Remember the stimulus? Remember when the government was going to help the small businesses that really can't thrive until we get a vaccine? The market doesn't remember, which is why it's going down with abandon.
Now before we give up on stocks let's recall that we have been down for a while. As I listened to the talking heads today I was kind of in awe to hear that suddenly people have recognized that the big cap tech stocks act terribly. Of course this is the third week that they have acted terribly which is usually the sign that a bounce could be on the horizon. And why not because we need to set the story line of what is happening right now and why it seems more perilous, more in disarray than usual.
First, there seems to be no hope for a deal between the administration and Congress for some sort of safety net package to keep small businesses alive. Many of the managers of these businesses know that it is just a matter of time. It's truly incredible that the only things that help stop the virus right now are social distancing and masks as they are a total anathema to small businesses. That means we have to start facing up to facts that you have to restrict how many people can come into your stores and the opening of restaurants and bars, no matter how few tables you allow, simply is too dangerous. Almost everywhere the bars and restaurants are open covid resurges. There are about 15 million people involved in hospitality alone and they are just out of luck. Fortunately there is a safety net but there's nothing to leap up to after you land. That's why it was so great that the government offered extra money to the unemployed. It sure isn't their fault. And the Paycheck Protection plan worked well to keep many businesses alive. You know what many are doing now? Returning the keys.
Second, the travel and leisure providers and airlines are truly on the ropes again. They just haven't had the resurgence that many thought they would have. The virus fears haven't gone away and the business traveler is used to working on Zoom (ZM) . We have had one tech company after another tell us that things are better with Zoom. As long as your competitor is Zooming it's the best Zoom presentation that wins. But the first class business traveler who stays in a first class hotel isn't coming back without a vaccine. That means the airlines are going to start hacking and the unemployment rolls will swell. At these loads there are way too many employees.
Finally, you can't see it but a high percentage of renters have stopped paying rent. The stocks that are reacting, Federal Realty (FRT) , Simon Property Group (SPG) , Vornado (VNO) , Realty Income (O) , and Starwood Properties (STWD) , among others, aren't where the pressure points are. It's with tenets who can't pay their apartment rent. The owners can't oust them. They are becoming, alas, squatters.
Disarray number two? The unfortunate, sad passing of Ruth Bader Ginsburg. We don't have an election until November but the nomination process, though, may be a forerunner and it promises to be ugly and confusing. A bruising fight over the nomination will put the focus on the election and the stark differences between the two candidates. The first thing that Vice President Biden seems bent on doing is raising taxes on corporations. That means next year's going to be a down year. Hard to calculate what stocks will do with an across the board earnings slash but the election season is a mean one and the coming Supreme Court battle will be harbinger.
While the unemployed fret, the government is focusing on making sure that an entertainment site, TikTok not be owned by the Chinese. I don't even want to go over the machinations behind this one but it sure is tying up the government. I want to look at it as good news for Oracle (ORCL) and Walmart (WMT) , which will be wresting control over the company with a pledge to hire 25,000 people - win for the U.S. - but it does seem like a sideshow versus the stimulus needed to help millions of people.
Or there's crushing of Nikola (NKLA) , the pastiche of borrowed technologies which lost its chief evangelist, Trevor Milton, over myriad corporate indiscretions. Why does it matter? Because it's another Robinhood stock and that's the cohort that has kept speculative stocks alive.
Finally we got some weird wave of corruption that washed on our shores from foreign banks. What you need to know is those banks remain weak, much weaker than ours, but they are still joined at the hip.
Okay, these are all real. They are all negative. They are hard to refute. We know that there is enough out there that you can't necessarily wade in and think that you will make money.
But you know what's worth noting? There's nothing really new here. We seem to have only noticed it because we have been down so long that we are beleaguered. I heard so many people pronounce the death of FAANG and friends because they are in bear market territory. I think it is amazing that it took a drop of monstrous proportions to get people to realize that it's time to sell these stocks.
I question that. As someone who turned bearish on these stocks, as someone who told club member were trimming back every single tech stock because we felt so greedy we can't ignore this downdraft. In fact, I felt the opposite. We put money to work in a host of stocks that we haven't touched on the way down. We upgraded some stocks, we rank them every day, and while some are so above our basis how you can you not be enticed by Apple (AAPL) down 20% from its high. I don't care that it's up 45% for the year. It has more catalysts than almost any other stock: new revenue streams, great balance sheet, work at home, play at home, school at home, and of course 5G, so why not buy it? You sure aren't buying at the top. Same with Microsoft (MSFT) and Amazon (AMZN) and Alphabet (GOOGL) .
Earlier I gave you a list of what else is working, but I think that when I see the kind of across the board give up as we have today, I think it's healthy not toxic. We had an awful lot of people thinking that this was a replay of 1999 when we just went up and up and up.
Well, guess what.
This is not 1999. We didn't get these kinds of vicious declines that shook out investors and made you realize that investing had big risks. We know after these couple of weeks that while it would be terrific to say stocks don't go down, they do go down and they go down hard.
That's your key to start doing some buying, not some selling. The uncertainties, the disarray, the mayhem isn't going away.
But it's time to realize that we've been in a gigantic selloff and everything's being thrown away except a handful of work at home stocks. Better to buy them when they are down than when they are up. That, sadly, is a revelation to many of the new investors. I just hope they have some money left to take advantage of it.