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Stocks and the underlying fundamentals of the companies that the equities purport to represent have been at a vicious variance for much of 2004.

Nowhere is that more evident than the Smokestack Seven, the group of cyclical stocks I highlighted last fall that I said could set the world on fire with their earnings this year.

A quick check of the group shows that they've done just that. American Standard ( ASD), Fortune Brands ( FO), 3M ( MMM) and Ingersoll-Rand ( IR), four of the seven, have just preannounced sharply better-than-expected earnings.

Caterpillar ( CAT) just gave a rather robust set of projections. Deere ( DE) reported a terrific quarter. And last week, United Technologies ( UTX) reaffirmed earnings projections for almost $6 a share. That's one cheap stock at $85.

And what's the reaction from all of these stocks? With the exception of Fortune Brands, it is to be mired in the ranges they've been in, despite the competition from bonds lessening since the year began.

Not only is there no price-to-earnings expansion, there's actual P/E contraction, usually a sign that either rates are about to head sharply higher or that we are seeing the peak in earnings and next year will be much tougher.

Is that right? To me, faced with owning stocks for Action Alerts PLUS, I contend that despite the running in place -- and in UTX's situation, a true faltering -- these are better buys than, say, tech, which is actually in the process of going down aggressively. A group that stays in place is a better group than one that gets crushed.

In fact, I have begun to wonder about the so-called "expensive" market I hear so many commentators talk about. How can United Technologies, a premier growth cyclical, selling at 14 times earnings be considered expensive? That's cheap where I am from.

I think it is too early to back away from this group. This is the group to own during the first three tightenings and we haven't had one yet. I can't desert it now.

But that said, what a discouraging moment this is: When you do the homework, you get it right (these are dynamite companies), and you still don't make anything.

Very, very frustrating. But, as always, better than a sharp stick in the eye.
At the time of publication, Cramer was long Ingersoll-Rand.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to jjcletters@thestreet.com. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."

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