. It is amazing what the media considers premium content
. The above headline from CNBC’s “PRO” service is a prime example
. Beware the click bait and for heaven’s sake don’t spend your good money on it
.Where to from here?
“Mike Santoli’s Market Notes” (6/3/20)

Our headline for this post is pretty negative, save the part about “strong market internals” which brings up the rear. I’m pretty sure that was intentional. The part that lured me in was “patient investors punished.” I’m a patient investor (sometimes too patient — holding the wrong stock too long) and the last couple of months have not been punishing for me. My question is “who are these patient investors?” I came to find out that Santoli’s “patient investors” were people who either sold stocks during the March panic or had sold much earlier looking for an opportunity to buy back at more reasonable prices. Because the snap back from the lows was so rapid these “patient ” ones were not able to take advantage of the opportunity created by COVID19.
Let me suggest again that trading is tough
It is especially tough because of the media overload world we live in and the countless numbers of experts and pundits willing to give us their two cents about the direction of the economy and market. It is confusing to say the least. This is especially troublesome when (if you have sold) it comes to the question of when to reenter a shaky market. The savvy media knows that ‘bad news sells’. This spin provides a negative bias that pushes investors away from positive action at market lows. This is exactly what happened this time. Opinions ranged from ‘we have much lower to go’ or ‘there will be a retest … keep your powder dry’. As usual many people sat on their hands and have missed out on an almost 100% retracement of the S&P 500 decline plus an absolute new all-time highs in the NASDAQ.
“The $64.00 Question”

Now you have investors (patient) looking from the outside in posing the question (I believe the rookie question), “Why is the market continuing shrugging off all the bad news?”
There is a simple answer and Santoli as a long-time market observer should have pointed it out but he doesn’t.
The market is forward looking mechanism. February into March the market was being pummeled by the ‘what ifs’ of the Covid19 pandemic. By the end of March, based on all available information at the time the market was beginning to price in life after Covid19. The biggest problem for most, including the pundits, is that they continue to be paralyzed by the ‘what ifs’. I wrote about this May 16 (“Stock Market at The Crossroads — Buy, Sell or Hold”)
“Let me suggest at this point that most people and the market know that Q2 is going to be awful. I would also throw out the idea that 2020 is going to be a write-off. My sense is that the worst has been priced into the market. So the bad news going forward (negative GDP growth, big jumps in unemployment, awful earnings for some companies, including much red ink) will have little negative effect on the market. The focus will shift to the positive impact of the unprecedented stimulus and monetary policy currently being applied by central banks and governments all around the world.“
This appears to be what is happening. It does not hurt that the most recent unemployment statistics were much better than expected or that the most dire predictions about the pandemic appear off the table for now. This is regardless of the potential of a second wave coming in the fall. We’ve had 5 months to get to know the virus enemy and prepare for that second wave. When it comes, if it comes, it will not have the fear factor that it carried in March
“The Dash for Trash”
I believe that “trash,” in the context of Santoli’s piece, is anything value, mid cap or small cap growth, anything Russell 2000ish. This verbal disdain is a reflection of the fact that the S&P 500 and Nasdaq are where the action has been the past five years while R2k is down 13.5% from its all time high of two years ago (1742.09-8/31/18). I own some of this so called ‘trash,’ and I will assure you that because of the bifurcated market we’ve seen the past few years it has become great trash at reasonable prices.
For the institutional investor with billions to invest, small and mid-cap stocks are labor intensive. And they are very difficult to own in a meaningful way. If you have $100 billion to manage and your maximum position can only be 5% of your $100 billion and you can own no more than 5% of any given issuer’s, stock a $100 billion market capitalization stock is as small a company as you can look at. If there is great $5 billion company out there you could only own at max $250 million worth. If that stock tripled it would add only 75 basis points to the value of your portfolio. It is hard to justify the effort to research the investment unless you saw much more upside.
The nice thing here is that there are a lot of smaller funds that can buy smaller cap growth and value where the performance would make a difference. In recent times they may have focused on the shiny objects known as the FAANGs (FB, AAPL, AMZN, NFLX and GOOG) plus many other Tech/Momentum stocks. This is where the action has been and why the cap-weighted indices, S&P and NASDAQ, so outperformed.
Where to from here?

If you have money to put to work, if you missed this move, I would suggest you remember that Apple was once considered ‘trash’. I believe it is time to take the road less traveled and head to the dumpster to prospect for fresh ideas. Obviously there are cyclical reasons these stock have begun to outperform but their long-term underperformance and the fact that nobody seems to care makes them interesting. It really appears to me to be one of those times when The Street is leaning in one direction (a la the ‘tech Bubble) and those leaning against it could be handsomely rewarded.
What is your take?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.