Maddening inconsistency. That's what has Wall Streeters pulling hairs and banging fists. Companies, sectors, data, you name it, they just don't add up and the confusion's playing havoc with the bulls and the bears alike.
Let's start with the broader economy.
We have so many indicators that seem to be pointing up or staying strong: housing, employment, manufacturing, broader retail sales. But then we get hit today with one of the weaker manufacturing reports we have had in ages, a 49.4 PMI number with anything below 50 meaning contraction. Heck, Britain gave you a 53 and they just went through that gut-wrenching Brexit election.
How can manufacturing be that soft? Has oil, two years after a peak, at last hit home? The data don't indicate that. Some would say autos are peaking. But they are doing so at a very high level. It's just plain out of synch.
Then there's oil itself. There are two markets. We have a true commodity market, which is governed by supply and demand. Trust me when I say supply is swamping demand. We are running out of places to store everything from oil to gasoline to natural gas liquids. The domestic rig count has tripled since the bottom a few months ago. The Saudis are pumping like mad. So are the Iraqis and the Iranians. The Nigerians seem to have reach a truce with bandits who have endlessly blown up their pipes.
The glut continually drives oil down, with $39 seeming to be the next stop for crude as it declines another $1.32 to $43. It's hideous out there.
But when we get to those levels we find sudden rumors percolating that there's going to be a deal between the Russians and the Saudis to throttle production or that OPEC producers have agreed uniformly to cut back. Even though it is certainly not in any of these countries to cut back, because U.S. production will come right back on line, the rumors always do the job of popping oil right back up. So, the real market should be lower but the phony market keeps it higher. Given that so much of the stock market depends directly on the direction of oil, this erratic rumor-driven market should, in no way, be counted on for any honest signal.
Then there's the Fed.
Who speaks for this Fed? One week ago Janet Yellen put one rate hike on the table, perhaps as soon as September, especially, you have to believe, if we get a strong nonfarm payroll number tomorrow. Yellen's Jackson Hole speech sent the market soaring.
Then Vice Chair Stanley Fischer, within a couple of hours of Yellen's speech, put the two-rate-hike thesis right back on the agenda. Which is it? One or two? Who can make investing decisions in this kind of environment? Why did Stanley Fischer have to confuse us? Why? I have no answer whatsoever for that.
How about overseas?
What are two of the strongest markets around the world? They are Brazil and Russia. Brazil's got new leadership and a strong currency. But only a handful of companies are reporting anything good there. The Russian economy's based on oil. That means it should be weak. The West still has sanctions against them from the Ukraine incursion. The strength in either makes no sense. Yet the markets are telling us that all is well and getting better.
Or Europe. I have talked to dozens of companies with operations in Europe and they are often the strongest portion of their business mosaic. Yet interest rates are negative. How the heck is that possible if the economies are showing real growth?
How about China? We keep hearing weakness, right? No one is talking about China gaining strength. Yet last night we got a purchasing managers' report that was better than expected and we saw a jump in Macau gambling that was so meaningful that it's driving Las Vegas Sands (LVS) and Wynn (WYNN) stocks dramatically higher.
Then there's the bizarre, inconsistent state of individual American businesses. Take the two hottest subsectors of tech: the cloud and cybersecurity. On Tuesday Palo Alto (PANW) reported a terrific quarter, but then gave guidance that some analysts interpreted as a deceleration. The stock immediately lost $10. But then today, upon further review, buyers rushed right back into the stock, taking it up more than $7. What happened to move it back up? Nothing, nothing at all. There's not a single story or piece of research I can find driving the stock higher. My conclusion: perhaps it should never have gone down to begin with?
The cloud's even more difficult. Every company is rushing to the cloud. It's an ongoing revolution that's accelerating globally. But last night, Salesforce (CRM) , the king of the cloud, reported softness in U.S. cloud business in the month of July. Huh? How is that possible? The company blamed its own blocking and tackling and cited its own execution problems for the slowing in sales. But what if something's happened to slow adoption? There are so many companies that are dependent on the continued migration to the cloud.
Out of nowhere, it's a conundrum.
What's the hottest part of tech? How about the most boring, slowest-growing and most-commodity portion: namely flash and DRAMs. That's why Micron's (MU) been on fire. You want topsy-turvy? Intel (INTC) and Advanced Micro Devices (AMD) , companies that make microprocessors for personal computers, have very strong stocks. Intel hit a 52-week high today despite reporting a shortfall in its most recent quarter. AMD's up 155%. That's incredible.
Or how about the craziness of retail? Is it good? Is it bad? Target (TGT) says it's tough. Walmart (WMT) says it's better. Home Depot (HD) blows it away, Lowe's (LOW) delivers a just-OK number. The mall's supposed to be dead, but L Brands (LB) , Urban Outfitters (URBN) and Children's Place (PLCE) , Penney (JCP) and Nordstrom (JWN) all report terrific numbers, I mean terrific ones. But then again, Gap (GPS) , Abercrombie (ANF) , Macy's (M) and Kohl's (KSS) report subpar results.
Sometimes the inconsistency in retail afflicts the same company. Two months ago Costco (COST) reported fantastic numbers. Last night? Weak ones. Why? No answers.
Consumer packaged goods stocks have traded together for ages -- not any more.
General Mills (GIS) recently reported a fine number with excellent acceleration in its natural and organic business. But Campbell's reported its earnings last night and they were, by the company's own admission, disappointing. The weakness? Yep, the more organic portions of their business.
Finally, there's the transports.
The companies that have the most trouble making their quarters? The rails. Why? Because their most important cargo, their money merchandise, is coal and coal is going away so fast it's almost as if it were banned. The decline keeps outrunning whatever these companies do to cut costs, no matter what they do. Nevertheless, their stocks are among the strongest in the entire market. They go up on good and bad days. They go up on bad quarters. They just go up.
But you know what goes down consistently? The airlines. They are dirt cheap selling at price-to-earnings multiples that are at a third of the overall market, even as they are brimming with cash because they are greatly exceeding their cost of capital, the first time in my lifetime that's happened. They are returning capital with dividends and giant buybacks. Yet they can't get out of their own way. They are performing horrendously, all of them.
I can't blame a soul for being frustrated. I can't fault anyone for wanting to sell now that we are in the historically worst month of the year facing a rate hike or even two and uncertain earnings from companies that rarely miss. News defies the truth. Facts are stranger than fiction. Conundrums do not make for fabulous investing opportunities. So, until we clear up the inconsistencies be careful out there.
Random musings: Don't forget to watch "Ground Zero Rising" at 10 p.m. ET on CNBC.