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A No-Justice Market

Then it began to bounce back to the high $80s. Sure enough, the company then reported and guided back down again, citing the exact same problems. It did not, however, take out its low. Then the stock just took off, in a truly amazing run, almost in a straight shot to $109. That's right: It put on 24 points in a virtual straight line, even though the company hadn't solved any of the problems mentioned.

So, to me, the question will be: Why not just buy it again, betting the same thing will happen once more? This is a charmed company that attracts buyers every time it is put on sale. A lot of people thought FedEx had fixed its problems and bought it at what amounted to about 13x earnings -- and those people could be drawn to it now at about 16x earnings simply because they believe the company will fix those problems.

Now, I would prefer to pay a lower multiple, and I believe the worries still aren't discounted. But that wasn't the way it worked last time, so I don't know why it would work that way this time. People love to own this company, and nothing I heard Wednesday will cause people to change their minds even though it was the exact same thing that tripped them up last time. They may not change right now, as the wounds are too fresh and the stock is still too high, even after yesterday's shellacking. We tend to see a two-day shellacking, which is what happened the last time FedEx got hit.

But at the end of the second day, we'll have seen exits by the firms that wanted to get out of it, and that tends to be it for the selling. The rest of the people are believers, thick and thin, and new people will think that the stock overreacted. Plus, no one of any import is going to downgrade it after this pulverization.

Next Caterpillar: Sure, the sales were bad both in North America and in the rest of the world. Down low-double-digits is miserable. But Caterpillar, the premier machinery company in the world, now sells at just 10x earnings. That alone will bring in buyers. There will be plenty of people who will say this is a one-off decline, especially if China gets stronger and the U.S. starts seeing some commercial real estate building.

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