Hold on a second. You don't go from fabulous to horrible. We don't suddenly doubt the entire edifice of a strong consumer. Only on Halloween would I accept the trick that we are about to go into a recession, because of weak numbers and more negative trade talk vs. a treat of good earnings and low interest rates.
Yet on days like this, when we get some weak manufacturing data, we believe the worst is yet to come, something that will be exacerbated by the so-called trade stalemate.
So, let me tell you where I think we are, and why I think there's nothing new, maybe something borrowed, and a whole lotta of blue.
First, as I have been saying for months, we have two economies: There's the consumer economy that is incredibly strong and there is the industrial economy that is weak and, in some cases, getting weaker.
Second, we are largely a consumer economy, so we don't need to panic -- remember panic never made a dime for anybody. The industrial economy, as important as it is, cannot bring down the stock market all by itself. It just isn't big enough. It can bring down the manufacturing segment, for sure, but with the exception of some companies that cut outlooks, most of the enterprises are doing well. Maybe their stocks are a little too high. They will give back those gains. But the proof -- the actual results -- are more important than the macro figures would indicate.
Third, a story has been floated by an important and reliable business network that says the Chinese aren't about to make a serious deal with the United States, even as we hear from people as accomplished as Tim Cook that things are thawing between the two countries. The truth is we have no real knowledge of what is happening behind the scenes. I do not share with you everything I hear, because often I believe that the information I have may not give a full depiction of what's going on.
But I do know this: Anyone who thinks, with the Chinese economy seemingly rolling over, that the Chinese are in charge of their own destiny is dreaming. The mainstream media seems to fawn over the Chinese almost as much as they trash the president. Hate Donald Trump or like him, he's been true to one principle: He's not going to agree to a deal that doesn't substantively change the way the Chinese do business. It's not about soy anymore.
To me, the two countries are on the same repeated collision course. But there is one huge difference that no one talks about, yet it is crucial to the understanding of the real status of the talks. Behind the scenes our government is relentlessly insisting that our companies move out of China with all deliberate speed. China? It makes so little here it doesn't even matter.
Both countries have a problem with employment: They can't keep losing the number of jobs that are flying out of China and not have an unemployment problem -- which can often, in a dictatorship situation, result in an unrest problem, a la Hong Kong, which the all-powerful Chinese have not been able to quell. We, on the other hand, can't find enough workers to fill all the jobs we have. Their situation is suboptimal. Ours is pretty optimal, as long as there's no wage inflation to speak of and the data says there isn't.
So, do this for me. Every time you hear about Chinese intransigence, you think that companies just bought time to get the heck out of China. If you need to remember this, think of a Zebra. That's right, Zebra Technologies (ZBRA) , which just told you the other day on my show that it's moving out of China as fast as possible. Do you think the Chinese are going to get that business back if they buy some 747s?
I don't think so.
The longer these talks drag on, the worse it is for the Chinese, but not for us. Will some holiday presents costs more than they would otherwise, because of tariffs? Actually, you may not even see the price increases, and I expect WATCH -- my trenchant acronym for Walmart (WMT) , Amazon (AMZN) , Costco (COST) , Target (TGT) and Home Depot (HD) -- will have an excellent Christmas.
Fourth, didn't the Fed just cut because of these kinds of worries? Did it really say it won't cut again? No. Fed Chair Jay Powell, after initially being captured by the anti-inflation ideologues, has come to his senses and is doing what's right. Lots of home-related loans and auto loans get priced off these short rates. They will create more business. The Fed has our back, even if the media says Jay Powell doesn't.
Fifth, did anyone bother to listen to the Facebook (FB) or Apple (AAPL) calls yesterday? I did. Facebook is coining money and helping hundreds of thousands of people build businesses, but all we seem to care about is political free speech. Oh why not just sticker this stuff with some sort of cigarette-like warning and move on for heaven's sake. Apple's selling incredibly expensive phones and other accouterments at a clip that would hardly indicate any weakness in this economy.
Both Facebook and Apple, If anything, would indicate things are getting better, not worse. OK, neither is emblematic of the earnings season: Both are far better than that. But, can I make a really bold statement: Other than GrubHub (GRUB) I have not heard of a company say that things are terrible. Yep, just that one.
What can you do in this situation? I think it is simple. All stocks went up in this most bountiful rally.
Now, all stocks are coming down in this sell-off.
In the rally, the industrial stocks soared while the food and drug stocks did OK.
The industrials now have to give back some of the gains.
But stocks like Bristol-Myers Squibb (BMY) , Merck (MRK) , Eli Lilly (LLY) , or Biogen (BIIB) and Abbott (ABT) can and should be bought on the way down. Mondelez International (MDLZ) put up a decent number, and Waste Management (WM) is oversold. At this pace Walmart, Target and Costco will be, too.
When we get these sell-offs, we tend to get broad sweeping predictions, often of dire proportions. We hear that Apple's moved up too far, too fast, or that a Starbucks (SBUX) didn't rally, so the quarter must not have been as good as I say it is.
You should be thinking the opposite. You should be thinking, Will the market let me into Apple at lower prices, because it's too cheap given its prospects. Or, you should be saying, The sellers are wrong; it's time to pick up some Starbucks.
When you look at a sell-off through that prism, after taking into account my five larger issues, you will recognize that nothing has really changed, except the prices. The market is throwing a sale it doesn't need to throw. That's opportunity; not tragedy.