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Well I remember every little thing, as if it happened only yesterday

Posted April 28, 2020

The word "quarantine" comes from the Italian words quaranta giorni which mean "40 days." In the 14th century, in an effort to protect citizens from the Black Death, the Doge of Venice required suspect ships to sit at anchor for 40 days before landing.

There is no record of whether the term of 40 days was due to the disease burning out or if it was the length of time people would sit before rebelling.

I suspect the latter. Rules only work if people obey them.

After six weeks of living in my bunker in the untamed wilds of Maryland, the beautiful brunette and I couldn’t take it any longer. We unbolted the gate and fled the compound in search of groceries and a hamburger, which was no minor feat.

The Start of the Rebellion 

Judging by the cars along the streets near our local park, we weren’t alone.

Costco had a line around the block and an over-an-hour wait. The Giant parking lot looked like any regular Saturday. We eventually settled on the overpriced Safeway, which was stocked with toilet paper but had no baking items.

Our takeout urge was satiated by a $17 hamburger from the White Oak Tavern. I know $17 for a hamburger is beyond the pale, but in my defense, it is the best burger in Howard County. And I imagine in a year, we’ll all be happy to pay that little.

We took our burgers to the local Kiwanis Little League Baseball park and ate them on the bleachers. There were some teenagers talking in the dugout, and my first thought was a rumor in middle school that purported that Angie Deporto lost her virginity in the visiting dugout at Whoppo Oil Field.

Paradise

For non-Americans out there, a dugout is a long, narrow structure with three walls, a roof, and a long bench facing a baseball field. It is where the team and coach sit while waiting to bat.  

Every town has one, and they are dirty, filled with graffiti and the remains of chewing tobacco, sunflower seeds, and bubble gum wrappers.

Looking back, I feel sorry for poor Angie, as in all probability the rumor was just some vile concoction of lust and envy because she developed early.

What does this have to do with the stock market? Perhaps nothing, perhaps everything. You get what you pay for here at Energy and Capital, and our musings are free. But one could make the argument that the stock market is nothing more than a middle school locker room, full of lies and bravado.

The Big Cat

Take today, for instance, Caterpillar (NYSE: CAT) — one of the worst blue chip growth stocks for the past decade — reported a drop of 21% in first-quarter revenue last night, and the stock gapped up this morning.

Adidas (FRA: ADS.DE) reported a 96% drop in first-quarter net profit and forecast a 40% drop in sales for the current quarter, and it too was up this morning — ninety-six percent! 

Everything about the economy is negative, but not just negative, things are hyperbolically bad. Today’s index of consumer confidence slid to 86.9 in April from 118.8 in March — a record drop.

The Big Hurt

We are heading to 23% unemployment and a negative 30% GDP. But thanks to the Fed putting your children in hock, the stock market is up.

But the truth will come out as they say. Today is a major turning point. I’ve been writing about the 50% retracement you will find after the first move down in bear markets. On the S&P 500 that number is 2,792.

This morning, the S&P gapped up to 2,921 before selling off. Was that the last gasp of the bulls? Or has the market detached itself from all logic? 

Market glowing like the edge of a knife

 

We will soon find out. This week, three of the FAANG stocks — Apple, Amazon, and Facebook — plus Microsoft report. (The other two FAANG stocks are Google and Netflix.)

The market will expect huge things from Microsoft and Amazon; anything less than a blowout and positive guidance will be sold. Facebook could get crushed as ad sales have dried up, and Apple has already pushed back its next iPhone launch.

This handful of stocks is the market and comprises more than 20% of its total value. The outcome of the game rests on a knife's edge. It’s the bottom of the ninth, and the home team needs a grand slam.  

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Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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