NEW YORK (Real Money) -- "That's not sustainable." Those are the four words that have keep many an investor from making the right decision about a stock. That's right: "That's not sustainable" is the bane of the bull and the honey for the bear. While this idea hasn't worked since the bottom of the Great Recessions, it still reigns supreme among the cynics that rule the media and predominate in hedge funds that can profit from shorting stocks.
What does it mean when someone says, "It isn't sustainable"? Let's talk about the life cycle of news events. It all starts with a good number. Let's take, for instance, a strong reading in the Chicago purchasing managers index -- like the 65.5 number we got on Friday, up from 63 in April.
Now, that's a strong number, and a sign of some robust behavior in the industrial sector. But the "not-sustainable" crowd was immediately interpreting it negatively. "The weather got better," was the first alleged chink in the armor. Then it was, "There had to be some one-time only business included in that number." That's a frequent criticism, just like when you get a strong durable-goods number and we hear that it's all about aircraft deliveries -- as if, somehow, aircraft deliveries are one-time only when in reality they are the U.S.'s biggest consistent export.
Then we get the usual from the polemicists. It'll be something like, "If this is all this economy can deliver with the Fed still buying bonds like mad despite the tapering, then who knows how poorly it will perform when the buying stops? Maybe it will never be able to stop given how weak it is." How long have we had to live with that claptrap, ever since the data has been captured by the agenda-ists and ideologists who politicize everything and are about polemics not facts? They are more responsible for keeping you out of stocks than any other force I have seen, including a not-that-pro-business White House.