It's not phony. It's based on some facts. But today's the first day where my charitable trust braintrust all agreed, it's time to take something off the table.
I write this not just because when I walk around downtown I hear more "make me some money, Cramer" than I hear, "booyah," or " love the show." It's not just the fact that even the losers are turning winners, which means typically late to the game.
No, it's because all of the issues that have dogged us seem to have gone away and it's more likely than not that we've got a Pangloss thing going and unless its Pangloss Cellars, a winery out of Sonoma that makes a delicious cab. You can't have the best of all possible worlds, or at least you can't have it for long.
First, let's talk about what is going right, though. Exhibit A, the 10 year Treasury. Oh don't let those eyes glaze over lest I come to you with the nifty eye drops I have to take to get rid of some infection that can't be transmitted, especially through the camera. For months the armageddonists, who are now legion, told us that we were headed the way of Europe with the 10 year Treasury going up in price and down in yield. Why?
Because, besides Beamers and Benz's we were going to import negative rates from Europe. It was a bit of a chicken and egg thing because for a bit there, the armageddonists told us we had to have a recession because the bond market was signaling one by having 10 year interest rates below the federal funds rate.
That storyline then caused panic which just made for more bond buying and a further indictment of the economy.
But a funny thing happened on the way to the inverted yield curve. Turns out Fed Chief Jay Powell reads the papers and watches TV. He heard what was awry. He knew that a yield curve that's inverted can only really be cured two ways. Strong long demand that moves up rates or a cut in rates that might breed loan demand.
Now why wasn't this self-evident to the armageddonists? Pretty simple. A couple of reason. First, a lot of these naysayers hate Trump and saying anything against the negative-yield-curve-means-recession narrative means a tacit endorsement of President Trump. This guy is so hated by the globalists, the hedge fund managers who like to come on TV and the masked liberal commentators who regard Trump as a foolish, jingoist xenophobe that they let their politics get in the way of making money. Many of the money manager armageddonists need the market down because their view per se is dictated by the yield curve so they were either underinvested or, to some degree, short the market. That's why so many seemed cheery about a recession: two birds with one stone, a win by the Democrats in November, and a recession would mean that their underinvestment was wise.
Second, Jay Powell used some silly words to talk about the rate cuts, something about a mid-course adjustment. This stuff is meaningless. Powell raised rates too far too fast. Now he has to undo them. Is he supposed to come out and say that? Should he admit vulnerability, ill-advised actions?
Not unless he's a masochistic Fed chief. So he threw a lot of people, including the acolytes who cheer him at every step, off the scent of his real plan which was to be sure we didn't turn into Germany, that we avoided the inversion.
The funny thing about Jay? He's got us right where he wants us. He has all of these people running around saying that he said he was done cutting rates - that midcourse correction again.
But what he is really doing is what his predecessor Janet Yellin did, let the data and the homework tell the story. No, it's not a fed put. Nevertheless, if you put stock in that midcourse correction drivel, you won't be able to buy stocks until it is too late.
Next bit of the Panglossian worldview? That the trade talks are going to go smoothly. Talk about Pangloss, just the other day we heard they were going badly. Now it is entirely possible that something positive is going on, that tariffs could be rolled back. I say that because it is true that the Chinese have finally done something that they promised in Argentina last year: they are cracking down on Fentanyl drug pushers who are killing so many in this country. It's the first sign that they might mean business. Roll back tariffs, though? Let's see what else they agree to before we get too giddy. I don't like how rosy everything is 48 hours after we have heard that things were going badly.
Next bit of Pangloss?
Specifically, earnings in retail and earnings in tech. This morning Ralph Lauren (RL) reported a very good number with excellent growth, sharply better than expected. It's been ages since we heard that a supplier to retail, especially mall retail, is doing well. Forget that a lot of the goodness here is that they pulled out of the poorly-performing malls. No matter, when you see the end of the inverted yield curve you want to buy and apparel fits the bill. May I suggest a buy of Columbia Sportswear (COLM) ? It had the misfortune of reporting during the "recessionary" period and if it reported today it would be flying, too.
But let's be careful here. The combination of no recession and a better number by a great apparel company has led a rally in all of retail. It didn't hurt that Costco (COST) had a terrific number last night. What you need to know is that the likelihood that all of these retailers doing well is simply inconceivable. Time to trim.
Next bit of Pangloss? The endless move in the banks. Now I have been a huge champion of this group. It represents the greatest value in the market and the higher yields on the 10 year will let them make more money. But can we just admit that buyers who come in now aren't exactly early? Do we really believe that you are going to be rewarded from these exalted heights? Yes it is possible that some of the bigger ones could get business from a move into China, if that country lets our banks in. However, I think it is highly unlikely that business has gotten that much better that fast. I think it 's too tenuis when we are in the midst of a slowing economy.
Final bit of Pangloss? The possibility that 5G is going to drive all semiconductors higher. That's how investors are reading the huge number from Qualcomm (QCOM) last night. This number on top of Qorvo's (QRVO) terrific figures are being extrapolated to pretty much every chip stock. Dream on, but there are enough 5G plays - my favorite is Marvell (MRVL) which is a very big position for my charitable trust, which you can follow along by joining the at Action Alerts PLUS club.
I want to make clear that I am not saying I expect a big selloff. I am saying that when you have a jailbreak of incredible proportions like we are having right now, you need to know that not everything works out as perfectly as people think. And that means do a little selling so you have cash to redeploy when Pangloss is revealed as smacking more of fantasy than of fact.