Wow, what a difference 60,872 minutes makes!
It was about 6 weeks ago when the world was awash in rampant, nearly uncontrollable fear about a few things:
“The WORST start to the market in 80 years”
We had it all – a bad first week, a terrible first month and the worst first 6 weeks to a year on record. Earnings were “plunging” – well, they weren’t really but you tell me which headline you will read:
“Earnings Plunge Continues as Red Ink Flows”
“How Dumb Does One Need to Be to Miss the 5%+ Earnings Growth Under All The Noise, ex-Energy Shellacking”
I jest a little….you get my point I am sure : )
Well, as we have seen so many times since the 9/11 tragedy:
Apocalypse Now once again morphed into Apocalypse Later.
You see, oil has rallied 40% in the last six weeks. Some of the best performers have been oil and commodity stocks (see our Jan 21/22 Morning Note). The dollar has sagged and industrials – surely dead from the collapsed energy marketplace – have seen their best three weeks in years.
In fact – and you are going to love this, the headline this morning on CNBC speaks for itself:
“The DOW About to Do Something It Has Not Done in 80 Years”
The story goes on to state that if the DOW closes the quarter where it is right now (still 6 trade sessions left), a little under a half percent into positive on the year, it will be the greatest quarterly comeback in prices since 1933!
How about that huh?
That means if you fell asleep on DEC 31, missed the New Year monsters and woke up yesterday afternoon at 4:15EST, you would think nothing had changed.
What Has Changed?
We sent many thousands of investors packing. Fearful hands tossed out stocks for weeks – no matter the prices. Tens of billions of dollars were jettisoned from equity funds only to quickly find their way into “safe” bond funds. Dividends rose, earnings rose, fear rose by leaps and bounds, politicians made fools of themselves and that all-too-hated crowd, the workers and businesses of the world, went on their merry way of becoming better at what they do.
History tells us it is the same at every major hurdle we have faced. How do we know? Because we made it this far right?
All we see around us, all we live and breathe, all we experience and benefit from – all of it – is the result of solutions delivered. You can’t have a solution unless you first had a problem.
Pray for more problems and more red ink and more panic.
It is said that arriving at a successful conclusion is the result of making the most lemonade one can from the lemons life tosses at us. It is all in perspective.
In the future, let’s mentally allow ourselves to get excited during corrective actions – not terrified.
One is very profitable over time – the other, not so much.
Just in case you were thinking it as over, think again. The same crowd that told you that plummeting crude, a rocketing dollar and the deflationary hell awaiting us will come around again for Act 6.
They will tell us soon that inflation is the real culprit – thanks to a plummeting dollar and a doubling in the price of crude.
No matter what – we will still be told to fear the end of the world.
Early Headline Summary
So, just for grins remember these items early:
It’s OK if oil “spikes” by 100% – to $55. It will still be half of what it was 15 months ago….saving billions every day.
It’s OK if the rally in the dollar fades a bit – all those “terrible” earnings expectations – along with the “earnings recession” we are told to fear – will go away : )
It’s OK if commodities rally back – you want inflation over deflation any day of the week and twice on Sunday!
And yes, it is surely OK if the Fed raises rates to 75 basis points versus 25 basis points today. We lived just fine for decades with rates far, far higher.
Indeed with inflation creeping up (covered last week for you), the Fed may want to pick up speed – and eventually the market will like that too.