How Crazy Is This Market?

 | May 07, 2013 | 3:52 PM EDT
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Emerson (EMR) could not have been more negative if it tried. The diversified industrial conglomerate basically said things were bad from the get-go and got worse as the quarter went on. It was quite discouraging, especially given the breadth of products that Emerson makes and the wide-ranging use of the products both domestically and worldwide. Plus, just so everyone's clear, Emerson is best of breed. If it is seeing weakness, it isn't because other companies are seeing strength.

It's because there is weakness. Globally.

So what happens? People switch to buying Caterpillar (CAT) instead, even as it reported a terrible quarter. They buy Honeywell (HON), even as it is analogous to Emerson in so many ways. They switch to buying housing plays. They say, "OK, I will let Emerson settle and then I will buy it tomorrow."

Here's what they don't say: "Wow, things are bad, so I am going to sell stocks." Or say, "Things are getting worse, so I am going to switch to buying soft-goods stocks." They don't even leave the smokestack biz.

This is amazing to me. It is a sign that the bears have to be hurting but good because being short Emerson was about as good as it gets in this game. When I read the release, I figured the CYC, the Morgan Stanley Cyclical Index, would be absolutely hammered. Instead it was up huge. There was not an ounce of pin action off Emerson -- off Emerson for heaven's sake. Even the big disappointers of the quarter, 3M (MMM) and Cummins (CMI) weren't hit.

And that's exactly what this bull market -- where stocks are up 20% off the bottom -- is about. It's about looking the other way. It is about trying to find what will get better. It is about a fundamental belief that Europe is turning, which is what the rally in the once-moribund European bank stocks is saying. It is about a belief that China is coming back. It is about a belief that the Japanese strategy is working.

And most of all, it is about a sense that the U.S. is going to start growing again and that's what the employment number on Friday signified.

We aren't as bad as "Emerson's awful, go buy Emerson."

But that's only because the CEO made it clear that you shouldn't buy the stock. He was emphatic about it.

Had he said that anything was getting better, had he held up the door for anything good, had he given you any hope, this stock would have been up two or three 3 points.

Yep, it is that crazy a market.

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