Too many disparate metrics. Too many things to keep track of. Too many. Too much non-earnings per share to focus on. And all of these new signposts have made this market far more difficult to understand.
It's not talked about enough, so I am going there right here, right now to explain why the market's so reactive and so feckless.
Case in point, maybe the best case in point: Netflix (NFLX) . Here's a company that doesn't trade on earnings per share. In fact, I have never heard anyone say "have you seen how cheap the stock of Netflix is? The darned thing is down to 80-times earnings. What a steal."
Netflix is never talked about like that. Never. This is all rather amazing, given that the company came public 17 years ago. You would think by this time, there would be a way to measure the company's worth. Nope, so it defaults to other metrics, metrics like FOMO per share, or fear of missing out. That means the Emmys matter, and Netflix just did OK in the Emmys. There wasn't anything to speak of that made me think, "Wow, I am missing too much. I have to subscribe." It seems fatuous, but weak Emmys means weak sign-up numbers, which means sell the stock. That's just plain nutty, but its how things work.
Or how about two big companies like Facebook (FB) and Alphabet (GOOGL) ? If these stocks were judged by their earnings per share, they would be dramatically higher because they are doing so well. They are the two cheapest large cap companies in this entire market.
So what do we do?
We figure out what really matters to both stocks. And the answer? Investigations per share. This morning Snap (SNAP) revealed its "Project Voldemort-Harry Potter Villain," which kept track of all the nefarious things Facebook has done. The Federal Trade Commission is looking at everything and word about Snap's slam book on Facebook has investors shuddering. Meanwhile, we know that Alphabet is being investigated by state attorneys general for what the company was investigated for at the beginning of the decade. Google acts better today, because there's no government news. No such luck, Facebook.
Johnson & Johnson (JNJ) is one of the absolute greatest companies on earth. Triple-A balance sheet -- one of only two, the other Microsoft (MSFT) -- fabulous pipeline of drugs, high organic growth. So what. JNJ is gripped by the opioid and talc stories. JNJ is now about lawsuits. It's lawsuits per share. McKesson (MCK) and CVS (CVS) are lumped in. Obviously Teva (TEVA) and Mylan (MYL) . Those stopped trading on earnings per share a long time ago. They go down every time there's a loss in court, not a loss in earnings. Who can analyze that? It's a dreadful way to think about a stock; totally impossible to quantify. A nasty situation.
The tariffs are another impossible-to-quantify story. This morning Apple (AAPL) announced it's going to build the new Mac Pro in Austin, Texas, and in return it got a waiver for parts brought in from China. That's a huge win. But it is totally impossible to analyze. We don't know what the tariffs were. We don't know how much the breaks were worth to Apple. We just know that it is "good." Is that why Nvidia (NVDA) , Micron (MU) and Broadcom (AVGO) are going up? Is that the reason why Intel (INTC) and NXP (NXPI) are rising? How about semiconductor equipment makers Applied Materials (AMAT) and Lam Research (LRCX) ? The answer is yes, but is that something that can be predicted and measured? How do you put a price-to-earnings multiple on a company that suddenly can get its parts through that couldn't before? That's a wholesale re-do and you have to be willing to pay up for these stocks until we get a new tweet or a delegation of Chinese that doesn't go to Montana.
Railroads used to be measured by their freight loads and earnings per share from them. Now it's how precise is their railroad. Precision railroading, where they know where the cars are and don't give big discounts is the rage. You need to know those numbers if you are going to invest in these stocks.
Then there's aerospace. We know nothing is more important to this industry than getting the Boeing (BA) 737 Max into the skies. Boeing gets hit periodically on negative publicity -- there hasn't been a single positive article about Boeing. But you have to hang in there for approval, because I think this stock will go off, rallying gigantically on that day.
I have another dozen of these ideas in my head, stocks that simply don't trade with earnings or sales, and I have come to think that they are part of the ongoing difficulty of trying to assess what so many stocks are really reacting to.
What do you do if you are hostage to one or many of these odd measurements? I think, first, you have to recognize that if you have too many of these, you will be driving yourself crazy and want out of the entire market. Second, if you are really sick of these faux metrics, then go buy some higher yielding stocks. You will be able to sleep at night. It's vital that you know yourself. You do not want to be shaken out of good stocks simply because other stocks are eluding the grasp of traditional securities analysis. Third, if you know the stock of a company you like and you know what they do and you can accept the metric, then by all means pounce.
But there's one more thing. I don't like markets that have different kinds of valuations other than traditional ones. I didn't buy into the eyeball thesis of measuring cyber companies by the number of people who read or glanced or whatever. Yet, that's what the suspension of rigor ensued.
The more stocks that are valued by nontraditional metrics, the more likely that we truly are overvalued. Right now, I still think we are, and the bulls do have the upper hand. They are winning in September, a month known for its havoc on prices.
But let's accept this as gospel: You can only go up for so long on non-earnings per share issues, before you have to accept that valuations have gotten out of whack. Let's watch this and accept that this isn't a regular market, or a regular advance. It is often too wacky, and I say that as someone who has been around forever and has seen all sorts of markets.
Saving grace: We don't have to worry yet about WeWork and what looks likely to be a "tequila per share" measurement judging by how much tequila flowed in the office when King Adam Neumann was on top of his game.
But don't worry, with nine bankers on the hook, they will find a way to get that metric in front of us.