“Popular culture is a place where pity is called compassion, flattery is called love, propaganda is called knowledge, tension is called peace, gossip is called news, and auto-tune is called singing.”

-Criss Jami

We are living in interesting times where news platforms have become weaponized, but more so to annihilate a competing point of view than promote affirmations of a favored ideology. This skewed analysis of the world has actually made the world more skewed.

Nowhere else are we seeing this other than in the financial world and the stock market. 

Rumors are elevated to a headline status, and non-stories become top stories by connecting fabricated dots rather than facts.  They become part of the 24-7 news cycle, and from time to time, erupt like the story of President Trump taking on Amazon.

It’s no secret that President Trump has a bone to pick with Jeff Bezos, the owner of the Washington Post, over unflattering reporting and too many false reports since he decided to run for the White House. However, the Facebook fiasco was another excuse to roll the story out again. 

Even though the White House denied it was actively working on ways to curb Amazon’s reach, Wall Street couldn’t shake the story, which had been around for more than a year in the rumor mill.  Consequentially, Amazon shares stole the spotlight from Facebook, which still faces the rath of an entire planet, not just an angry president who has been victimized by biased reporting.

So, how do investors survive these kinds of environments?  I have one answer:

Don’t Panic

There’s an even better question. How do investors profit from these kinds of environments?  I have one answer:

Buy the Dip

The market was all over the place on Wednesday with the Dow Jones Industrial Average, once again relinquishing a 200+ point rally only to stumble into the closing bell. The good news is that a massive sell-off was averted.  Moreover, we were reminded of the strength of the U.S. consumer, which helped to power the final read on the fourth-quarter Gross Domestic Product (GDP).

That said, the savings rate slipped to 2.6% from 3.4% in the preceding quarter, and 3.6% a year earlier.  This isn’t a great sign, but people are more confident when their paychecks are rising, and the stock market is on a historical run.

Moreover, the question is whether consumers have the ability to keep spending and to keep driving the economy.  I say that the answer is yes, considering the employment and wage trends and the ability to stretch even more.

The U.S. financial obligation service payments as a percent of disposable personal income, and the financial obligation ratio (FOR) is still at a reasonable level.

FOR Components:

Mortgage debt

Consumer debt

Auto leases

Retail payments

Homeowner insurance

Property taxes

So, between an embolden consumer and perhaps a more humbled Amazon, brick-and-mortar retailers rocked yesterday and have more room to run.  Also, it was the beaten down names that enjoyed the biggest moves:

• (SHLD) Sears Holdings Corp +12%
• (JCP) J.C. Penney +5%
• (M) Macy’s +4.3%

Oversold consumer staples enjoyed strong moves as well:

• (CLX) Clorox Co +3.0%
• (CVS) CVS Health Corp +3.5%

Of course, those retailers with huge short positions rocked, led by a name I’ve mentioned a lot – Restoration Hardware (RH)+22%.

I’m not sure how the market acts in front of a three-day weekend that includes Passover and Good Friday tomorrow, and Easter on Sunday, but this selling is overdone, and everyone should be ready to pounce.

Today’s Session

This morning we got the latest on personal income and spending, and once again consumers showed restraint in February as spending grew at half the pace of income.  Inflation was modest, which should quail fears of an overactive Fed- for now.

Although economists saw the dip in savings as a consequence of post-hurricane spending, the trend of saving less began last summer.  This self-correction points to a more informed consumer and to the lingering memories of the Great Recession.

Comments

Best piece in some time and most are very good. Craig on 3/29/2018 10:01:31 AM

Bingo! Agree with Craig. Robert Waddell on 3/29/2018 10:10:51 AM

Way to go Charles!!! Agree Agree Agree! Lewis W. Gloss on 3/29/2018 10:47:05 AM

I like BTD (Buy The Dip). Get your chips ready for alot more dip. Thanks Charles. Johnnie Parnell on 3/29/2018 12:47:57 PM

Agree agree agree also! Like I said earlier in the week... back the truck up and load up on all your favorites at a beautiful discount! Ray Weldon on 3/29/2018 2:42:32 PM

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