Doesn't someone have to be wrong? Can every theme be right at one time? In the short term, yes. In the long term, no. But today is about the short term and that means, as the legendary Cole Porter teaches us, "anything goes."
Let's go over the big themes at play, so you can know why the market is doing what it's doing, and so you don't think the whole shebang is positively crazy. I mean it's nutty, but not beyond the realm, because someone will be right and whoever is right is going to make more money than those who are wrong.
The first theme is the "America Awakens" trade. The people subscribing to this thesis believe that the government made a terrible mistake locking down the economy and that will never occur again. Because of that, you can bet that there will be people going out and spending and returning to work and, for all intents and purposes, the pandemic is behind them. The worst is over. We know how to deal with it once you get it, if you get it, and by the fall it won't even be on the radar screen. There optimists, who include Larry Kudlow, who are betting we will come back stronger than ever. The recession? It's over. Joblessness? Rear view window. Plus the Fed has every company's back so there's no need to sell anymore.
The buy list of these characters:
- Nike (NKE) . It reports Thursday. That totally discretionary item that's high priced. You would not be buying it if you thought we were about to go into a serious downturn but, boy oh boy, this could be a rocket ship if the company blows out the quarter. We got not one, but two big price target boosts by legit firms Monday morning. My dictum is you don't get that confluence unless you have done enough work to be right. It is classic "happy days are here again" stock.
- Best Buy (BBY) . The stock is roaring. If you are buying a big screen TV or spending money on some really expensive equipment, then you go to Best Buy. Almost everything in that store you can live without, which is why its huge rally Monday is a sign that there's a cohort that truly believes that with the opening of New York to getting your hair cut, and the decline, not in infections, but in deaths, from Covid-19, things are really better.
- Gap Stores (GPS) -- an analyst Monday suggested that Gap is worth much more than its current price in part because of real estate value and in part because of the value of Athleta, its Lululemon (LULU) -like division. I think this is a thin reed, because the fundamentals are in decline. But if you believe that things are going to get better, then you want to own this stock on a call for a marginal retailer that otherwise might not even make it.
- Home Depot (HD) -- this stock is up huge and at this point you are buying it because you believe that things are getting better and better and it's the beginning of a very big move.
- Carrier Global (CARR) , the spin off from United Technologies, now Raytheon Technologies (RTX) , is all about H-Vac, heating, ventilation, air conditioning. You do not buy this stock if you think the economy is tanking. You sell it. You might even short it.
- Then there's Freeport-McMoRan (FCX) , which is a play on copper, which you buy when you think the economy is about to roar. It is the quintessential bullish economy stock, a tremendous call on boomtimes. It's certainly what you would buy if you think that Larry Kudlow is going to be right.
- Finally there's Disney (DIS) . You think things are going to get better? You think sports are coming back? You think movies will be booming again? This is the single best stock there is.
Now how about if you believe that the big increase in cases around the country coupled with the incredibly large unemployment numbers make it so things aren't getting better, in fact they may be getting worse.
First, you would buy some Campbell Soup (CPB) and Conagra (CAG) , ideal food stocks that make a ton of sense if things aren't getting better, you fear a long recession and you think the work-at-home thesis is in play more than ever.
Second, you would buy some Clorox (CLX) , a company that makes a product that's impossible to procure because its like gold in the era of Covid. The stock of Clorox is a great equity if you think that we are going into a recession. You get a twofer here, this time because Clorox, the bleach kills everything. Covid's no match for Clorox.
Third you would buy Etsy (ETSY) , Shopify (SHOP) and Square (SQ) . OK, so I lumped them together, but what I am talking about is small scale internet commerce, which is the rage when your brick-and-mortar stores are closed or will be closed a second time -- think Apple (AAPL) .
Fourth, there is no substitute for owning some Zoom (ZM) . In fact you have to own this one if you think that we are never going back to the old ways until we get a vaccine and at this point you are also betting that we won't get one. That's how far this one has run. But what a great company; the growth company for the ages.
Fifth, not many restaurants are going to be able to make it through to the other side, which means that you have to own the stock of a restaurant company that can make a ton of money on take out and delivery. Which means you have to own Chipotle (CMG) , hence why its stock took out the $1,000 level like a knife through Land O'Lakes. Again, buying it up here presumes that most of the competition fails.
Sixth, you can buy any of the work-at-home stocks, including the cyber crime stocks, because there's been a window into the organization via the cloud that's hard to close. Fortinet (FTNT) , Palo Alto (PANW) , Zscaler (ZS) , Crowdstrike (CRWD) , they will all do.
Finally, seven: Amazon (AMZN) . While it is does well in either scenario, as long as it's dangerous to go out, there will be a cohort that might never go back to shopping. That's Amazon's ticket.
Let's give this an eighth: Netflix (NFLX) . It's overvalued if we can go out again, it's overvalued if we can travel. It's overvalued if we can do anything. But we can't. So it's a buy.
Finally, there's the cohort that simply doesn't believe anything is going to work, that the Fed printing presses will just cause inflation that Donald Trump loses and Joe Biden wins, or that Trump wins again -- remember, two camps to everything, and they are buying gold. Physical gold. Gold coins. The (GLD) , and most important Barrick (GOLD) , run by the incomparable Mark Bristow, or Newmont (NEM) , which has a long-term level of consistency or Agnico (AEM) , inconsistent, but with excellent properties.
Where do I stand? Again, I prefer a barbell where you own some of all, which could explain why both camps can be under one roof at a time. But a vaccine will make the both the gold and the recession camp wrong, and you sure won't want to be in them. Can a vaccine be developed? I think with all of these great scientists focused on one thing, the answer is yes. I just don't think it's yet in time for the "let the good times roll" camp to dominate the averages.