Those Who Know Vs. Those Who Don't

 | Feb 14, 2014 | 7:25 AM EST
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The battle between those who know and those who don't: It play out every day in this market, and it's always just a series of small unconnected skirmishes that don't add up to much of an impact at all.

Yesterday's skirmish, for example, broke out at the open when stocks sold down on some disappointing January retail sales. Now, we knew already, from every major retailer, how terrible the weather has been. We have heard from the auto companies that there are too many cars on the lots, in part because of a huge decline in traffic to the stores, again because of the weather.

But we decided that this was, somehow, new news. We reached a harsh verdict that the market is overvalued -- it's always futures-led, because the market's dominated by macro hedge-fund traders -- and everything goes down except, at least on my screen, Time Warner Cable (TWC).

I sit there and look at the sea of red and I say to myself: One of the smartest business people in the world, Brian Roberts (yeah, yeah, my boss), decided to spend $45 billion to buy Time Warner, an asset on the decline with a heck of a lot of homes wired, with no overlap. He's willing to subject his company to a grueling process in order to get approval. He doesn't care that the stock was at $86 this time last year. You don't hear him moaning that he wished he had bought it earlier. He just knows that the market is still undervaluing the asset as a business.

For the rest of the day, the market then rallies simply because of a recognition that the weather played a role in distorting the retail sales and we shouldn't be selling stocks on it.

Another skirmish? Cisco (CSCO). The downbeat nature of the earnings call was stunning. So many minus signs. We are so used to hearing anything Internet-related just shoot the lights out, so when a company so clearly identifies with the Internet's growth, it can be seriously daunting to listen to it be so negative about orders. Maybe all of those equipment companies we've been buying aren't doing well. Maybe the whole thing is a pile of hype, particularly with stocks like Xilinx (XLNX) and Juniper (JNPR), which seem to have rallied hard and compete in the Cisco arena.

But by mid-morning the market's woken up -- again -- to how John Chambers' company, the one he rules with an iron grip, is just getting the stuffings kicked out of it by its competitors. It realizes again that the terrible declines he is seeing are all about losing business to competitors, even as this either doesn't dawn on him -- why he almost sounded content with the disappointment -- or he refuses to talk about it.

The group, and the rest of tech, then rallies.

A selloff, shake-off rally. That's been the tale since the bottom last week. I think it's going to be the tale for as long as the 5.8% decline in the S&P -- including a 10% decline in 50% of the stocks -- sticks with many who can't believe how the losses could mount up so quickly. Which means it will be with us for some time.

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