Totems. That's what I call things, tangible things that can help explain levels and give you guideposts about what can happened next.
For weeks now, I have been saying that this market has to take out the December 2018 levels that we got to when Fed Chief Powell was gung ho about raising multiple times in 2019 just when the economy was cooling from his previous hikes.
Now we are there.
We are, unfortunately, in a lot worse shape than we were back in 2018, so arguably, we have to expect that while the averages are below, the individual components may not be. I would contend that if the components have economic sensitivity and are appreciably above the December 2018 lows, then those stocks are vulnerable. I am not trying to split hairs with a Goldman Sachs (GS) at $154 when the price back then was $156 -- although the big difference is that Goldman's tangible book value has shot up gigantically to $205. It's an unprecedented discount, and that makes little sense to me unless they are about to show big losses and that seems inconceivable -- please David Solomon, don't make me eat my words.
So who is way above? We have to start with Apple (AAPL) , which is almost 100 points above where it was back then. Of course, that was before the service revenue inflected and the iPhone 11 became a big hit. I am sure there are plenty of people who are itching to get out before it goes back to that level. I am unchanged: Own it, don't trade it. But if you can get out now and get in before Fauci et. al. beats this thing, be my guest. I'm not doing it.
Second? Visa (V) , which is almost thirty points above where it was back then. I think that's just a mistake plain and simple. Visa's too high. I can't justify it being at $152 when it was at $121 when travel and commerce were booming. Count me a seller here.
Third is Microsoft (MSFT) : tough one. It is doing so much better than it was back then, yet it is up forty points from $94. I think that means that it could take a header here. My charitable trust, Action Alerts PLUS, owns some, but I have to tell you that, because of Azure's strength, this is one I would be salivating over as it got closer to that $94 level. Again, though, traders probably want to bolt because it is up so much from then.
Procter & Gamble has (PG) been bothering me. It's doing so much better than it used to be in a very short period of time, but I think the stock has been doing better than the company. With a 21x multiple and a 2.76% yield, P&G's stock is twenty points higher than it was back then. No dice. I think it can go lower from here.
Walmart's (WMT) up twenty from back then -- and, again, you have a company transformed as it has developed into an online and off-price behemoth in less than two years flat. However, I can't justify that premium from where it was -- especially because it has Chinese sourcing issues and it has newfound "congregation" issues. I think it has at least ten points of risk.
One last one: Home Depot (HD) : It's up $8 from back then -- and yet it was a better time to buy back then than we have now. We own Home Depot for my charitable trust, Action Alerts PLUS, and it has fallen more than 40 points. That's insane until you realize what people were willing to pay for it the last time we were about to go into a recession.
I think it is a better company than it was back then, and I am really thinking, 'what the heck happens if they cure this darned thing?' That's why I am still leaning to buying back the stock we sold higher. Retailer or not, it's just too good a company not to buy.