More S&P 500 stocks now have negative beta than positive beta.
Now that is downright lunacy.
Let me explain you something. Beta is how much a stock moves compared to the S&P 500. If your stock has a beta of 2 and the S&P moves up or down 1%, your stock moves up or down 2%.
Negative beta means the S&P goes up 1% and your stock goes down 1%. McDonald’s has negative beta right now.
And before somebody comes at me with “the beta says 0.43, you monkey,” that’s a five-year beta. Look at the three-month numbers, because they’ve gone negative.
If you have a 401(k), you should be very afraid. I’m not here to bear up on you, but you should be afraid.
The Rotation Into Crap Nobody Ever Wanted
Heavy buying in Lulu. Heavy buying in McDonald’s, which was down 24% and all of a sudden explodes to the upside. It’s freaking McDonald’s, man.
Nobody wanted Walmart a few weeks ago, right up to the point where it exploded. Two straight weeks of almost two-standard-deviation moves is what you’d expect out of GameStop, not a grocery store.
And why? Because there ain’t no other crap to buy.
Then they start buying Boeing. Planes are falling out of the sky, but don’t worry, we’ll buy Boeing. It’ll save us all.
Look at the consumer staples fund, XLP. About two and a half weeks ago, it was up 3% on the year, and now it’s up 13%.
It’s so overbought that you need a new term for it. The fund made a move that would normally take months.
I’d Rather Die In The Open Ocean
You know how many times over the years I’ve said that if Jamie Dimon is in a lifeboat trying to pick you up, I’d rather die in the open ocean than get in the lifeboat with that guy?
I speak in hyperbole. What I mean is, if I’m a money manager and the financials are where I have to go to hide, kill me.
And that’s exactly where we are. We’re getting in the lifeboat with Jamie Dimon, buying XLF, Walmart, Target and Costco.
With all due respect, you could buy the living crap out of Goldman Sachs and there’s still going to be capital destruction. If you sell Nvidia, which is a $5 trillion company, there’s nowhere for that money to go. There’s too much of it.
The Biggest Warning Shot This Week
Then the flows start moving into the bond market. When they start buying bonds, a product no one has wanted to touch, you’re in it. You’re in trouble.
We’re at the inflection point. Either you rotate back to tech and the semiconductors bounce, which they may, or you sell the whole damn thing.
Watch the financials. If they start to drop hard, either we’re rotating back to tech or we’re going to get crushed across the board.
Either way, this negative beta regime will not last.
If you want to learn how to trade all this stuff, click here for the details.
To your success,
Don Kaufman
