We've got vast confusion right now. So many stocks have run that might have to pull back if Jay Powell says things are too hot. So many tech companies have seen tremendous multiple expansion, which doesn't work as a concept if inflation is heating up as the Producer Price Index says is the case.
At the same time we are seeing the Amazons (AMZN) of the world keeping costs down so that the producer spike doesn't translate into a consumer spike. The endless rallying in the companies that are e-commerce related shows you how fast the deflationary forces are spreading, something that was abundantly clear when I spoke to Cisco's (CSCO) Chuck Robbins last night. Boy oh boy is that stock cheap, something I communicated to the team this very morning on the eve of the call.
At times like this people just want to wait to see how the gauntlet of the Fed and tariffs plays out. I think that's reasonable given the run we have had. At the same time our instinct, as we say on the club call, is to take small profits so that we have room to do some buying if we get knee-jerk selling during the gauntlet.
The fact is that the economy remains strong and I am thinking that only the fed can stop it from getting stronger. The momentum is that great.
I know that there are people who felt that the Caterpillar (CAT) rolling numbers with 24% growth, weren't that strong. There were expectation numbers at the 28% level. I don't care about the relative now, though, I care about the absolute in the fact of the tariffs we are placing on countries.
All I can say is so far so good. And that's what matters.