Resilience, complacency or both? As the market stages a huge rally from last night's moment of crisis, when Iran launched ballistic missiles at our air bases and no one was hurt, I marvel, as I did on Wednesday's club call, at this market's ability to overcome even the toughest of obstacles.
That's why I need to stress now the concepts of resilience and complacency, because they define the moment we are in.
First, let's cover the complacency. A few days ago the President of the United States ordered the killing of a monster, an Iranian general who even the mainstream media acknowledged as a killer of Americans, including hundreds of soldiers. The reaction was swift -- only the die-hard Trumpers seemed to believe that there were going to be imminent attacks orchestrated by Gen. Qassim Suleimani and that the world's now a safer place without the man who seems to be at the center of Iran's plans to terrorize all of the enemies of the state. The vast majority of commentary indicated that the world has become far more dangerous, and that World War III beckoned even as it was hard to see who else would join Iran in the battle against us.
We saw oil and gold soar. We saw waves of puts bought.
But we also saw stocks pretty much entirely ignore the entire fracas, even to the point when retaliation almost had to be imminent.
When it was, it occurred at night, when the market was closed. About a dozen ballistic missiles get launched and the overnight futures plummeted the equivalent of 500 Dow points. Next thing you know, though, the president tweets that it looked like there were no casualties and all was well. You could see the futures start to rally. Then a Boeing (BA) 737 -- not a MAX -- from Tehran crashed after take-off and a second wave of fear swept the market.
But when no further attacks came, when the Iranians tweeted that the message of revenge had been set, the overnight markets reversed and the pajama traders who sent the markets down about 2% were revealed to be too jittery, too panicky and plain wrong.
Things only got worse for them when we got the kind of numbers and commentary that justified not only staying the course -- my view -- but going outright and buying, the ultimate merger of resilience, complacency and hubris, all of which paid off when the president demonstrated restraint that outfits like the New York Times seemed baffled about. Trump with an olive branch vs. a bazooka?
There were certainly enough traders caught on the wrong side of that one.
However, if it were just a short squeeze, then we know it's something easily undone. It's not, though.
In rapid fire Wednesday, we got one volley of good news after another.
Let me tick them down.
First, the ADP number, a great gauge for employment, showed more than 200,000 jobs created last month. It's not the ultimate arbiter, that's the Labor Department's non-farm payroll figures. IT did show, though, that the rate cuts are working.
Speaking of rate cuts working, Lennar (LEN) , a gigantic home builder, reported Wednesday and every single number was a beaut -- with the most important one being new orders up 23% and the most important commentary that California, a fifth of the country, but even larger percentage of the nation's home building activity, has bottomed and is recovering.
Thank you again, Fed Chairman Jerome Powell, for the rate cuts. You were as good in the fall and winter of 2019 as you were bad in the fall and winter of 2018.
Then we got a number from Macy's (M) that was NABAF -- meaning not as bad as feared -- and the company continues to close underperforming stores, trimming to where it's left with good stores in quality malls. It's a good strategy, and it's also a reminder that we could see some much better retail numbers to come, including from Nordstrom (JWN) and perhaps Home Depot (HD) when it reports: There are enough analogues between Lennar and Macy's to suggest that the underperforming Home Depot could rally.
We needed some tech reinforcement to keep that ball in the air. How pleasant to get it from a company that had lagged for hours, Apple (AAPL) . My thesis to own Apple and not trade it is based on a combination of incredible innovation and customer satisfaction that allows the company to monetize the 925 billion iPhone users. We got some data on apps and Airpods that were staggeringly large and one has to wonder what would have happened if they had enough product to sell. It's not easy to move the stock of the world's largest company, but when you combine the incredible new products with brand loyalty, you can begin to figure out the lifetime value of a customer, and it easily justifies the price of the stock. I was on a vacation recently with seven other Apple phone owners, all older models. Despite the naysayers' judgment that there's nothing new under the Apple sun, I think that every one of my trip mates feels the need to own the 11. It's that much of a leapfrog. Same thing with the 20 people in the box at the Eagles' loss last Sunday where only my phone was worth taking pictures with. So much for no innovation.
Then there's the steady drumbeat of origination and 5G utilization we keep hearing from the Consumer Electronics Show, or CES -- all similar to the upbeat commentary we got last night from Harman's Dinesh Paliwal who regaled us with stories about products that seemed to be impossible to make even a couple of years ago.
Not enough good for you? This morning in something almost nobody noticed, American Express (AXP) finally got the nod, after years and years of waiting, to open up a China franchise all of its own, no meddlesome joint ventures. You get good news like that, and you start thinking the thaw is real. What does it mean for Mastercard (MA) , for Visa (V) , for Goldman Sachs (GS) ? No one is waiting to see. They are buying.
Or how about the companies that were supposed to screw up that didn't? This morning Constellation Brands (STZ) , which will be on "Mad Money" Wednesday night, reported very strong beer consumption and not just from the Modelo and Corona that we sell at Bar San Miguel, my small plate Mexican restaurant in Carroll Garden Brooklyn. That wouldn't be so important, if there had been a story circulating yesterday that the company might have a shortfall, because of slowing beer sales. Sure, beer sales weren't on fire, but compared to everyone else in the business, these guys are crushing it.
Oh and let me throw in one more: GrubHub (GRUB) . It's been my feeling that the food delivery business is ripe for consolidation. We already had the private DoorDash buy Caviar from Square (SQ) , which, by the way, is now finally being acknowledged for its growth post the departure of the amazing CFO Sarah Friar. But there's a need to lessen the competition further. Thank you GrubHub for acknowledging that it might very well seek a combination. I have one: DoorDash -- you buy them, or Uber (UBER) , you spin off Uber Eats and merge with Grubhub.
All of these notes create conviction, which creates resilience and causes complacency that keeps potential sellers from selling. And that's how you get Wednesday's spectacular rally.