You may be wondering about why I'd start Mad Money with Noise Cancelling Headphones at the start of this show with all of the Earth Shaking events that are about to happen.
I will tell you why. Because I want to get it right, that's why. I want to be able to think clearly and not have the crying baby of tariffs or the snoring by that beast right next to me in steerage while I am trying to write. Okay, a first class buy, you get the difference.
I am wearing these on a placid day because to appropriate that Warren Buffett of song, Johnny Nash, I can think clearly now that the selloff's gone. Gone are the Uber deal and trade talks in my way. Gone are the dark tweet clouds that had made me deaf, and it's eventually going to be a bright, bright, bright bull market day.
Yes, you see I am about to suggest something heretical ahead of the Uber deal and the midnight trade deadline that the president says the Chinese will want to make a deal by, in of course, his own inimical impressive rigorous way, a tweet. I am going to suggest that come Tuesday this will be behind us and as long as you have raised some cash you, too, can wear the noise cancelling headphones brought to you by Logitech (LOGI) which actually had a good quarter but sold down for no particular reason at all except it had run up into the print.
And what did I hear when ensconced in noise-canceling-ville? Let me give you a list that came into my head with the sounds of silence and darkness who happens to be my old friend owing to saturnine nature.
Silent point number one:
The president is right that the Chinese need a deal more than we do and he is right that the Chinese backslid from 100 pages worth of agreements last week, calling into question the soothing words of the Treasury Secretary and instead defaulting to the harsh line of Robert Lighthizer and Peter Navaro who hung in there waiting for the Chinese to go back on their word once they signed the document. This time he didn't even need to wait until the ink was dry, hence the angry but justified - given the Chinese bait and switch - presidential tweets this weekend. So, my thinking is the president has every right to do what he did particularly because of the before-singing betrayal. And the Chinese know it which is why a deal is still very much possible but only after a stay of the 12:01 am Friday execution. All the Chinese have to do is go back to where they were 10 days ago. Is that all that hard?
Silent thought number two:
Let's say the tariffs go into effect. This is a president that monitors the archaic Dow Jones Industrial Average very closely, particularly the big components, like Apple (AAPL) and Boeing (BA) of this price weighted index that gives inordinate amount of power to those two stocks.
If the president detects a real decline in the Dow in the works because of all of these China-appeasing economists who say the tariffs will cost America hundreds of thousands of jobs, and hit the average hard-working family for $767, not to mention the family-farmers, always at the front line to get payments for their losses, he will pivot and add something that will reverse that Dow.
Not only that but I have a pretty darned good idea of what he will do which brings me to silent thought number three:
If any company that is hurting makes a pledge in the next 30 days to cut the China manufacturing cord within two years' time, they will immediately be exempt from the tariffs. It's such a good idea I wish I could get credit for it, but my ego's big enough to take a pass on those kudos.
Oh, and lets be sure of one thing: the scare tactics are really starting to bother me. The first tariffs the president slapped on were for steel to keep the Chinese from dumping steel through our so-called trading partners that almost decimated what's left of our steel industry. How much have steel prices risen in the last year? Ooops, hot rolled steel, the kind that is often used where you can't see steel, is down 22%. Cold rolled steel, used in the best autos, is down 16% - and you thought the belly-aching car companies were being hurt by the tariffs? Au contraire, mon frere. Oh and plate, which was a real fear in terms of the cost of infrastructure? That form of steel is down 6%. The tariffs? Deflationary.
Silent gem number four:
The potential Uber debacle. Remember, I was plenty worried that big buyers would need to raise money to be able to take down as much Uber as possible. Well guess what, that's' exactly what happened. That was the big selloff we had yesterday. Today's action tells you that they are down to tag ends on the selling of the cloud kings. The selling in the FAANG names has petered out, even with Apple, which we know is at the epicenter of the China problem. Of course the hapless Lyft (LYFT) is being sold because who wants Lyft if you have some Uber. Sell, sell, sell.
Yes, there can be more selling with a presidential tweet that says the Chinese are no longer interested in a deal. But the fact is the Uber bullet is locked and loaded and the begging for stock is very much on.
So, how about Silent Gem number five:
Uber will get done and Morgan Stanley is being coy enough with this deal to try to control the opening as best as possible. What does that mean? I think it means that the Uber IPO has been gamed a great deal and Morgan Stanley has enough stock to sell to keep the opening much more controlled than I thought. Remember what has to happen here: the opening of the stock - not the price of the deal but the opening of the stock - has to be priced where its biggest accounts will buy more. I think that Morgan Stanley will do everything it can to hold the opening price to below $80 where the big accounts will average up. There is one problem - the crying baby that pierces the headphones with a decibel moving scream: many large investors have developed hedges that get triggered if the stock gets hammered. That's because there were a lot of convertible securities in Uber that can be banged down reverberating on the common. I think that the deal could be okay, not great, and not market-wrecking like Facebook (FB) .
Which brings me to silent slice of wisdom number six:
After the rain of a botched Uber deal and a huge tariff raise, a bright, bright, bright shiny day will be upon us again filled with lower interest rates, better earnings, and a compliant Fed, even if you, wrongly,think it shouldn't be. The China appeasers tell us how so many jobs will be lost with tariffs? You know how on-hold a chastised Jay Powell will be then especially with a world slowing thesis.
So let me give you one last silent dollop of wisdom: if you have raised some cash as I told you to, then you will be ready to buy the stocks of high quality companies if they come raining down on you, and it will indeed be a bright shiny year once again because the earnings will be there and the valuations, after a huge run, will once again be reasonable enough to buy.