Why is this market so hated and feared?
It's unnerving that almost every strong stock has a poorly performing company underneath it.
Almost everyone I know has two emotions about this market: They hate it and they fear it.
They hate it because they can't figure it out. They fear it because if they can't figure it out, then something must be very wrong that they either can't see or can't get their arms around.
Some of this fear comes from the fact that no one I know -- and I've canvassed the best desks -- has a clue why interest rates went down last week on some very strong U.S. data. The only plausible flight-to-quality provokers I heard were as follows:
1. Russia attacking Ukraine under the premise that "Ukrainian bandits" provoked them.
2. Japan's new taxes could cause a Great Recession.
3. Something in China is so awry after those pathetic export and import numbers that the country is near a "collapse" to a 5 percent GDP growth level, down from 7 percent.
Yep, something is happening in each or all three countries that is so scary and frightening that it has some very in-the-know people buying U.S. bonds. Is it flight-to-quality? Or is it that there is no quality anywhere else -- particularly in Europe, which has extremely low rates and less stability -- so the money, in search of a decent yield, comes here?
Among those who are buying bonds, whatever these folks fear, they presumably fear it for a legitimate reason. The money's too big to be a couple of yahoos buying. The usual underlying reason -- the economy is rolling over -- just isn't the case in the U.S. Employment is too strong; sales are too great. We also know Europe is better, not worse. But China, Japan and Russia-Ukraine are all bad and worrisome, and each one could lead to some sort of worldwide slowdown if they get out of hand.
But if that's the case, why is the truly global commodity of oil going up and not down?
It just doesn't make sense that oil is relentless in its advance, especially when many other commodities are being hammered. Oil cuts toward some sort of doomsday scenario involving Russia and a genuine clash with the West. Otherwise there's oil coming out of our ears globally, and the U.S. is importing less and less of it. Again, it just makes no sense, but those oil prices are going to start hurting this country at the retail level if this keeps up.
To stoke the hatred people have for this market, let's break down the micro. The best-performing stocks since the slide began? Hands down, the utilities. OK, I get that: search for yield. But the best-performing utilities? Nope, not the highest dividend yielders, but the ones with the greatest growth, led by Exelon (EXC), Edison International (EIX) and NRG (NRG), all of which have among the lowest yields in the group. That's totally counterintuitive to people who say this move is all about the yield. Again, it's too confusing for most who are trying to figure this moment out.
Two telcos have held up well and are now advancing -- CenturyLink (CTL) and AT&T (T) -- and I believe it's because they yield 6% and 5% respectively. Again, I am willing to call that a thirst for yield.
That thirst is hard to slake. For example, lots of real estate investment trusts, particularly the office-building and retail REITs, have been bid up for their yield. But, as with the utilities, the ones that are still rallying have puny yields -- yet they keep going higher. It's almost as if people say, "I want yield; buy some utilities," and they aren't even realizing they aren't getting good yield anymore.
But some yield is just not considered to be any good. They aren't created equal. Consider the master limited partnerships. These stocks have all been awful except Enterprise Products Partners (EPD), which is the most fully valued and has one of the lowest dividend yields. The higher-yielding ones seem shell-shocked, a result of too many equity offerings -- think Markwest Energy (MWE) -- or too much worry about distribution cuts, as with Linn (LINE) and Kinder Morgan (KMP). While I don't think that will happen, I didn't think that Boardwalk Pipeline (BWP) would slash its distribution, and that has cast a pall over all but EPD and a couple of other pure toll roads with no commodity exposure and plenty of room to grow.
Next bizarre area of strength after the utilities? It's in the polar opposite of the utilities: machinery. I told you this is an exercise in counterintuitive and befuddling logic. Yep, Deere (DE), Terex (TEX), Joy (JOY) and Caterpillar (CAT) are all roaring higher. Again, these are total mixed messages. Sure, some crops are doing well, so Deere can be reconciled in the U.S. But business outside the U.S. is iffy at best. Joy? Coal is horrendous. Sorry, it is simply horrendous. There is no future for coal in this country, even though a short-term and short-lived natural gas spike has caused some switching. The sector is in permanent secular decline and, therefore, so is Joy. Is it selling itself? Perhaps, but after the disastrous Bucyrus buy by Caterpillar, who would be that foolish?
The only explanation? Perhaps Europe needs to stockpile coal because of a Ukrainian war and Russia potentially cutting off oil and gas? Could that be why people are buying Joy?
It wouldn't surprise me, because the best-performing energy stocks, despite the oil spike above $103 per barrel, are the natural gas stocks. This is despite the fact that natural gas prices seem to have peaked. The moves in these -- Southwestern (SWN), Encana (ECA), Ultra (UPL) -- are insane. The only one that's being crushed is the one that had been the favorite for years, Cabot Oil & Gas (COG). I think we are getting this move because people actually believe those companies, with the exception of Cabot, are going to supply the world with natural gas. Cabot can't because its natural gas is spoken for by New England agreements.
Caterpillar? What can I say? It's absurd. But it appears there is not a seller to be found, no matter where this stock trades. It's the same with Terex, which is a poor man's Caterpillar.
Beyond these, there is a scattering of strength in the most boring and old-line of the drug companies, namely in Eli Lilly (LLY) and Merck (MRK), which look like upside-down charts of Gilead (GILD) and Biogen Idec (BIIB).
