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OPINION

Despite Surge Lot of Angst Beneath Surface

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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And the coast is clear. Well, not necessarily but this rally isn't going to go gently into the night. There are several compelling aspects to this rally. There are stocks coming along for the ride but there are also undervalued stocks that might be overlooked by the momentum crowd. We saw some rotation yesterday into blue chips including drug makers which reflects more of a bunker mentality than one of reckless abandon. I suspect a lot of the action came from the pros that have missed this rally and still need to catch up as waiting for a correction isn't going to cut it.

There is still a herd mentality to the rally as well and rotation is swift. Just looking over the past one month period yesterday saw more stocks closing at their lowest point than highest for the New York Stock Exchange. Yet NASDAQ stocks sport far more "highs" than "lows" over the past 30-days.

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For the past twelve months new highs are significantly above new lows but somewhat misleading for those late to the party. One thing that continues to stand out is once a stock gets moving the bandwagon fills quickly. Of the 221 new highs, 193 traded volume well above the daily average.

The pattern suggests rotation will continue with money afraid to move to the sidelines while the big boys figure it out. The one thing individuals must do is make sure they don't listen to the holier-than-thou crowd that seems to be on television every second. Those are the guys and gals that missed this amazing rally then chalk it all up to Ben Bernanke. Most have never read an Income Statement or Cash Flow Statement in their lives - only a couple have looked at Balance Sheets. I repeat - just a couple.

Don't let anyone hint that your stock market gains aren't as pure as the real estate gains or gold gains or antique guitar gains. In fact, stock market gains are more real than any other gains. In the end, they're based on companies that generate profits which is different than appreciating in value versus another asset class. I want you to own real estate and gold and antique guitars, but don't let the bunker crowd spook you or make you feel guilty. They have no guilt, after all, for spooking millions of people out of the greatest rally in a lifetime.

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Don't get me wrong, Fed money printing is designed to create inflation including the stock market. I just think the impact thus far has been more pronounced in other assets.

This is where Ben Bernanke is making his biggest mistake. The Fed shouldn't appease the Wall Street crowd. If they ever think the coast is clear for the economy then they should snatch the punch bowl rather than fiddling around with portions. Keep the printing going until it's time to completely stop. The exit out of accommodation has to be unequivocal... no baby steps or policy that shifts with the wind and latest data. I suspect for the Fed, the Dow has to get to 16,000 before the kind of mania the Merchants of Doom scream is a reality.

Of course the Fed isn't going to listen to me, but then again like the Merchants of Doom, I don't think they should exist and certainly don't think the main goal should be bailing out failed businesses and putting the nation at jeopardy trying to balance failed fiscal policy. America isn't a house of cards which is why it stands even after all the hot air, but it's not ordained to always be the greatest. We need to get our game back in focus and push the economy toward its potential. I just don't see it happening with this administration and neither does Bernanke.

Still, I would rather the Fed close the spigot sooner rather than later. Either way we are looking for unrealized value and not gimmicks. If you are buying stocks and don't understand the fundamentals then you are going to be whipsawed by the Merchants of Doom.

It's All About Washing Machines and Chicken Fried Chicken

I didn't listen to them 9,000 points ago and will not listen now other than to speak to the public about not being shy when there is a chance to be an owner. And, any asset you choose will be influenced by the Fed, but their policies don't mitigate all the washing machines Whirlpool sells in South America.

Yesterday Cracker Barrel (CBRL) posted a strong earnings number and the stock went ballistic. It had nothing to do with the Fed and everything to do with pricing power and market share and great management. Same store sales for the restaurant were up 3% and for the retail part 5.5%. But the magic is each quarter there's about 2% pricing power, which is absolutely amazing. But then again, for someone living in the northeast where finding good grits is like finding a needle in a hay stack, I get it.

No gimmicks just grits, fried chicken and country fried steak. Feel guilty about eating too much of the food, but if you own the stock, be proud. If you never considered buying the stock but eat there all the time then you have to rethink your fears and the "experts" you listen to. I bet they don't eat at Cracker Barrel and have never looked at the income statement or cash flow statement or balance sheet for that matter.

Manufacturing... Manufacturing

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It is pretty hard these days to keep manufacturing alive simply with cheap currency and high taxes. Not that we needed to be but the markets were reminded of this yesterday.

Manufacturing Expansion:

* South Korea (I should just type Korea don't think anyone would be confused), India, Russia, Turkey, Brazil, Canada and South Africa.

Manufacturing Contraction:
* China, Poland, Netherlands, Spain, Italy, Germany, Greece and France

No matter how much any central bank prints, countries need policies that reward risk-taking. Hungry nations are gung-ho, while rich nations are too enamored with the idea of being more like poor countries.

Conclusion

The message of the market is clear, money wants to stay in play but anxiety is a big part of the decision-making process. The action in drug stocks was amazing yesterday with gigantic volumes on positive news and a renewed sense these guys might be able to revive the blockbuster business model.

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