We've got two markets, one is a house of pain and the other is a house pleasure. The house of pleasure has walls made of traditional stocks and holds up under any scrutiny, but the house of pain has been falling apart and today the walls came closing in.
What are these two markets and how did they come about?
Simple: you have the old timers who know when you have a moment of economic acceleration you have a whole host of stocks to buy, all sorts of good old fashioned cyclicals and industrials that can make fortunes coming during the great awakening. These are the stocks that have powered the stock market to new highs. They are the stocks of the roaring twenties, the boom stocks that are your basic plays on economic revival.
Then you have the younger cohort, drawn by no commission trading, an easy Robinhood app, and very exciting stocks, stocks like Tesla (TSLA) , that have so much going for them.
The first group owns stocks that the second group has never heard of, stocks like Okta (OKTA) and RingCentral (RNG) or Emerson (EMR) and Ingersoll Rand (IR) . These stocks mean absolutely nothing to the younger people. They wouldn't know a Honeywell (HON) if it hit them over the head. Their interest can't be held by a PPG (PPG) or even a Home Depot (HD) or a Lowe's (LOW) .
They would rather slit their throats than own JP Morgan (JPM) or Wells Fargo (WFC) .
Yet that's what's working, it's just that what's working means nothing to them. The newer folks want excitement and they found it in the stocks market, which has it in abundance when the markets are going higher but is a nightmare when things go bad and things are going very bad.
If you watch Mad Money regularly you know the winners, no reason to repeat that.
But tonight I'll spend time on the furniture, the tables and chairs of the house of pain, what we discover when we walk into this house of excruciating, gut wrenching losses.
First, we see Tesla. Now this stock has been nothing but straight up... until this year. Did you know that Tesla is unchanged in 2021, sliding ever lower after its peak when it joined the S&P 500? Seasoned investors understand not to chase. Unseasoned traders can't resist and don't seem to realize that you are supposed to SELL the news not buy the news.
Until this year Tesla had been the greatest stock story ever told. It's rally had been the stuff of dreams and it brought younger people in to buy Tesla, and then to buy options on Tesla. Options work great when stocks are soaring. But when stocks stagnate there's nothing worse. Everything at the money or out of the money, has been disastrous in 2021, but nothing as painful as worthless calls on Tesla.
It sure doesn't help that the news flow about Tesla's hasn't been that great with a terrible accident that left two dead apparently because no one was at the wheel. Self-driving is the fault of the non-driver, not Tesla, but it doesn't matter. Tesla's in the doghouse and Elon seems more interested in rockets. Who can blame him?
Then we had the COVID winners, the stocks that benefit from being locked up in your house. The pain dwellers loved Zoom (ZM) , first the product and then the stock. Again, though, now Zoom has gone from $588 to $322 and the obviously great stock has become obviously terrible.
Third, they loved the cruise stocks and for the most part these worked because they were so oversold. But now they are stalled with a CDC that seems determined to put them out of business. Again, if you are playing them with calls, as so many younger people were, they stalled out and the calls stalled out with them.
Fourth may have been the most devastating: the SPACs. The desire to find the next Tesla has driven many to anything that looks like Tesla or is powered by something better than Tesla. Many of these companies could turn out to be gems but now so many of them have collapsed that they have crushed the hopes of many a newer investor. We had QuantumScape (QS) on Friday, an exciting stock with a battery that might be much better than that of Tesla's but the projections are aggressive and the possibility of failure not accounted for originally but with the stocks down 62%, it's a battery of broken dreams.
You can say the same thing about Lucid or Fisker (FSR) , fantastic ideas, hideous stocks. Lucid's an amazing car company but its merger with Churchill IV (CCIV) was anything but copacetic. Right now Churchill, the SPACer is up 90% for the year. The problem is that the stock, which is at $19, traded as high as $64 as some mistaken chatter about what Lucid would receive drove Churchill way too high. Many didn't even understand the process and the sponsors of the SPACs then to have a real caveat emptor attitude.
Like I said, even the best are struggling. MP Materials (MP) which mines rare earth materials for electric vehicles had been among the best but a stock offering crushed it and its stock has fallen from $51 to $29.
All of the charging station stocks have been walloped. And everything involving the powering of vans and trucks like the quicksand of Lordstown (RIDE) , XL Fleet (XL) and Nikola (NKLA) . You get into these stocks and you aren't just licking your wounds, you have your statements locked in a drawer and you can't look at them.
Then there are the alternative power stocks, like FuelCell (FCEL) and Plug Power (PLUG) . These two were so hot that you had to believe that there would be some big orders and a huge shift to green hydrogen. There is no shift to green hydrogen. And, instead, you got an accounting irregularity at Plug Power and accounting irregularities equals sell.
And then today there's another house of pain stock, Peloton (PTON) which was doing so well as a biking emporium but is now dealing with the fallout of a U.S. Consumer Product Safety Commission video that would make it so you would never buy their new treadmill. I found the video of a toddler going underneath the machine with his rubber ball one of the most frightening real life short films. Hollywood could not make something as scary as that clip.
I could go on and on about the house of pain stocks versus the house of pleasure stocks but what really matters is that if you are in the plain old fashions equities, the POE's, you are reeling in the years and stowing away the time, but if you are just starting out and have never been bloodied like so many of us old timers. Are you gathering up the tears, have you had enough of mine?
Yes, amazingly, one group isn't just left behind, it just keeps losing money. While the other group is shrugging off this day with aplomb. All I can say is thank heaven today for GameStop (GME) , the ultimate whippersnapper stock that defines the era because everything that happens to is so charmed, but, of course, it's not.
(HON and WFC 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.)