Sept. 15, 2008 -- the day Lehman Brothers went bankrupt -- was a scary day within a bunch of scary days for those in the know.
Four years into my Wall Street analyst job I only thought deep down days in the market were buying opportunities. After all, the old B.S. line on Wall Street for years has been "buy low, sell high." Selling dominated my trading screens, high-stakes drama was playing out on business news networks and behind the scenes in DC, and an entire generation of investors were being wiped out -- houses, stocks, you name it.
I can still recall, though, taking a rare break to walk down to the Wall Street bull on Sept. 15 (had to get away before I put my head through a table) and seeing things appear business as usual. People taking photos, smiling, holding bagged lunches. It was like I was a member of a cool club that held secret information, while everyone else lived in a world detached from realities playing out in the financial system's plumbing. Weird stuff.
But thinking back to that time and today's environment, I can confidently say most investors have learned nothing 10 years since the Lehman bust. Investors I talk to still don't put the time (or any time) into researching stocks. Everyone is still searching for the hot tip so they don't have to do the work. Are they leveraging up their personal balance sheets like 2007? Not at the moment, but they are starting to. Just take a gander at the consumer credit data and two years of strong home remodeling demand fueled by low interest rates. Retail sales have come on strong, too, as people consume the hottest tech gadgets and jeans. Most tech stocks have gone through the roof without any consideration on valuations. People are simply riding momentum because everyone else is and they don't know how to read a cash flow statement.
Some continue to hold Lehman lessons dear, but it's my view the majority have moved on without revisiting that time every quarter -- as they should. It's sad and it will come back to bite investors -- again -- within the next five years.
Preparation is VIP. Before the Santa Claus rally descends on the market, investors will likely have to endure some short-term pain. That's why you must tune into Jim Cramer's latest monthly Action Alerts PLUS member call on Sept. 13 at 11:30 a.m. It's time to get prepared for the rest of the year while staying cognizant of near-term market direction.
With President Trump ratcheting up trade war rhetoric, emerging markets stocks tanking, tech stocks selling off and many investors questioning valuations after the surprise August rally, the market is starting to look a bit toppy. The daily global advance-decline line of 73 country indices is at risk to break down from a 2018 top, pointed out Bank of America Merrill Lynch. The problem with that: Every time it has happened in the past the market have entered a nasty correction. "Prior tops for global breadth in 2015 and 2011 saw deep corrections for global and US equities, but the US equity market (S&P 500) beat the rest of the world (MSCI ACWI ex US) when global breadth was weak," cautioned BofA's technical analyst Stephen Suttmeier.
Red flag. Amazon's (AMZN) stock has dropped for four straight sessions.
Wall Street note. General Motors (GM) stock has run out of gas this year, down about 10%. It appears auto analyst Joe Spak (the analyst that was ridiculed by Elon Musk on Tesla's (TSLA) the first-quarter call) just had a productive meeting with GM's CEO and CFO. But the caution laced throughout his new note hinted that GM's stock hasn't bottomed. Key mention: "Unknowns/headwinds include: 1) Commodities which GM already indicated at current spot prices would be a headwind though GM working with suppliers to see what they can lock in contractually. 2) Foreign exchange (particularly SA). 3) Higher depreciation on new trucks. 4) Macro/trade. GM seems comfortable with potential NAFTA resolution; Section 232 resolution a bigger issue."
Execs wouldn't commit to much commentary on 2019 numbers, Spak said.
The celeb says. As I mentioned on Monday on Morning Jolt, Kiss frontman Gene Simmons was live in studio. As always, an interesting conversation with a business savvy rock-star worth reportedly more than $300 million. That kind of dough makes me regret not playing the guitar back in high school, instead I pursuied a dual track of baseball and future stock-picking legend. Dumb millennial.
Anyway, Simmons dropped his latest stock market prediction: a 1,200 correction on the Dow over the next 12 months followed by a rally to 30,000. Simmons blamed the possible pullback on rising political turmoil, and then a landslide re-election for Trump for the strong market rebound. The rock star called for Dow 20,000 and Dow 25,000 on our network before, so don't think he is a joke.
Having gotten to know Simmons a bit, he is very well read on all things business/stocks/markets. And above all else, he wants to make more money. That is a good driving force to stay knowledgeable on the things impacting one's earnings potential.
Meanwhile, Simmons continues to be bullish on Tesla CEO Elon Musk. "I think it's cool, there is nobody out there like Elon Musk," Simmons, who has praised Musk before, said when asked about Musk's performance on Joe Rogan's podcast. "People on the street that don't understand these big personalities will see guys smoking dope with Joe Rogan, they don't get it -- bet on Elon Musk." And there we have it.
Tech talk. In the latest installment of The Tech Skeptic, our @AnnieGaus looked at Jeff Bezos-envy inside Silicon Valley. Everyone wants to create the next Amazon. Give Gaus a foller on Twitter -- she will be on the ground at Apple's (AAPL) product event on Sept. 12 in Cupertino.
Morning memo. Our friends at CME Group wrote in with a look at a key recession indicator that investors must watch. Yes, of course, it's flashing a recession sign or else I wouldn't be mentioning it here.