Industrial stocks have lost their footing
The common ground seems to be that the buyers and holders of these shares no longer believe the aerospace cycle is a tailwind.
The rollover in the industrials is almost in lock-step. It doesn't matter how well a company did, its stock is acting just like the others.
I didn't even realize how closely coordinated they were until I hit up the chart of Parker-Hannifin (PH), an excellent industrial with tons of aerospace, and thought for a moment that I had actually punched in Boeing (BA). That's how much they looked alike.
This is an important concept to grasp, because they didn't all report the same kinds of numbers.
Honeywell, for example, blew the numbers out, raised the range and took off, only to come flying back to earth in the past week.
United Technologies had a good, not great, quarter and sold off immediately. It continues to do so right now. Boeing had what looked to be an amazing quarter, one that caused the stock to gap up before the opening, only to plummet pretty much daily. Everything, from execution on a big defense project to order degradation versus Airbus, rocked the stock. Neither Boeing nor United Tech had the kind of big operating cash flow numbers that make investors feel they are standing there buying back shares because they are brimming with cash.
Parker-Hannifin was just mystifying. People simply couldn't figure out why the company didn't make more money, given across-the-board robust order growth.
You can make a case that PH, UTX, HON and BA were all hurt by one aspect of their businesses: defense. When I read through these calls, it was pretty clear that the sequestration hit all of these companies to varying degrees and the street just hadn't figured out the amount and was genuinely unpleasantly surprised by the numbers. Boeing compounded it by some errors in execution. PH seemed to be faulted for poor communication about its issues. I don't even think that UTX did that badly in defense, but nothing seemed to make up for it. Honeywell's was as expected.
But the common ground here seems to be one thing and one thing only: The buyers and holders of these stocks no longer believe the aerospace cycle is a tailwind. Whether it's because of a fear factor -- MH-17, rockets over Israel or Ebola -- or because of increased insurance rates, the airlines are being viewed askance, and that's translating into a belief that the cycle is not pausing but is just over.
I have such a hard time believing that it's over, because the secular trend toward world travel is so powerful that there will be demand for every single big plane for years and years.
Doesn't matter. These stocks simply can't get out of their own way.
I am not including Eaton (ETN) and General Electric (GE) in the calculus here. Eaton's numbers are so confusing and the company's inability to rein in the Street on estimates or on big restructurings has made that stock a nonstop pariah. What a remarkable fold that stock has been.
GE sat out the upside to begin with. It has not kept pace with any of these winners, so it might not have that big "what a winner it was last year and now we are tired of it" rap. That was pretty much the gist of the Bernstein upgrade Wednesday.
I remain a believer that these stocks can ignite if we get some international traction, namely a resolution in Russia-Ukraine that gives Europe some oxygen, or a turn in China that could lead to industrial orders, or perhaps a Congress that goes back to spending on defense the way it used to.
Otherwise, we are witnessing multiple compression right before our eyes, and it's not even worth distinguishing among them right now (not unlike what I see happening in oil service, by the way.)
I know things can't stay in lockstep forever. These are all very good companies, and they have to be unhappy with 2014 stock performance. They have levers to pull and cash to put to work.
It's just that right now they are all one big ne'er-do-well virtual ETF, and that ETF can't seem to find its footing, no matter what is said or done.
Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners. The portfolio
is long BA, UTX, ETN, GE.
More from TheStreet
"The Department of Education said Thursday it will try to make it easier for students with troubled credit histories to get college loans."
Isn't this were we got in trouble on home loans you freakin idiots !!!!!
WhoTF is BAWRNEE FWANK....MSN pleasssseee don't allow illiterate 8th. Graders to post...
We can't help it if they live in Alabama..
WHEN BAWRNEE FWANK TURNS AGAINST PAPA DOC IT"S A PROBLEM FOR DEMONCATS
In 2013, Barack Obama was awarded Lie of the Year for telling the American people that they could keep their existing healthcare policies and doctors.
When Obamacare kicked in last October, nearly 10 million people receive cancellation notices from their healthcare providers. They were informed that their existing policies failed to meet the minimum requirements established by the Affordable Care Act.
Obama reacted to the news of the massive cancellations by declaring that existing policies should not be cancelled and that the insurance companies had to work to keep the policies in existence for another year. His actions presented three huge problems.
First, it was illegal as only Congress can make changes to a law that they passed. Secondly, over 4 million people’s policies had already been cancelled and third, insurance companies had already changed their entire systems at great expense and could not easily change back to keep the cancelled policies.
Obama apologized and acted like he was completely unaware that this would all happen. But according to former Rep. Barney Frank (D-MA), a staunch Obama supporter, Obama knew in advance that millions of policies were going to be cancelled and that Obama just handled the matter poorly.
In an interview with the , Frank said:
"The rollout was so bad, and I was appalled – I don't understand how the president could have sat there and not been checking on that on a weekly basis, but frankly, he should never have said as much as he did, that if you like your current health care plan, you can keep it. That wasn't true. And you shouldn't lie to people. And they just lied to people."
"He should have said, 'Look, in some cases the health care plans that you've got are really inadequate, and in your own interests, we're going to change them,' but that's not what he said."
"Any smart political adviser would have said, 'Don't lie to people, because you're gonna get caught up in it and it's gonna have this tsunami that you now have.' My political motto, very simple. I have always told the truth, and nothing but the truth. But I don't volunteer the whole truth in every situation."
I almost choked over Frank’s statement about telling the truth all of time. That’s not exactly his track record in Congress.
I was surprised to see Frank speak out so negatively about his hero Obama. However, I disagree with his statement that Obama should have told the American people that their health plans were inadequate and that it was in their best interest to change them. In the vast majority of cases, the changes imposed by Obamacare meant that people had to take coverage they didn’t need or want, have a higher deductible, less access to their preferred doctors and all at a higher cost. Not exactly what I would describe as being in the best interest of the people.
Frank is just another in the growing list of Democrats that have spoken out against him and Obamacare. Many are doing so in hopes of winning votes from dissatisfied voters. They believe if they speak out against Obama and Obamacare that they just might be able to win in November, but hopefully the uninformed and gullible American people will wake up and see through their ruse.
Well Jimmy I remain a Firm Believer that when this current Bubble really does burst wide open, it will be unlike any bubbles bursting in the past. However I am quite sure Jimmy will put out one of his many back and forth posts and say he saw it coming.
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