Good News Will Win Out -- Later

For the near term, it's not the right play. That's still soups, soaps and pharmas.
Publish date:

This column was originally published on RealMoney on Aug. 29 at 11:55 a.m. EDT. It's being republished as a bonus for readers.

What makes the embracing of the soups/soaps/pharma complex so difficult for people? I think it's the amazing statistics that come out of the financial world plus the amazing spending for infrastructure. Take a look at today's

Wall Street Journal

if you doubt me.

The soundness of the financial system can be measured by defaults by both corporations and individuals, the latter from bank debt and the former from credit cards. Both aren't going higher. The Chapter 11 stats in this morning's paper -- the lowest in ages -- tells me that the debt markets are so sound at this stage of the slowdown as to be beyond belief. Sure, the credit card debt numbers are skewed by the recent changes to bankruptcy law, but they are very positive. Home defaults are in the 200,000s, but given all the handwringing, that's a small number.

Now, consider articles about the infrastructure build, like the refinery article on the front page of the


. The amount of money pouring into these long-term projects is unprecedented, but the multiple on everything that goes into a refinery or any other large-scale project, plus the builders, is shrinking and shrinking dramatically.

Both the credit situation and the infrastructure build seem so positive versus what the soda/pharma situation tells us.

Of course, both could be right. But the market says no, only the slowdown/recession thesis is right.

To buck it is to underperform horribly.

The confusion for those who want to think past the tightening stage is rough indeed. Made rougher by the tempting valuations of cyclicals. But it's always like that in a slowdown.

So, I guess the takeaway is near-term, don't be swayed by the good news, but longer-term, the good news will win out.

Random musings:



problems are explained well by the


this morning. Of course, the problem is that nobody wants to pay to be the next


(GOOG) - Get Report

. Viacom's Web history is so awful that it's hard to imagine the company can make a comeback there. Plus, the paltry revenue for all but the winners is a nightmare. I love how the article talks about how badly media mergers have done when Viacom is entirely a media merger story that, until recently, was viewed as the greatest success story out there! ... Quandary: How do you explain the strength of


(EXPE) - Get Report




, given what's going on? Merger talk?

At the time of publication, Cramer had no positions in the stocks mentioned.

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