Why can't this darned market stay down? Where is all of this money coming from? Don't people realize that earnings are going to be down this year? What's with this endless investing? How stupid can people be?
There. I have now encapsulated the prevailing wisdom I hear pretty much everywhere I go. The smart money is still betting on a recession. The thinkers are insisting that this is just one more Fed-inflated bubble. They want to grab buyers by the nape of the neck and explain to them how they are going to lose all of their money.
But every day something contradicts them and even as they refuse to be defensive, I intend to put these bears under the microscope to show them how they just don't get it, they don't get how they are looking at all of the wrong things and that's why they keep missing the mark.
So, let's look at stocks.
Not that long ago, HP (HPQ) reported an OK, not great, number and the much-beloved CEO, Dion Weisler, stepped down for family reasons. Enrique Lores took his place and immediately announced that he had to let go 9,000 people to boost profitability. It had been a tough summer and fall, and the stock plummeted from $21 to $16 before the plan was announced. It has been creeping back up, but I couldn't think of a reason in the world why you would want to buy a company with a faltering printer business that missed its last quarter and couldn't quickly turn things around.
But in this market one man's famine is another man's feast, and wouldn't you know it, Xerox (XRX) , a company a third the size of HP decides to make a bid for the company.
Now, this takeover bid is a pretty good metaphor for the entire market. Xerox doesn't have the money to buy HP. But HP has the money to buy Xerox. Either way, if you owned HP, it has gone from ugly duckling to swan on the strength of what may be a chimerical bid. Or, to put it in something we will all understand: You made a ton of money believing in HP when you shouldn't have because who the heck would have thought that a company much smaller than HP would make a bid, and anyone would take it seriously. But they are, even if it means that the deal is reversed from what we think.
Exhibit B: Walgreens Boots Alliance (WBA) . We heard rumors all last week that there might be a buyout for the drug store giant. This morning Bloomberg reported that KKR (KKR) is very interested in taking the company private. To me this is, again, patently absurd. Walgreens has a balance sheet already bloated with $16 billion debt. It's been doing quite poorly vs. Amazon (AMZN) and the front of the store, what used to be the bread and butter of the place, has seen multiple negative comparable stores. It's been a terrible stock, because it has nothing special, not cheaper drugs, not a health care business like CVS, not merchandise that sells all that well when you walk in.
In other words, it's a dog. A total dog.
I could not think of a reason to own the darned thing.
But KKR apparently sees it quite differently. It, perhaps, sees what it could be. It does not matter one bit what I think about how crummy Walgreens is. What matters is that I am seeing Walgreens the way it is, and KKR sees -- right or wrong --something different. I guess I'm wrong on the stock price, even as I think I am right about the company. The former is all that matters.
Exhibit C: Apple (AAPL) . We know that the iPhone 11, the current iteration, was considered to be no more than a placeholder. After all, we know that 5G awaits. Who would possibly act now?
I had to. I didn't want to. I dropped my phone and the glass splintered, so I had to get a new one. I went to the brand new store at 59th and Fifth, where I had to wait for ages to get to a sales person, even as I wanted to give this company $1,000 for a new phone.
It's worth every penny. First, the battery never seems to run out. It's just not something I think about anymore, something I never thought would happen. Second, I thought I wouldn't need the three-camera feature. What I didn't realize is that so many pictures I want to take I knew wouldn't come out because of the lighting.
Turns out there are tons of pictures I now take that I had long since given up taking. When I am out with others and we want to take pictures to post in social everyone wants me to take the picture with my camera. Third, I love the ease of use, no button at the bottom, easy on flashlight. All good.
I am obviously not alone. The phone's an outrageous hit worldwide. It's causing parts makers who were hunkering down waiting for 5G orders to go into overdrive now, just as they are starting to see the 5G builds. It's a bonanza for a Micron Technology (MU) or a Broadcom (AVGO) or Skyworks (SWKS) or Marvell (MRVL) .
The complex, which was supposed to be in a huge downturn, is now climbing and the analysts -- most of whom were universally negative -- are frantically trying to catch up.
Exhibit D: Boeing (BA) put out a time line for a return of the MAX on Monday and as arduous as it reads, it was enough to spark a rally in the company's shares. Can you believe that this stock is up almost 15% for the year? You would at least expect this stock to be down 15% or more and that it would be taking the whole aerospace contingent with it. Nope. Are there too many believers in Boeing? Is it the fact that there are only two major aircraft makers? Isn't it unfair that the stock's so high?.
The latter, which I keep hearing, is totally laughable. That's because fairness has nothing to do with it. The stock is up, because there are more buyers than sellers. The bears would be right if there were more sellers than buyers. There aren't. There is such a thing called belief, and no matter what the headlines, buyers believe in this company.
I have tons more exhibits, but let me give you Exhibit E: General Electric (GE) . I always want to be concerned about balance sheets and possible black holes that can cause people to lose a lot of money. GE was one of those black holes. I kept thinking when the stock hit $7 back in August we were in a "here we go again" moment where the $6 floor from last year would not hold. I know the person I most trust on the stock, Steve Tusa from JPMorgan sure made me think it.
But the stock didn't get there. The black hole is clearly no more and this is despite Boeing's problems. CEO Larry Culp raised, not cut, guidance. Is it going to have a big 2020? I don't see how. But I didn't see how HP, Walgreens, Apple and Boeing would go flying either. And maybe that's the mystifying point of the whole exercise. The bear prosecution rests.