Accentuate the positives, eliminate the negatives, latch on to the affirmative and don't mess with the bears.
Yes, we've got a Johnny Mercer market -- named after that legendary song writer, who truly got the zeitgeist correct for this market.
The market simply refuses to traffic in things that are going wrong and focuses on what is going right or, remarkably, what could go right.
Let me give you some subjective and objective ways this hopeful and optimistic market really works.
We come in this morning with plenty of ugliness. You could taste the disappointment. The futures traders could see nothing to like in the headlines. You have House Speaker Nancy Pelosi calling for impeachment, telling you basically that we have a crazy man in the White House who is capable of anything in the next 10 days. The papers are filled with stories about how the inauguration could be the next travesty, or whatever description of what you thought happened at the Capitol last Wednesday.
The social media stocks were in the crosshairs, because of their censorship of President Donald Trump. And bitcoin, which has, somehow, helped the stock market when it goes higher, got whacked big-time. You get a 25% decline in something that had an "Everyone wins the lottery" feel to it, and it cools the speculative jets.
The result? The futures just can't pull this market down. Oh, it tries, and succeeds at the opening of trading. But then what happens? The people who accentuate the positive come in and start buying, and those who eliminate the negative stop selling and you get an in between market with pockets where the affirmative gets latched on to no matter what.
Before I go through a list of the shrugged off and the ignored and cherished, I want to tell you a story of something that happened this weekend.
I was out in Summit this weekend, and I realized I had left the plugs for my PCs -- my new thing is to have two of them -- at the office. I was bummed, but Lisa said, have no fear, we can go to the Best Buy (BBY) that is 3.5 miles away.
No way, I said, I don't want Covid. I am not going to the store. She said get in the car, she would go in and she wouldn't get Covid. Like you, we talk about getting Covid all of the time -- dominant theme -- and I don't like to go anywhere, except my friend Michael's garage bar, because it has a big screen television and terrific ventilation. Oh, and nice people are there, too. Those are my priorities in the era of Covid.
So we go to Best Buy in Vauxhall and there's a line 20 deep to get in. I wait my turn -- passing a sign that says they are out of Sony (SNE) PlayStation 5 and Xbox (MSFT) Series X/S -- and when I get up to the front of the line, I ask the guy at the door what's the deal. He says that you can't mill around in the store, that you have to have a customer service rep with you and they only have so many customer service reps. The lack of a crowd protects you and protects the customer sales people.
I thank him, even as I had to wait a long time to get in. If I had called ahead, someone would have brought them outside, but who thinks to do that?
So I get my plugs, I get back in the car and I tell my wife -- who ever heard of waiting to get into a store? I am going to do some work, as the last quarter wasn't that great and maybe they are screwing up again, especially because there's a sign on the door that they don't even have the Playstation 5 and Xbox Series X/S in stock.
She was apoplectic. Why? Because they care about their customer service people and their customers. What's wrong with that? Man, was she ever accentuating the positive.
Me? I figured this one has to be a short. But, before I can even open the book on it, the stock takes off. Given that everyone who went to a Best Buy may have experienced a similar line, you have to figure that's a negative worth affirming. It's plain as the nose on you face.
In this market, though, in this market? Lisa's right. There are swarming buyers for this thing despite that they were allowing a handful of customers in and only if they knew what they wanted.
I knew I had to figure out why, because the message of this market resides in the power of the buyers not the sellers.
Here's what I come up with.
One, perhaps the stock buyers simply don't care about the current numbers. They have visions of vaccines dancing in their heads and these moments don't mean anything.
Two, what they have is so priceless that people are willing to wait in the freezing cold to be able to get in.
Three, there aren't enough retail stocks out there that offer products to turn your home into an office, because nobody's going anywhere with this caseload and this death rate. Target (TGT) , Williams Sonoma (WSM) , Lowe's (LOW) , Home Depot (HD) all had stocks that worked their way higher.
The important takeaway: in any other market I have seen for the last four decades you would short Best Buy's stock nine ways to Sunday, because if the other stores are like this one they have to miss numbers.
In this market? A line around the block to get in, even one motivated by Covid, is a reason to buy, not sell. That's bringing gloom down to a minimum. Oh, and for the record, I say buy Amazon on this. The stock's down big. I say it's going higher.
Consider some others: A Boeing (BA) plane went down this weekend and given a record that most believe is checkered, you have to believe that the stock could be down more than 10%. Nah, we got a big recommendation of it and buyers simply wouldn't let it fall as much.
Or how about Twitter (TWTR) ? I think that the banning of "The Real Donald Trump" is a huge negative for the company, plus there are all sorts of headlines about who are they to cut off access to their products. Forget the latter. You sell on that, you are selling on Current Events that have nothing to do with the stock. I think the fact that this stock was only down three and change, though, for one of the major reasons you had to keep going back to the site? To me that's latching on to the affirmative.
Or how about the banks? I am reeling from the positivity here. These stocks have been levitating for ages. They start to report this week. Right about now, you should begin to get really worried, because they are coming in way too hot. But nobody cares. Nobody at all. A firm upgrades, says the same thing everyone else says, boosts price targets, because, of course, the stocks have run, and it works.
Look, I am not totally against any of this. Monday we learned that because of a chip shortage, Ford (F) can't make all the vehicles they need to meet demand. At the same time, they took a $4.1 billion charge to end manufacturing in Brazil. In another market, there would be shocks and horror: lower sales, huge charge! In this one, I look at it differently I think there is huge demand for Ford vehicles, hence the shortage, and the fact that Ford is closing manufacturing in Brazil? That's gigantic and a sign that Jim Farley means business. The oompany will be selling small trucks there, but losing money for the sake of not taking the medicine? Not a strategy. The toughness of Farley? It's extraordinary and Ford's stock is a screaming buy.
How long can this Mercerization of the market last? Oh please, that's the kind of central-casting question that has kept people out of this market for ages. When you worry, just think of me freezing in a line outside Best Buy waiting to get into an empty store on Saturday afternoon, incredibly suboptimal, and the stock says who cares?