Going With the Sector Flow

 | Feb 26, 2014 | 3:56 PM EST
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The money has to come from somewhere. We know that there hasn't been a lot of new money coming into the stock market since the year began. In fact, bond funds, bond ETFs, and anything fixed-income have been the hottest aisle in the financial supermarket. You would think there's a buy-one-get-one-free thing going on.

But when you see stocks like the retailers fly up today after many of the most aggressive momentum stocks have roared, thank heavens some of them are taking a breather today. You have to understand that that the fuel is not being added to the fire; it's just being taken from a couple of formerly hot spots and being put into others.

And that's what is happening to not one but two groups right now, and it's a fascinating thing to see -- unless you are stuck in them. I'm talking about the consumer-product goods and the banks. Both have their own woes and we have to deal with them head on.

First, the banks. We know that they need to have interest rates go a little higher than they are because they aren't earning enough off your deposits to get that net-interest margin humming. That, not new mortgages or fewer bad loans, determines how high those stocks can go.

Now something more insidious is happening. You pick up the paper and see the malfeasance -- "Senate Says Credit Suisse Hid Billions" -- right there on the front page of the business section of the New York Times. Or how about the daylong analyst meeting for JPMorgan Chase (JPM)? What was the big takeaway? For me, and my charitable trust, it's that the bank has to add 3,000 more compliance people on top of the 7,000 hired last year. Those people are a deadweight loss. And then Bank of America (BAC), one of the cheapest stocks the trust owns, discloses new investigations that could raise legal bills again. Yes, the group is cheap, but who can take this pain? Obviously not the departing shareholders, no matter how cheap the stocks may be, and they are historically.

Then there are the other stocks, the consumer-packaged goods, the foods, the beverages, the shampoos and the soaps and the drugs. Money's pouring out of these stocks like there's no tomorrow. Why? First, their yields simply aren't that compelling vs. potentially rising interest rates, rates that could be around the corner given how consumer spending may have held up more than we thought.

Second, did you see the front page of the New York Times? "Obesity Dropped 43% Among Young Children In Decade"? How did that happen? How about a revolt against fatty snacks, sugary cereals and cookies and sodas of all sorts, not to mention the processed foods that many people are rapidly concluding revolve around a corrupt food chain? You think it is happenstance that WhiteWave Foods (WWAV), the all-natural and plant-based food company on Mad Money today, is up 22% this year while almost all the "conventional" food and beverage stocks have been hammered? Does it really shock you that Chipotle (CMG) is going to $560 from $316 in the last year while the "Farmed and Dangerous" stocks have been left far behind?

Meanwhile, look at the profits CVS (CVS), Walgreen (WAG) and Rite-Aid (RAD) are making on their store brands, made mostly by value-winner Perrigo (PRGO). That's right out of the hides of all of those big, heavily promoted name brands that suddenly seem to have lost their edge courtesy of the new frugality I wrote about in Get Rich Carefully.

Chicanery, dividends too low to compel us, a food chain we don't trust and store brands we do trust -- these are the reasons why the turnstiles are in motion, and I can't expect them to reverse any time soon.

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