Does this market demand too much? Are investors asking for a level of performance that can't be delivered? Or has the stock market moved so far up since Donald Trump was elected and tax reform passed that expectations are just totally out of whack?
Every time I look at a stock after it reports earnings, I'm mesmerized about how horrendously it invariably acts.
Now, some of this is self-inflicted. For instance, management at Caterpillar (CAT) gave us a monster guide-up last week, literally raising its forecast by $2 a share on the strength of worldwide end markets for pretty much everything -- construction, mining, oil, you name it.
As a CAT follower from way back, I was stunned at just how strong the company's earnings were. And management made clear that the business cycle that created such bounty still has a lot of room to run.
But there was one problem -- CAT's chief financial officer and investor-relations person declared that we'd seen the high-water market in margin expansion, and that raw-cost issues will bedevil the company in 2018's second half. When I go over the call (and I did many times), I realize that management simply didn't discuss its business rationally.
As someone who prognosticates for a living, I would have given the street some different wording. Something like "we need to see some raw costs come down, and we need to be sure that our supply chain is rationalized or we might not be capable of maintaining this pace."
You could then understand how a company could guide up, because it should have guided down with that high-water-mark nonsense.
We got earnings Monday from Cummins (CMI) , another big industrial that gave us some self-inflicted wounds.
Like CAT, Cummins talked in its earnings report about the same strong markets for its engines. However, the company also had some component degradation that caused it to take some major, serious charges.
And let me tick down some strange behavior from the stock market that tells you how important macro forces are right now -- and how rude buyers are being to companies that they should be buying.
Let's start with United Technologies (UTX) .
Here's a company with three big businesses: climate controls, elevators and aerospace. All three came in better than expected in UTX's latest quarterly earnings -- check that, much better than expected.
However, the stock has done nothing but go down since the earnings announcement, even though it has pricing power over every end of its business. I think a lot of people are simply saying: "That's as good as it gets. Let's get out of Dodge, especially if the president goes after China and the Chinese decide to wreck the best market for UTX-owned Otis Elevator."
Then there's IBM (IBM) . I still can't believe this stock hasn't had an inch of respite from the decline that it's seeing.
I could easily argue that this was a very strong quarter for Big Blue, and that people are about to see IBM's faster-growing portions overtake its slower-growing business. And yet, IBM has a 4% dividend yield and a 10x multiple!
And it's not just the industrials that are struggling.
I still can't believe that the stock of Goldman Sachs (GS) acts so horrendously. I know we hear a lot of talk about how this might be "the last good quarter," but I could argue that it was the last bad quarter for this company. And Goldman's numbers came in much better than expected.
The firm didn't announce a stock buyback, but it did boost its quarterly dividend. I think that's wrong, but I'm sure Goldman management wants to see what the regulators say before it does so.
Now, I know as a Goldman alum that what the firm does best is navigate volatility for its customers. It also has an amazing mergers-and-acquisitions advisory business at a time when M&A has caught fire. I look at each firm that wins M&A business and Goldman has won more than its fair share.
All in all, this should be Goldman Sachs' time -- but we've all seen that it's Goldman's time to get whacked. That the stock of the premiere firm on Wall Street sells at just 10x earnings tells me that investors are demanding way too much from this company.
Under Armour (UAA) reported earnings Tuesday morning, and all I can say is that the company gave us a clean, solid quarter. It was right in line with the turn that CEO Kevin Plank suggested on Mad Money would occur.
It's not easy to right a ship that had been leaking, but that's exactly what has to be done here. And I think that Plank is executing precisely how he should. He didn't overpromise, and he's not underdelivering.
I know the long knives are out for him and his company, and that the stock was at one time down more than almost any other in the market. But ultimately, people came to their senses. Still, the animosity here is pretty insane.
How about the defense stocks? I know that South Korea might be talking to North Korea, but did you notice the first stops that the new Secretary of State Mike Pompeo made? He went to Saudi Arabia, Israel and Jordan.
He's building a coalition contain Iran. Does that make this a more-certain world?
Oil goes up on this, but the stock of Northrop Grumman (NOC) has now gone from $356 to $306. Did Northrop cut numbers? Nope, it raised them ... in a pretty spectacular fashion.
But it doesn't matter. The defense stocks are weak, and people seem to want the impossible from this company.
Finally, did anyone hear anything from Allergan (AGN) on Monday to justify the stock's astonishing pirouette from up $4 to down $8 on Monday?
Sure there were restive shareholders who want CEO Brent Saunders to break up the company, but he wants to be sure that a break-up would be the right thing to do.
In the meantime, Saunders has got a huge anti-depression drug and a major innovation in migraines waiting in the wings, while Allergan's Botox franchise just keeps rolling along.
Now, I know that there's a Botox competitor out there from Revance Therapeutics RVNC. But those who are so excited about its profile vs. Allegan should understand that doctors aren't going to be switching all that easily if patients are happy, unless there's definitive proof that a new product lasts much longer. Because this is very happy, if-it-ain't-broke-don't-fix-it market.
We've been waiting to buy some Allergan for my charitable trust (which you can follow at ActionAlertsPlus.com) as soon as I'm allowed to do so by compliance rules.
I think it's finally gotten a little ludicrous that Allergan, which has a much better growth rate than the vast majority of the industry, currently sells at just 9x nine earnings.
But like I said, this market simply wants too much out of pretty much every stock. Unless there's little competition, no increase in raw costs, no any China inputs and very little exposure to a tweet or a crack from the president of the United States.