Trapped. Handcuffed. Dragooned. That's how you have to feel looking at the stock futures which cannot be divided from their bond market masters.
It doesn't stop.
You could have all the positive news flow in the world. Our stock futures are determined to follow our bonds down in value and up in yield.
Yesterday, as you might have thought, the market plateaued where it was when the news of the stay in tariffs came out -- but that now looks aberrant. That's something we chronicled last night on Mad Money using the excellent VIX work of our colleague Mark Sebastian.
But before you go throwing away all stocks -- something I discuss on our club conference call at 11:30 a.m. ET -- please remember that there are plenty of stocks that are now offering accidentally high yields that do not seem in danger of not being able to pay them.
All but Dow seem to have reached levels where they reflect the state of the numbers -- and even Dow does seem fetching below $45.
I think that the 10-year action can't have it both ways. You can't have a piece of paper that's calling the tune, forcing other, higher yielding pieces of paper down. Short term, it can happen. Longer term, these accidental high yielders may turn out to be this moment's 2008 when those who socked in high yielders where there was thought to be credit risk ended up making a huge amount of money, unless the dividend needed to be cut.
Right now the algorithms cannot be overridden. They are too powerful. There is too much money run that way.
What's incredible, though, is that there isn't another algo set to think more than this session, an algo that shows you how, long-term, lower rates produce higher economic returns.
Think of it like this. What's the precise opposite of an algo? I would say it is the prescience and thoughtfulness of a man like Warren Buffett, who doesn't play for the short term.
What is he buying, and buying relentlessly? The shares of banks that are now so cheap vs. their prospects, their tangible book value and even their dividends, now that the 10-year's been removed as a source of competition.
Do we make a judgment that Buffett has lost his touch, that he doesn't know that lower interest rates are dangerous?
Or do we say that he is thinking about the ultimate elixir that is lower interest rates, which produces a more robust economy and makes banks more money, even with the yield curve as it is?
I know that Warren Buffett isn't always going to be right. But you are betting against Buffett if you are betting with the nameless, faceless algos that are now in control. The algos won't have a lovefest in Omaha. They won't have a folksy interview with terrific reporters. They won't explain their actions. Their judgments are by rote. But that doesn't make them right.
I don't ever like to go on autopilot. I am not going to say, "Warren Buffett has to be followed no matter what." But I will say that his analysis is as crisp as ever and I would prefer to side with it, than against it.
Sorry algos. You may be right today, or the next day or the day after that, as our yields turn to negative and invert.
I am going with the man who thinks about owning stocks for a lifetime -- and he likes the banks more than any other group.
I'm going with him, not them. I am willing to be wrong for a short time if I can be right for the ages.