Don't overlook these 3 drivers
A trio of unheralded cycles are working even in this horrendous environment.
This economy has three drivers, and I'm talking about them, even if no one else wants to. These drivers are so stark that I think you ignore them at our own pocketbook's peril. But they go unheralded because of weak employment numbers and fiscal cliffs and unsustainably high Spanish bond yields. Why is that? I think people like to talk negatives either because positives seem like they aren't rigorous or because people are ignorant of the so-called big issue.
I want to stipulate that I am not ignorant of the big issues. I'm constantly checking out every European bond auction, and I am well aware that our taxes are going up -- and maybe, for some of us, up big.
But I keep going over these quarters from about one-fifth of the companies that have already reported, and I hear three things.
1. Automobile builds remain strong. Thursday's affirmation? Union Pacific (UNP) talked about cars as being a huge driver of rail traffic, enough to help offset the decline in coal. I think this driver is obscured because General Motors (GM) and Ford (F) are so international (and their international businesses are such disasters right now) that you can't determine their strength. We don't want Ford or GM to pull back from Europe or Latin America. That would be stupid. But I have to tell you that shares of Ford (U.S. Ford) would be at $15 by now. General Motors? Call it $25.
2. Housing. How strong is housing? It is now in the phase where even the most wildly inconsistent plays are working. Witness the 3-point run in Whirlpool (WHR) -- remarkable. It's tough to recommend Lennar (LEN), Toll Bros. (TOL), Pulte Group (PHM) and Standard Pacific (SPF) right now after these runs. But that doesn't mean you can't pounce at the right moment. And, as the charts show, the right moments are coming up over and over again. Toll dropped from $28 to $23 in a heartbeat. Pulte sold off by 25% in six weeks. When we see pullbacks, you have to pull the trigger. We have a developing house shortage, and these are the guys with the homes.
3. Aerospace. It's so easy to dismiss these stocks on worries about the finances of the airlines and the slowdown in China. But take a look at Textron (TXT) and the amazing numbers from Cessna. Go listen to what Dave Cote told us Wednesday night on Mad Money. He made it clear that the aerospace cycle has its fits and starts, but it is in a long-term ascendance. Anyway, is it really possible that in the first year of the delivery of Boeing's (BA) Dreamliner that the cycle is now over? That's a little ridiculous.
So we have three unheralded cycles that are working even in this horrendous environment. Who knows what will happen if things ever get better. In the interim, when we see pullbacks, these are the themes that have our backs and can be bought into any weakness -- provided you don't put too much emphasis on the international players and you stick with as much domestic security as you can muster.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in the stocks mentioned.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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