How is it possible that we are still trying to forecast things on the basis of the Fed or the money supply or the savings rate or even the 10 year Treasury?
That stuff worked back in February of 2020 before the world changed. It made plenty of sense and we could make some decent judgment and translate them into stocks. You could figure given a six month forecast - the time I tell people to think about when they are selecting stocks from our recommended list from my Action Alerts PLUS club - whether it's a good time to buy Procter & Gamble (PG) or sell Nucor (NUE) . Maybe it's a decent set-up for Federal Express (FDX) or Chevron (CVX) .
But that's all gone now.
The problem isn't, though, that it's gone because of COVID. It's gone because we now know that there were four phases of the illness and the forecasters simply couldn't keep up with any of the tidal waves.
Our first phase: Lockdown and pay people not to work. This phase was supposed to last as long as we got the illness under control through social distancing and contact tracing. It seems a long time ago but we actually, primitively, thought we were doing a decent job and some states jumped the gun so we could get a partial picture of what the economy was going to look like as we beat back COVID.
That included avoiding the office and moving out to the burbs or the country because we felt we had a better chance of not catching it or if we caught it we could contain it. Meanwhile we made progress over time in how to treat it so it didn't kill us, although that took a very long time to figure out. The federal check tide-over caused a predictable wave of spending at the big indispensables as it wiped the floor with small businesses. It was incredibly sudden but so was the "hell" downdraft and lots of new Robinhood (HOOD) money saved the day.
The second phase also took us by surprise: the vaccine phase. Incredibly, through technology shotgunned into needles, we developed something that, if taken like we did polio or small pox, would wipe out the illness if we at least made any attempt to close our borders and doing it nationally.
I think the forecasters got the hang of the opening trade rather fast and made plenty of adjustments on the fly. We calculated how much business would be done as we came back to the central office and abandoned the home. We figured out that benefits would run out and women would return to the work force and inflation would settle down. The great spring re-opening trade.
Amazingly, though, we got a third wave that no one I know counted on. After what seemed like one of the most anticipated and prayed for rollouts of the vaccine, the demand faltered. It was inconceivable to those clamoring for the shot - including almost every CEO and policy maker - that half of the people in this country rebelled against getting vaccinated. Talk about throwing out forecasts. Useless. Go back and read them. Useless.
We settled into siege where we accepted that some part of the country with stubborn governors would accept the risk and others went about their new lives of returning to work, maskless and happy.
Now, out of nowhere we have a fourth wave: the combination of Delta, which you get with casual ease - in a store, in a restaurant, brushing by a sick person who doesn't know he's sick. It's happening at the worst time: the strong efficacy of the vaccine is shorter than we thought, really only six months but the useless public health officials are saying eight months either to make it so we still bother to take it or because we might run out. This wave is breaking through all over the place but not causing a lot of hospitalizations or deaths, except where the majority didn't take the vaccine in the first place.
It's this current phase that isn't even fathomed yet. I think it, in many ways, is going to bring us back to a phase one variant - back to the home with new home sales skyrocketing, home offices here to stay and test, test, test.
In that environment you have to revert to individual stock picking relying on CEOs to be able to augment what their business might do. The infrastructure package and trillions sent out can help the thought process. But you can trust no aggregate figures and you must find stocks that fit the next phase. With that narrative I just gave you, do you care to tell us what phase five is? If you say yes, I think you are just kidding yourself. Find companies with managers who can navigate anything. They will be the winners regardless of the Fed, inflation or anything else the aggregate throws at you.