- a lesson from UPS; and
- market psychology.
UPS Throws a Monkey Wrench Posted at 11:49 a.m. EDT on Friday, July 12 Will the real economy please stand up, please stand up? I can't tell you how many people I know who were using United Parcel Service ( UPS) as the giant chit in the recovery play. It made so much sense. We know that the U.S. is getting stronger. Europe seems to have bottomed. How bad could Asia be? We have so much Internet business. We know that this is one of the best-run transports in a totally transport-driven leg of the bull market. Plus, let's face it, since FedEx ( FDX) is all the way back to almost $105, why not play the laggard? What can I say? How wrong could investors and traders be? A preannouncement of all things. A darned preannounced shortfall. And a bad one. So $4.98 in earnings per share for the year goes to $4.65-$4.85. Or more like it, $5 and change -- the whisper -- is going to be perhaps 10% too high. You want to get really down and dirty? The reasons for the shortfall read like a disaster roll call:
- Too much capacity in the industry -- this, even though we have had FedEx take out a ton of capacity.
- Customer preference for lower-yielding shipping solutions, meaning that people are feeling less rich and opting for slower shipments. I mean, what's the hurry? It will get their eventually. Where is the urgency in the economy? Don't look at UPS.
- And worst of all, a slowing U.S. industrial economy. Huh? I thought it was accelerating.
Now, before we jump to conclusions, we do know that there are some parts of the economy -- at least the U.S. economy -- that fly in the face of this preannouncement. Auto sales are very strong. You don't get a big increase in the price of gasoline if there isn't a pickup of some degree in business. We know there is job growth.
Why New Highs Matter Posted at 12:45 p.m. EDT on Thursday, July 11 What do new all-time highs mean? What does it do to the psychology of the market, to how people view stocks, to how people think about equities? That's what's on everyone's lips and it is imperative that the issue be addressed because it does matter to what happens next for peoples' IRAs, 401ks and personal accounts. First, there's this odd notion that the move doesn't count because it's supported by the Fed Chief Ben Bernanke's largesse. Some people, including my own CNBC colleague Rick Santelli, said that this very morning. It's almost as if the whole move isn't valid because it's artificially inflated by bond buying and it's just plain unfair.
I've got a different view. I ask "unfair to whom?" My whole public existence is about trying to help people make money and preserve capital when it's impossible to make that much money by investing in stocks. I am not about trying to make a leveraged bet on bonds. I am not about abetting short sellers in scaring people away from certain stocks. I am not about betting against the Fed to get the highest return for my rich investors. I did that already. I spent 10 years doing that. I didn't and don't want to do it anymore. I just want to help. That doesn't mean I will always be right, far from it. When I am wrong I point it out even as that just makes me a bigger target. I don't care. I know who I play for. There's no confusion. My private feelings about what Bernanke's doing have no bearing here. They are irrelevant. That's because they aren't about trying to make you money, they are about some soapbox I don't want. So what if Bernanke is the financial equivalent of Despicable Me. It's a blockbuster. And they don't sticker the returns at the bank. They just take the money from your winnings and put it into your account.
Why is this so important? Because the vast majority of the time in this remarkable run I have heard people speak strategically about leaving the market. There have been top callers all the ways. Their strategies have been defrocked and often revealed as just derivatives of panic. Let's reveal them for what they are: people who got it wrong. Don't listen to them next time. They hurt you. Typically they called tops because they didn't like Bernanke's handiwork. Meanwhile, look around. The actions of the European Central Bank before the bottom and of the Chinese right now are what these critics wanted. How'd that work? Why do you think we are the strongest economy in the world? The Fed's policies, and our smart executives who took advantage of them, made that happen.