Not possible. Can't be. Thirty-thousand on the Dow?
If you didn't know any better, with negative gross domestic product forecasts, the eve of a super spreader event, and the nations ICUs jammed with Covid patients as we try to keep the cases to below 200,000 a day, you would think 20,000 is more likely than 30,000.
But the numbers don't lie. We've climbed out of a Covid related abyss and we look like we can go much higher.
What happened?
What explains the action?
I think moves being driven by 10 tipping points, 10 things have gone the way of the bulls in a spectacular fashion.
Let's tick them down.
First, we got surety when it comes to who is in the White House. With the president filing suit after suit after suit, the possibility that the defense could run the table seemed ludicrous. After all there are so many Republican judges, you'd figure the president had to hit paydirt somewhere. But he didn't. It wasn't just that his legal team was pathetic - they were - what really mattered was there wasn't any fraud. So when the president lost the Keystone state this Saturday, the jig was up. A discordant chapter in American history was finished. And Trump moves on.
Second, the vaccines. When we got one vaccine from Pfizer (PFE) that shows about 95% efficacy, maybe Pfizer got lucky or the trials were arbitrary. Then we got Moderna (MRNA) at about the same rate, making us feel better. Then AstraZeneca (AZN) came up with about the same rate with a different technology. Three's a charm and it is possible that there could be as many as 100 million doses among them for the U.S. Pfizer's not part of Warp Speed, so we don't know the distribution methods. But we are very quickly going to get Moderna and Astra through the Army to McKesson (MCK) to the drug stores after the first responders get it. I am concerned that the drug store level could be chaotic but I have faith that McKesson will get it to where it has to go. I was derided by many for saying trust science, especially the New York Times, but it's nothing short of a miracle and we must respect that.
Tipping number three: the vaccines will open the economy even as the virus is raging right now. I think that we all expect that we will come in contact with it and many of us will get it; in fact it's a footrace between the vaccine and the virus for many. But the fact is we will soon, with the vaccine, be traveling, going out, shopping and cruising. These stocks, airlines like Southwest (LUV) and United (UAL) and American (AAL) , or cruise lines like Carnival (CCL) and Royal Caribbean (RCL) and Norwegian (NCLH) , restaurants like Darden (DRI) , Cheesecake Factory (CAKE) and other national chains will stay open at reduced levels until we get the vaccine. But when we do, their competition, about 40% of their competition will not survive because Washington did not come up with a stimulus package in time. Disneyworld (DIS) can make a huge comeback. The marginal retailers like Macy's (M) and Kohl's (KSS) , will stop being marginal and the shopping malls are dwindling but the good ones are owned by Simon Properties (SPG) , and shopping centers? Don Wood's Federal Realty (FRT) gets to the promised land. Remember that Alphabet (GOOGL) runs on ads, especially travel ads. It's a winner.
Tipping point number four: even though the central office might be open, the virus has lasted so long that people are still fleeing the center cities for the suburbs and the country where they are buying houses and turning them into bedrooms, classrooms, entertainment rooms and offices. That's causing amazing sales for the Home Depots (HD) and the Lowe's (LOW) and the Williams Sonomas (WSM) and the Stanley Black & Deckers (SWK) . It's causing a whole new wave of sales by Apple (AAPL) , which his being overlooked. You are getting Whirlpool (WHR) on the cheap. And of course, Walmart (WMT) , Costco (COST) , Target (TGT) , and yes, Amazon (AMZN) . Remember the marginal retailers are good, and they are having their day in the sun but if we have a heavy duty virus outbreak, we might go back to the majors until we have the needles are in our arms. With rates this low and prices going higher for homes, the builders and their wares are not done going higher. And, of course, you need a car to get around at your new house. They start with used. They go to new. Everything inside a car goes higher, whether it be from Illinois Toolworks (ITW) or DuPont (DD) or NXP Semi (NXPI) .
Tipping point five: Tesla (TSLA) , or more specifically the search for the next Tesla. Younger investors have seen how Tesla's stock has been unbelievable, maybe the greatest story ever told, so they are buying Tesla but also all the derivatives, the Chinese Tesla, the hydrogen engine Tesla - we have Nikola (NKLA) on tonight, the NIOs (NIO) , the Lis (LI), they are endless and they keep getting bought and bought and bought. Finding the next Tesla is huge and it has brought in a gigantic number of buyers, hunting for Tesla number two while buying Tesla number one. Tesla, not Apple or Amazon, may be the most influential stock in the market because it has totally broken the mold of what we thought could happen to car company.
Which brings me to Tipping point number six, the Robin Hoodies and their derivatives. We tend to think of these people as all day traders pouncing on short squeezes. I think they are people who buy, came in at the absolute low when the older generation and the professionals were cashing out. They made some huge buys, some with government money - thank you Donald J. Trump - and they know how to do non-Wall Street research, starting with Google and expanding to Reddit and chat groups and the websites of companies themselves. I think they are brilliant and we should stop sniffing at them.
Tipping point number seven: the buyers are overwhelming the sellers. In the last few days we have seen four gigantic offerings, Carnival, Norwegian Cruise Lines, and Plug Power (PLUG) and every one has been lapped up. It's a virtuous circle: they get the money they live to play again or expand and everyone's happy. Dilution means NOTHING to these buyers.
Tipping point number eight: the environmentalists are taking over. The pro-carbon Trump only helped to crush the oil and gas industry because they overproduce. Now we think that oil and gas will be capped by the environmental first president and that will raise the price of oil and gas at the same time the alternative energy stocks are on fire and will stay that way. It's climate diplomacy.
Tipping point number nine: President Biden will seek to rein in China by cooperation with our allies. That will mean that nothing will get done and President Xi will demand business on his terms, and get it, which is fine because the president wants business for GE (GE) and Boeing (BA) and Honeywell (HON) and 3M (MMM) and Emerson (EMR) , and you can see all of those stocks going up and up and up. They can build plants and buy goods from China again without fear or maybe even tariffs, and there will be no more presidential lightning bolts in the form of vicious embarrassing tweets.
Finally, number ten the biggest surprise of all, Biden turns out to be market friendly. He picked one of Wall Street's favorites, former Fed chief Janet Yellen for Treasury which means that we will most likely get a stimulus bill to bail out those who are still hanging on. Many feared that the job would go to Senator Elizabeth Warren who would crack down on the banks. Not going to happen so the banks can just roar. It's incredibly bullish. If Biden doesn't replace Powell then you are going to see an even bigger move on the banks and, frankly, the rest of the market.
Look, not everything will work out. Tech could be spotty here unless it can adapt to 5G or has something to do with the surging bitcoin, think PayPal (PYPL) or Square (SQ) . You need a consumer angle, like Apple. Drugs are tough unless you have a consumer angle, too, like AbbVie (ABBV) with Botox. All in all stick with the tipping pointers, they are the drivers of this and the next leg higher.
(DIS, GOOGL, AAPL, WMT, COST, AMZN, DD, BA, HON, and ABBV are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