Kellogg (K) and General Mills (GIS) -- the two food companies with, I think, the least impressive earnings streams right now, save ConAgra (CAG) -- are the market leaders in that segment. I would presume this is yield thirst. Plus, in the case of Merck, you have a potential breakup of the company and a potential hepatitis C pill to rival Gilead.
Shares of Hewlett-Packard (HPQ), Intel (INTC) and EMC (EMC) are all acting terrifically. This seems to indicate a return of servers as a powerful concept in tech even though, frankly, it shouldn't be. A step further: It's absurd and wrong. But it's happening.
What's so unnerving is that almost every single stock that is strong has a company underneath it that isn't really doing well at all.
And the stocks that are doing poorly? They tend to be just nominally attached to the best-performing companies.
Worst-performing stocks and best-performing companies. Best-performing stocks and worst-performing companies.
I see no other way to say it. And explaining it is no different from explaining the strength in the bonds in light of strong economic data. It can't be done with the current information at hand.
Maybe there is a giant worst-to-first sea change that's about to occur. Maybe the market has decided to reward poor performers and trash good ones.
Either way, it's very worrisome, because a healthy market rewards the good companies with higher stocks and punishes the bad companies with lower stocks.
But the opposite is happening. For anyone who has been in stocks for a long time, as I have been, we know an uncomfortable situation when we see one, and this one is mighty uncomfortable.
Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio to see the stocks Cramer thinks could be winners.
More from TheStreet
"But China, Japan and Russia-Ukraine are all bad and worrisome, and each one could lead to some sort of worldwide slowdown if they get out of hand. But if that's the case, why is the truly global commodity of oil going up and not down?"
Jimmy, Crude Oil has been one of the most manipulated commodities in History. Our Consumption has Slumped over time while our Production has Soared. Yet gasoline prices continues to rise since Oil Companies know that folks are too Dumbed Down to do anything about their gouging.
Before the Great Recession, the Markets were fueled by $500-700Trillion in Scam Banking Derivatives along with regular folks using their Home as a ATM. When that Rocket Fuel for Stocks froze up, the Global Feds starting printing to Infinity to reopen the Funny Money Gravy Train, once again. The only problem is, that's only working basically for just the top 1%. Everyone else is seeing a steady Decline in Income while inflation takes away the rest.
The Global Worker has been suckered by the Global Elite. Since they don't have the Stones nor Sense to do anything about it, when it all goes to Hades, they will still suffer the Most when all this Funny Business implodes bringing us right back to where we were during the Great Recession or Worse.
The stock market is nothing more than a scam that allows the elites to skim (while doing nothing productive themselves) their living off the real work that is done by the common man. Now add in the intentional pumping up of stock prices by the government (welfare for the rich), 80% plus of which goes to those elites, and it's easy to see why the stock markets make so many people sick.
Who hates the market? It is that most of the gains of the last few years have been fueled by FED money printing. That cannot continue, and thus many feel the market will have to price this FED balloon pumping out of the market. The market probably is overvalued by a (26 months x 85 billion) a couple trillion or about 3,500-4,000 Dow points.
Do you feel earnings will grow rapidly given the current 1.8% GDP growth? Hence what will propel the market higher? Certainly increased corporate taxes won't.
There is far greater risk on the downside as Obamacare crushes GDP growth.
I just saw some of the neighbor's pigs fly over the house, 5 of them.
They were flying in formation, like geese.
Jimmy everyone is buying their own Bonds so there are Zero Free Markets at this time to actually determine what or where Real Interest Rate Levels should be. Robbing Peter to Pay Paul will eventually fail and Rates will explode to the upside. Nothing mysterious about it. Gravity is a B.
"Why is this market so hated and feared?"
Because, it goes against fundamentals. It's propped up by the Fed's non-stop printing. It's smoke and mirrors. This is NOT the way to operate an economy.
1) The Federal Reserve has abandoned any hope of being able to keep the market up considering the downward pressure on the market caused by 10,000,000 new baby boomer retires each year taking $40,000 a year out of the market instead of putting money in and average US salaries approaching $16,000 a year
2) Russia and EU starting W.W. III this is almost 100 percent risk over the next ten years.
3) Japan economy totally collapsing - probably already has done this no one has called it yet
4) World wide Ebola outbreak -- no indication of any sort of containment of Ebola so far in Africa I expect in a month or two to hear about outbreaks in other countries. Sure that Al-Qaeda has been sending people to spread it. "When the first Ebola virus victims were identified in Guinea in February, no one knew it would be the start of an unprecedented outbreak"
5) If new mandate from UN for industry to get off carbon burning by 2050 is adopted by all nations we will be thrown back into the stone age. No cars, no electrical power for normal people, no internet, no phones, no computers, no clean running water, no heavy contruction machines so no new skyscrapers just grass huts, no lawn mowers except the hand pushed ones have you ever tried to use one???. Pretty much everything you know will be gone.
And these are just the more obvious problems.
Corporations have trillions of dollars sitting on the sideline, why? because they don't have to. They have moved from a need to produce something to make money to a place wher ethey can now sit back and simply sit on their lazy buts and get richer and richer.
We need to take back our country from these greedy people before they destroy it.
BUY AMERICAN, BUY AMERICAN, BUY AMERICAN
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
New legislation is allowing foreign companies to finally invest in the country's vast oil reserves.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.