We keep hearing about a return to the cyclicals, a belief that business is accelerating -- and that you want to be in the companies levered to worldwide growth.
I think that's moronic.
You want to be in companies where the comparisons could be exciting versus where they were, simply because things didn't get worse.
Take the airlines. You see these companies' stocks on fire -- and there is a simple reason: Things haven't become much better, but they haven't cratered. And when you see Delta (DAL) , United Continental (UAL) and American (AAL) trading at 6x to 7x earnings, that's a sign that the market thinks their earnings won't crater.
I wish there were more to it. But that's historically been the thesis behind such low multiples. They are about expecting, typically, LOSSES. But there are no losses ahead. Just continued flatness.
Caterpillar's (CAT) story is a little different. There, you have seen Asian sales turn year over year. A 2% turn -- but that's still a turn. Plus, we have seen coking coal come up in price, and that means the Street's excited about the fact that there are no number cuts -- at last. That's a big win for a company with a stock that's routinely shorted.
I think that all of these stocks make sense, because of the compares. The idea, though, that the economies of the world are doing better is directly being refuted by the IMF news today showing global weakness.