Sometimes it comes down to nightmare versus positivity and when the latter wins, as it has, the nightmare gets shrugged off and buying can begin anew.
We had both today, a nightmare start to the session filled with talk about inflation spirals and COVID variants of kinds, Delta to Omega, and earnings shortfalls that could sap the life out of the Great Re-Opening trade.
The fact that we could even have a placid, positive session is pretty crazy since we had such a huge week last week and superstitious traders thought we would have a repeat of last Monday's horror show.
Why not? At 4:30 in the morning the only stock that was higher was the perennial meme AMC (AMC) , leading me to speculate, is that really all there is? How about plowing into Apple (AAPL) ? Or Disney (DIS) ? Just because it doesn't have a big short position in it, doesn't mean it is uninvestable.
But by mid morning we had reversed and stocks like Boeing (BA) , trading heavily down 5 at 5 a.m., turned around even as this quarter is anything but a sure thing.
What's with this stark dichotomy? How can we be so at odds?
The answer: it all has to do with COVID and herd immunity. If we get some sort of pseudo-national immunity that's a combination of vaccines and infections, or even if we get a peak in cases, it could be like a second re-opening and the travel and leisure, energy and cyclical and retail stocks will be the place to invest.
What's the other side of the trade? It's a virtual Mummers Parade of horribleness, the likes of which scared every billionaire but is lost on about 320 million Americans.
First, we know that, say, if we get an infrastructure bill with no way to pay for it, we will be greeted with plenty of stories about the crushing debt burden our country is suffering from. I know the billionaire kleptocrat class thinks people aren't worried about it. They are, but therefore they see no hope UNLESS they invest in stocks. The inflationary impact with all off this money printing isn't lost on them.
Second, we have the debt ceiling crisis of 2021. Let's hope it is not true, but Secretary of Treasury Janet Yellen is urging that the debt ceiling should lifted by August 2 or else tawdry - my word -means will be necessary to raise the needed funds. Now many younger investors didn't trade during the debt crisis of 2011, where a horrendous bear market ensued because of the downgrade of U.S. debt. We could do without that but it is certainly on the agenda and I expect no real action taken on it given how fractured and partisan our leaders are. This is a nightmare that must be paid attention to if only because the media will talk endlessly about our default.
Third, lets deal with the inflationary spiral of wages and goods. I hear people now take this as a given. They read that used cars are being priced through new ones. They see house prices going up. They are shocked at the cost of everything from coffee to coal - brought on by a furious run up in natural gas. Many of the cognoscenti have totally lost faith in the Fed and think that Jerome Powell is asleep at the switch. I count only a handful of people in my and Powell's camp that the inflation is transitory. But we have to face facts: we have never had a level of demand like this that came from never having had the forced deprivation and then serial printing of checks to you that we have right now.
I think it is insane to hold Powell's feet to the fire right now. He didn't come up with all of these different checks that have come in the mail. He has kept rates down because unemployment is very high. He sees what everyone sees but he isn't going to slam on the brakes when the rest of government's on the accelerator. He's willing to bide his time until the supply chain catches up, hefty unemployment benefits run out, millions of women can rejoin the workforce because their kids are back to school, and enough homes are built to accommodate demand. Remember we have been underbuilding homes for years in this country and now we are playing catch-up with a hybrid home kicker.
Fourth, the nightmare extends to geopolitical craziness. The Chinese are attacking their own companies, companies that trade here, seemingly without rhyme or reason. Maybe it's a crackdown on corrupt billionaires both here and there? Maybe it's a way to stop things that should be free to all rather than paid to some? Maybe it's a belief that some sites are unbecoming to a great nation.
Whatever, the crackdown, if you can call something a crackdown if you don't know what you are cracking, is all over the place.
They are clubbing the for-profit after school companies because, apparently they are concerned that students are studying too hard. Really?
They are knocking a bunch of online companies in the grocery and music business.
What's next? Baidu (BIDU) , JD.com (JD) ? Alibaba (BABA) ? Does anyone really know? I had been adamant that we should stop the Chinese from raising capital from our markets. Looks like at least the Chinese took me seriously. They are destroying their golden Wall Street goose. Ill-advised.
Okay, there's the nightmare.
Gottlieb. That's right, Dr. Scott Gottlieb. With all the frightening scenarios being put out by all sorts of government public health individuals, what a pleasure this man is. This morning, totally against the grain, he predicted that we are going to follow the United Kingdom into a COVID peak. Oh it's not a great way to get there. Delta is such a force that it is infecting vast swathes of people who breathe on each other. Of course our ridiculous public health officials who first counseled that we clean counters, not realizing it is spread by airborne droplets, refuse to do anything but approve the current vaccines for emergency use, haven't been able to get the rational reaction they thought they could get.
If they would approve them, period, then employers could demand vaccination just like schools demand vaccinations. But, no, all they get is subtle coercion. I wish the whole country had the NFL's policy of forfeiting a game because of COVID. Then your co-workers would do the coercing as they will miss a game paycheck.
No matter, with this form of COVID, getting sick will happen faster than getting vaccinated and a peak will be reached. And when that happens, if you aren't long exactly what you would be short under the nightmare scenario, you will miss a cornucopia of profits that only a fool would pass on.