Technical deterioration –  preceded the accelerated Monday decline, which is why I pointed-out the ‘narrow universe of stocks’ carrying most of the weight of the preceding early November ramp, which tried (but we believe would fail) the effort to have this month replicate the preceding stellar ‘wall of worry’ climb.

While most snap-judgments of Monday’s decline (welcomed here as we were a good bit short coming into the new week as you know), tried to tie-it to newer belief that ‘the Fed will not be kept a bay allowing the upside to pay’; contrary it seems to the myriad of pundits who proclaimed last week how ‘the market was ready to live with a Fed hike’. 

Now of course they say live with the decline that likely occurs because stocks either got ahead of themselves (no kidding), or because they now recognize a single ‘rate hike’ is the exception; and that (as I’ve noted) these come by series of hikes, ‘not’ a one-off and done modality. 

Actually this is not so simple as ‘Fed reality bites market’, as largely presented. Rather ‘reality bites’. That reality goes way beyond what the FOMC will do; and targets most everything we’ve touche upon. This ranges from earnings, which in all seriousness I must point out are typically not viewed rightly when it goes to a discussion of ‘multiples’. They matter more for an index than individual or sector stocks. 

How so? Let’s just take energy. Oil stocks are now at a higher P/E, because earnings are obviously down; so now at depressed prices, analysts it seems want to downgrade them (what did they suddenly figure out?). When it comes to stocks, high P/E’s typically exist TWICE. Both when a stock is overpriced, as well as when it is down, because earnings are down; so obviously the P/E will be high. Again recall my meeting several years back with the Chairman of Texas Instruments at CES. He had mentioned that the shares, deeply down at the time, were said by a major tech analyst preceding my visit, as overpriced. I asked simply: ‘will TXN participate in an American economic recovery? Almost puzzled, he said ‘of course’. I said: then the earnings will go up and the P/E is going to drop unless the share price keeps pace; so that makes it a buy not a sell, or will very soon. (Incidentally I bought TXN personally the next day and it was within a half point of the low; I did the same thing with Intel back then.) Of course that’s not my point; but putting P/E’s in perspective sure is.