buy everybody Nikes (NKE) -- although they report this Friday and I like it -- but to buy what you purchase when you really mean it: Planes. Specifically 787s, 777s and, soon, 777xs, because Boeing's order book could support 2 million jobs.
Now, you can just do the easy way, go buy the S&P, as millions will do just that with their spare $600 -- and, yes, for many it will be anything but spare. Or you can buy FAANG; I heard it was found dead and buried, and I even think I read an obituary or two. But the thing that won't work? Staring at the Jordan River and saying, forget it, I am going back to the desert and wait for that manna from heaven to which I say, good luck.