Watch Out for the Tightrope

 | Oct 16, 2012 | 8:20 PM EDT
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The measure of this market wasn't Citigroup (C), which, alas, is in the end a $3 stock times ten. It wasn't IBM (IBM), which I think will ultimately bottom sooner than people think.

It's the ones like Murphy Oil (MUR), companies that take matters into their own hands and you are instantly rewarded with points on the board.

Murphy did nothing more than what the other guys are doing, splitting the company up, doing some value unlocking, going about the simple game plan that Third Point, a hedge fund suggested, and there are instant riches.

It's a shake-and-bake restructuring. Doesn't matter that there's a fiscal cliff ahead or that Iran might soon join the council of real nations instead of terrorist ones -- don't hold your breath -- or that there is a huge glut of natural gas, you do the unexpectedly expected and the market laps it up.

Throughout this rally, which seems pretty endless by now, there have been three kinds of winning companies: the ones that are involved in consumer spending, the ones that pay good dividends and the ones that decide they are going to take matters into their own hands.

The consumer-spend plays confound people because of the high unemployment, but we know that the consumer balance sheet is one part home value, one part stock value and one part paycheck (and two out of three ain't bad). People keep wanting to short these stocks, so they rally hard on any good news at all because that is truly unexpected.

The good dividends? Consider Lilly (LLY), Pfizer (PFE), Merck (MRK) and J&J (JNJ). They are all paying you to wait. Abbott (ABT) did, too. Just remarkable how the obvious plays worked out so well. And keep working. They will continue to do so as long as the Fed keeps working its magic or alchemy if you want to be all negative about it.

And then there are companies like Murphy and the Sara Lee (SLE) and Conoco (COP) and the Marathon (MPC) and the Kraft (KRFT) and they just are loved for what they do.   

If you aren't in one of those three areas, you are walking an earnings-and-macro tightrope that rides more on luck than it does skill. You are at the mercy of whoever spoke last. You are in China hell or Europe hell or Fiscal cliff hell. Two steps forward and one-and-three-quarter steps back, except the latter happens just when you got into the second of the two steps.

It's been like that seemingly forever.

It's so simple to see, but people get impatient or they think it's a watching-paint-dry situation to watch Clorox (CLX) or Kimberly (KMB) climb.

It's been a thoroughly boring, commonsense rally, where the consumer-spending plays, the dividend plays and the shake-and-bake plays are all you need to be able to outperform.

Somehow, I feel it will be that way right until the end of the year.

Obvious. Too obvious.

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