The Return of Old-Style Investing

 | Jul 11, 2013 | 2:55 PM EDT
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This aerospace theme won't quit.

When oil goes up it does well because you need more fuel-efficient planes. When oil goes down people think the airlines will do better and they will place more plane orders. It is, in the absence of a trend of rates -- and we don't know the trend -- it has become the de facto trade, even better than biotech and high-growth retail like Starbucks

One of the amazing things about this market is the intense and relentless run-up of the same stocks on the same news. There is no per se news about aerospace. We keep getting more orders and it will keep happening because of the fuel efficiency issue. But when is it built in? When does Boeing (BA) discount it? Right now the answer would seem to be never.

What I think is happening is we are seeing a return to some old-style investing. Boeing used to trade in seven-year cycles. A new '87 entry would give Boeing seven long years of profits with terrific gross margins, ones that get better every year. That's precisely what it seems is happening right now, doesn't it?

That means the discounting mechanism has gone awry.

Plus, the current crop of analysts just aren't used to a market this bullish. They, collectively, don't want to hype Boeing because they fear top-ticking it. In fact, the only stock that analysts don't seem to be afraid to top-tick is Google (GOOG). Before that it was Qualcomm (QCOM) and before that it was Apple (AAPL), although I think Google's better than those two.

It's just that the bullishness is so pronounced that they can't get their arms around it.

Plus there are tons of stories out there that people are short and they seem to be short/cover/short/covering every time.

Take (AMZN). Here's one where periodically you hear someone say something good, but it is much likely to hear about the stock as overvalued. How many people are short that?

We get that pattern, too. You will have a couple of days where winners are weak. Today it's PVH (PVH) and Netflix (NFLX). That brings in short sellers. Then something positive happens and the shorts spend the next two days scrambling. Again, constant pattern.

That, too, is reminiscent of the 80s and 90s where the bears just simply couldn't believe the moves, so they just shorted them out of disbelief.

Disbelief is a terrible reason to short something. And that's exactly what's generating a lot of these moves.

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