Culling and shedding. That's where we are at. We are culling the stocks that are worth owning and shedding those that aren't.
Right now, there are a lot more stocks not worth owning than owning. It's not because of the companies, though, it is because of the government. And when it is because of the government, you get an entire pall over the market where you pay less for everything.
A good example of what I am talking about? Let's talk Starbucks (SBUX) , a stock I got asked about last night on the Lightning Round that I can't believe has fallen as far as it has -- and no one has said peep about it during this entire hideous decline.
Not that long ago, the stock of Starbucks resided at $99 after the company reported a fantastic quarter near the end of July.
Since then, though, it's really become a down stock, especially since an early September presentation that its recent 10% growth rate was really more of a spurt that won't be carried into next year. The July quarter, the best in three years, seemed like an aberration after the presentation -- even as CEO Kevin Johnson explained the new profit forecast was being hampered by some non-recurring factors and there was no real change from the previous forecast.
The growth model with respect to revenue and operating growth remained intact, the company's CFO Patrick Grismer explained at a Goldman Sachs conference. The company was merely flagging a one-time, below-the-line, tax-related issue, which necessitated a deviance from the plus-10% ongoing growth model.
Wow, that bit of mumbo-jumbo was simply not accepted by the marketplace -- and the stock has now shed about 8 points from when it was uttered and now 14 points from where it was after the good quarter.
Or, to put it another way, Starbucks has gone from being a must-own to being a must-sell because of those simple comments made at a Goldman Sachs conference by the CFO, in part because they stood in direct contradiction to what the company had been saying. The sellers simply believe that there was something else -- not the tax-related issue, but something involving sales weakness -- that was responsible, and it was really perceived as a guidedown not an adjustment.
I mention all of this because it is pretty clear in hindsight that we are now looking for reasons to sell, not to buy. We are looking for reasons to raise capital not put it to work, because there's a growing lack of trust of pretty much everything and most of that is emanating from decisions being made in Washington not at the companies themselves.
In a better environment, you would have people jumping up and down talking about how this is a great moment to buy the stock of Starbucks, that the adjustment made at the beginning of September isn't meaningful and now we are in the best part of the Starbucks season, the pumpkin spice moment when promotions rule.
Instead, it's nothing but crickets.
But then, why should it be anything but that. After the pasting that the stock of McDonald's (MCD) took yesterday on no real news, just a survey, who wants to be a hero and say that the stock of Starbucks is done going down?
To me, the stock is entirely emblematic of this moment: There's no need to buy this stock. Why bother? The last thing we heard was something negative. Maybe it's gotten worse?
The result? Drip drip drip. With no end in sight until the company comes out and says something, anything, that might change the direction that's been the case ever since what the Street now almost universally regards as an important forecast slash... even if it wasn't.