Jim:     If you understand what's happening... what's the craziness of this market... but could certainly clean up long-term, you only need to look at Whirlpool Corp. (WHR)... a stock that I'm not recommending...

Here's a company where some analysts have cut numbers, where there are serious worries... and even sentiments among the bulls that shipments will be bad when the quarter is announced... that earnings-per-share will be diminished this quarter... Don't forget, we think we have a recession at home... and now a strong dollar, which is really bad for big exporters like WHR, because it makes their products more expensive abroad...

It even had an article in The Wall Street Journal, saying WHR only beat its estimates in the latest quarter, because of Brazilian tax credits... That was an all-pro slam job... below-the-belt kick...

And yet, despite this parade of horribles, WHR's stock has gone from $58.22 on July 15th, when many stocks like this bottomed, to $83.99 today... much higher even than yesterday...

That's a 44% gain. The stock did... it took a big punch in the face, though... down $5.49 today...

Why did this stock run?... Especially when you see this incredible collapse... the amazing collapse in commodities... why did this stock run?... Why was it able to go from this July 15th level, all the way up here yesterday, just a few points off its high, with all those negatives?...

Why?... Simple. None of these short-term negatives matter at all to the big mutual fund buyers. They believe the cycle trumps everything...

Don't worry, the hedge funds don't understand the concept of the cycle either... They think it means "spin cycle"... and, believe me, those hedge funds are being washed and dried, one-hour Martinized, bleached, cleaned and folded. That's why they're short 10 million shares of WHR, with 74 million shares (outstanding), all the way up... Maybe they'd better cover today...

I'm talking about the business cycle... think the state of the economy... think what the Fed's doing, and how the mutual funds play it...

You see, the mutual fund moves are so predictable that I had a chart at my hedge fund... that I put in Real Money: Sane Investing In An Insane World... which told you what to buy and sell, depending on where we were in the business or economic cycle in America... Now, because of the housing crisis and the high price of oil, things got a little off kilter... but what we're seeing here, with WHR going up, is a Warren Harding market... It's a little of a return to normalcy...

You see, the mutual funds play by the cycle and only by the cycle, and they're the ones that drive stocks longer term, not hedge funds. WHR is a quintessential early-cycle play... That means it's the kind of stock you would normally buy when everybody knows that an economic slowdown is upon us, and the Fed is anticipating a recovery by cutting.

Now we didn't have the recovery because of high oil prices, and the disaster in housing. All that meant though is that the recovery was put off. But, with less than 9 months, we believe... We are reiterating our call... We think that housing all over the country will bottom in 9 months, albeit 25% lower, okay... but, in 9 months, it bottoms...

The mutual funds are anticipating that. They know what to do... And they're going right back to playing the cycle, buying the Whirlpools of the world, anticipating that bottom.

Not every region's going to be down 25%, but the hardest hit ones... the 60% of the foreclosures that are in California, Florida, Arizona and Nevada... I think they'll go down another 25% before we bottom on June 30th of next year.

See, the mutual fund buyers see Toll Brothers (TOL)... just right off its 52-week high, and they think, hold it, TOL homeowners must be buying new wash machines, which WHR has a lock on, ever since its completely wonderful and ever-more anti-competitive merger with Maytag.

When Lowe's (LOW) and Home Depot (HD) said last week that things are getting better, people say, hey, that's WHR...

Sears (SHLD)... they reported a decent number. Sears sells Kenmore washing machines (made by WHR), which is just another WHR with a Kenmore nameplate. And we know that inventories at Sears are lean. That means they're going to have to re-order Whirlpools.

Now, all of this requires a tremendous leap of faith here. And, when you embrace the early cycle - not just WHR but also what it represents, retailers, durable goods companies... even some of the autos - you need a leap of faith.

Many of these stocks, by the way, have been going up, and now you know why. Many of them simply anticipated every single bit of what occurred. Now you would never have known it, unless you knew how the mutual funds play...

Now, right now, the mutual funds do not care that the economic picture is bleak... That's exactly when you're supposed to buy these early-cycle stocks.

Now, do you really want to wait for things to pick up before you buy WHR and the other early-cycle plays, or would you rather get ahead of the game?

That's why they jumped the gun and started buying...

That's what the mutual funds are doing... they're getting a jump on the cycle. They see steel - a big raw cost for WHR - coming down... They see energy prices coming down and, at the same time, WHR has put through big price increases... 6-10% as of June 30th. The price increases will stick, but the input costs are going down.

Now you must understand... unlike hedge funds... I'm trying to explain this as best as I can... the mutual funds do not care about the near-term outlook. They're looking to the future. They have to buy so much stock, they can't trade in and out... And, in the future, they see exactly what I've been telling you about... a June 30th recovery in housing of next year, so they're buying the early-cycle plays like WHR.

They like stocks where you can get year-over-year growth... explosive growth... and they think they can bet that from WHR for earnings, because they've raised price and had input costs cut.

The hedge funds are only thinking near term, and they're getting crushed, because they can't see a bigger picture.

This market's too hard to say that you should do what the mutual funds are doing now...

Now the mutual funds have bid this stock up too much but, on any pullback... and all it did today was give up what it made yesterday... you know where they're going to go, after this piece that I've done and, believe me, given the choppiness of the market, you will get a better entry point than they got yesterday...

In fact, they have bid up all the early-cycle stocks too far... especially the homebuilders and the retailers, which I would not chase here. And I think the autos - General Motors (GM) and Ford (F) - need a bailout, which I'm happy to give them, if they would just make more natural gas powered cars.

Right now, all I'm doing - because this market is not good enough to say come in and buy WHR - is simply giving you the mutual fund roadmap... not telling you when to buy WHR... But at least showing you how it could be so nutty that the stock could go up from July 15th so much, without anything good happening...

Here's the bottom line... 

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The Bottom Line!:     The mutual funds like to forget how bad things are right now...  and they like to embrace what they know is an endless cyclical business... the business of America... it comes back, and they need to be ahead of it.   The early-cycle plays, like Whirlpool Corp. (WHR), have been going up, and any serious pullback might be a gift for you, because the mutual funds never deviate from their long-term playbook.  They're not going to reconsider WHR now.  They're in.  And they are much more reliable co-shareholders than the young gun hedge fund managers that are rapidly getting their money yanked by their investors, because they're thinking so short term, and are getting in and out of stocks so quickly... and have borrowed so much money that they're getting destroyed.

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