It’s all good, until it isn’t.
After stocks rose on the heels of their frightening October to late December selloff, like an ancient deity rising from the dead, with the S&P 500 and Nasdaq Composite only five months later making new all-time highs, analysts were talking about the goldilocks economy and the goldilocks market for stocks.
All of a sudden, everything’s changing.
The goldilocks economy is about to be sorely tested with the trade war between the U.S. and China going to DEFCON 3. And the goldilocks market is being threatened by three stocks in bear market mode.
You know what a protracted trade war could do to the economy.
This Apple Has Worms
Apple Inc. (NasdaqGS:AAPL) is the Papa Bear.
The company’s been around the longest of the three bears. It is the biggest by far, being the first company to ever be worth a trillion dollars.
It’s the strongest in terms of, well, everything – including its hardware, software, global reach, number of users and apps subscribers, revenue, cash generation, profits, stock buybacks, and soaring stock.
Now Apple’s in correction mode, again, down 20% from the all time high it made last October.
It had fallen a scary 40% from its October highs in 2018 to its $142.20 low in early January 2019, a wicked three-month crash.
Like a rocket, after that drubbing, Apple rose 40% to get above $210 by the beginning of May.
From its October highs to the close of trading yesterday, Apple is again down 20.45%. On its intraday low yesterday, it was down 21.17%.
The dramatic fall back to earth for Apple is a microcosm for the tech sector, for global stocks, and for U.S. investor sentiment.
For the tech sector, where Apple is an icon, the prospect of litigation over how Apple makes money off its fast growing services businesses, particularly how it forces apps developers to sell through the Apple Store so it can control prices and take its hefty fees out of, is a frontal assault on how and what a lot of big and small tech companies do to make money.
If litigation adversely affects Apple’s ability to maximize the company’s growing profit stream off “services and subscriptions” at the same time sales of iPhones suffer from changing product cycles, higher prices, competition and some Apple fatigue, the stock will suffer the same declining prospects.
That’s not good for Apple, not good for the tech sector, or the market, which has been driven higher by tech companies for more than two decades now.
The One Circus Act Everyone Wants to See
Tesla Inc. (NasdaqGS:TSLA) is the Momma Bear.
Tesla investors love Tesla cars, Tesla’s ringmaster Elon Musk, his ideas and endeavors into space and underground, and believe all things Tesla and Elon Musk-related are good for the future of the market, of America, and of the world.
There was a time when investors and admirers were justified in their Tesla and Musk expectations.
That time’s passed.
Tesla stock is down from its $387.46 all-time high in December 2018 to $227.01 yesterday. That’s a 41% slide, beyond correction territory, solidly into bear mauling territory.
The bloom’s off Tesla because of declining auto sales, competition coming from everywhere, rising costs, perennial cash burn, and Mr. Musk’s less than adult Twitter pronouncements and regulatory provocations.
Investors now look at Tesla as a blown opportunity and a reality check on their hopes and dreams.
That’s not good for Tesla, not good for EV autos, not good for investors who believe in cult figures being enough to attract consumers and capital and turn them into profits and juggernaut companies.
And, that’s not good for the market.
Not Worth the Ride
Lastly, there’s the not so baby-sized Baby Bear, Uber Technologies Inc. (NYSE:UBER).
Uber, the mega-unicorn whose bankers claimed last year should be valued at $120 billion, IPO’d last week well below any hopeful early-stage investors’ expectations.
The deal was priced at $45, opened for trading at $42 and ended the day 7% below the $45 deal price.
By the close of trading on Uber’s coming party, it was worth $76.5 billion, barely ahead of the $76 billion valuation late-stage investors in August paid to get into the company knowing it was readying itself for public ownership.
Yesterday, Uber fell another 11% to end the day at $37.10.
What Uber’s 17% slide, almost into correction mode in two days of existence, means for the market is frightening.
It means investors are over the whole “build it and they will come” (meaning profits) business model.
It means venture capital and early stage investors aren’t going to keep layering more and more private money on companies that aren’t profitable because they now know that model can backfire on the late-to-the game investors they want to come in, pay up, and help jack up the valuation of private companies before the bankers execute everyone’s exit strategy. Which, of course, is dumping on public investors.
Investors in IPOs have been sufficiently burned by unicorns coming to market this year. They’re scared.
What just happened with Uber means the market’s not safe for wide-eyed neophyte investors, or even seasoned investors who’ve been counting on a raging bull market to lift all boats with the tide.
Unless things change back, it’s time to be a lot more cautious with your investment capital.
That’s why you’ve got to say, at some point, that you’re done trying to make money in the stock market.
Stocks are dead – since January 1, 2018, only 38% of all stocks have gone up in price. In fact, the average stock has gone DOWN -1%. In short, stocks are dead as a doornail.
If you can accept this truth, you can make money OUTSIDE of the stock market – even up to $11,000 a week with just a single click of a button on your phone or computer.
Until then, you’ve been warned.