The Cyclicals Bubble Goes 'Pop'

A group of analysts said cyclicals would go up and up. Where are they now, and why aren't they buying?
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Remember when the nameless hedge fund managers got quoted on

CNBC

as saying they were loading up on the cyclicals for a giant multi-year move? Or how

Fidelity's

Stansky, you know, the

(FMAGX) - Get Report

Magellan guy, wrote recently that he loved value above all and was buying it here? Or how about all of those guys who recently praised

Alcoa

(AA) - Get Report

in the mid-60s or loved the papers because of the liner board increases?

Don't you want to be in their faces right now and asking them what they are doing after a session when the cyclicals were slaughtered? Don't you want to hear whether they are still buying the stuff they told us they loved? Or have they soured on it and want to eat some cyclical crow? Don't you at least want to do what my five-year-old does to me when we play tag -- nah nah nah nah nah nah (sing song MP3 plug-in please. Oops I thought this was 2001.)

It drives me nuts that my own voluntary self-accountability is tougher than that of the full-time media. I saw more second-guessing of

Dick Vermeil

as a sports writer in the 1970s for decisions he made in

Eagles

summer training camp than I see among the portfolio managers who recently lived and breathed cyclicals.

That's right, as a wee sports writer right out of college I covered Vermeil's Eagles training camp and top-flight sports writers would badger him for doing too many kicking drills or spending too much time with the running game. On a daily basis he would be assaulted. I never forgot how tough these reporters were.

And that was a

Super Bowl

-bound club, the only in franchise history. This is a hot button with me because, like you, I will hear someone talking about how some macho hedge fund guy says it is the beginning of a multi-year move in cyclicals, and then, weeks later, the guy is out of them.

Ah-hah, you say, isn't that what I do? To which I say, oh give me a break. You NEVER will hear me give you that multi-year crap. How the heck will I, or anybody else, know about whether the cyclicals, companies with their destinies TOTALLY OUT OF THEIR OWN CONTROL, are about to enjoy a multi-year move. Hubris is your enemy as an investor. It should be extirpated by the media at every turn.

Go to work, media people. There had to have been a hundred managers who paraded through your offices and got interviewed by you who said the cyclicals would go up forever. All you need to do is ask if they are still buying them.

That's all we really want to know.

Random musings:

Oddly, if I am right that what is freaking these cyclical buyers out is the possibility of earnings disappointments, then you have to be more excited about the Net than before. We are only weeks away from finding out how this quarter was for Net companies, and I suspect it was a barnburner, especially when compared to the cyclicals.

You think it doesn't matter? I disagree. In fact, what precipitated much of this net selloff was

Jeff Bezos's

announcement that it doesn't matter, that the whole earnings game is a farce. Bezos, a great businessman, who can manage his stock with the best of them, is dead wrong about that. Earnings do matter, and those that have them, as well as explosive revenue growth, will go higher.

All of the Net got sold off as part of a Bezos-guilt-by-association trip. Only true revenue growth and the possibility of earnings ahead at some time in the immediate future will put the Net back together again.

I am betting it will happen.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. 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

letters@thestreet.com.