Trump’s Shaping Us Into A Banana Republic

If the first thing you do in the morning is check the quote on crude oil futures, you’re already Trump’s captive. Reasoning in the price of oil futures is now the leading indicator of the stock market, up or down. If futures tick down 5 bucks stocks open lower, maybe 50 to 100 basis points on the S&P 500 Index. 

Let oil futures tick up or down 5 to 10 dollars a barrel. I abhor energy stocks and their managements who dwell in thickly carpeted offices that remain pretty silent. They do worry over dividend payout ratios and keep capital spending within the boundaries of cash flow. In my day energy managements didn’t hire Jewish boys for their training programs. Neither did General Motors or Dupont. Their boardrooms were quiet places where worrying about cash flow prevailed but was absorbed by thick carpeting.

Although J.P. Morgan struck out on a big list of great growth stocks, the Magnificent Seven replaced it as a tighter buy list. Its results are turning south, too. The penalty for being wrong in today’s market can run a snappy 20% or so overnight. 

Nobody promised you a rose garden. Even traditional names like IBM no longer are polite portfolio names for the comfortably wealthy. 

Electronic car makers are best left to day traders. Tesla has shed 150 points past 12 months. Fast track stuff. If I had a great list of growth stocks at hand, I’d dig a hole and whisper such names into the ground. 

OK. I’ll reveal my poison. Apple, Goldman Sachs and Amazon. This is high profile actively traded merchandise. I wish I had owned some polite goods like Costco, Caterpillar Tractor and J.P. Morgan. Let’s face it. Those who live by the sword, die by the sword. 

Today’s money managers are unlikely to overweight the energy sector. Nobody over-reacts to vulgarly skittish energy futures. Sharp variances in oil is part of the market’s make-up. Down $10 overnight, take half a percent off the S&P that day and more off Exxon Mobil. 

As an operator, I feel S&P 500 valuation is fulsome. I’ve run 25% to 40% long past year with good comparative numbers. 

No blue sky in the world. Nobody talks about the S&P 500 fully valued today. Speculation in Tesla and its ilk goes on, hundreds of millions of shares over a busy day. 

Let somebody else own Tesla. I’ll stick with stocks I can model like Apple, Amazon and Goldman Sachs. Plenty of volatility here with reasonable price-earnings ratios. What’s more, they’re understandable. 

The penalty for getting wrong fooled on growth stocks has risen to over 5% overnight. I’m talking about Microsoft, Tesla, Salesforce, American Express, IBM, Natera, Oracle. Nearly a who’s who of growth stocks failed while the market itself is down just half a percent. 

What’s going on here? I can’t remember the fall from grace so abruptly and pitiless. Well, the reciprocal is ticking, too.  Caterpillar Tractor and Deere are bouncy along with Union Pacific. Prime industrials are getting their day in the sun. 

Simply, the cost of being careless and wrong has gone up overnight. The days of owning Microsoft and IBM for wealthy families may be over. I find the traditional investment ratio of 60% equities and 40% bonds is being challenged successfully. Huge price changes for individual stocks while the market is off just fractionally. The cost of being wrong has got out of hand.