Old Economy Vs. New Economy

The drops in AT&T and Kroger showcase the difficult logic facing this market.
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The curious double standard that is old economy vs. new economy played a big role in the disappointing action of two stocks this week,

AT&T

(T) - Get Report

and

Kroger

(KR) - Get Report

.

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If you read the press about these companies -- the large story in

The Wall Street Journal

about AT&T and the 3-incher in

The New York Times

about Kroger, you would have thought that things were hunky-dory at both. The

Journal

talked about how AT&T Chairman

Michael Armstrong

outlined aggressive revenue targets. The

Times

said that Kroger's earnings were up more than 20%.

Yet AT&T did nothing, and Kroger got hammered.

Why the disparity between promise and performance? It is simple. In the case of AT&T, "everybody," meaning the people in the know, expected that Armstrong would "raise the bar" or give even more of a bullish presentation about the future. The numbers he talked about were the same ones we were expecting, which while good relative to AT&T's past, paled in the face of other companies'.

In Kroger's case a slight degradation in earnings expectations led to the stock being crushed, just crushed. Kroger again shows you the fallacy of saying, "It's not hurting us," about a stock that might be in your portfolio. Frankly, I didn't think that Kroger had that kind of downside to it. It was flabbergasting.

Both of these stocks point up the difficulty of the logic currently facing this market. The punishment for not making the grade -- Kroger -- is just as horrible for the lowfliers as the highfliers. And the attempt to make a lowflier into a highflier -- AT&T -- requires constant higher guidance, something that AT&T just can't deliver in the businesses it is in.

Random musings

: When I left, Yahoo was at 338, still too high in my book.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo!. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.