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The Sum of the Parts
Originally published on 3/18/2007 at 3:58 p.m.
With analysts believing that crummy undocumented loan problems have already seeped into less-crummy loans, with the bears contending that inflation is raging, with everybody arguing that the
Fed is boxed in, the question isn't how far the market's going to go down, but why it hasn't cracked already.
Isn't that the real question? What's with the market anyway? Doesn't it know that it is supposed to go down, either in the form of a series of down-100-to-200 days or in a straight line as it did in 1987, or 1997, or 1998 or 2001? What gives?
Perhaps, at least when it comes to the
Dow, there are peculiar factors buoying most of the index. It's time for a special, end-of-quarter analysis of why the market is so resilient despite end-of-the-world pressures from residential mortgage-backed securities and collateralized debt obligations, a belief that Blackstone thinks it is the top, horrible CPI and PPI, a crippled president, rate hikes in China and the rest of the world and an overall belief that the smart money says were are going to crash.
It's time to figure out why we haven't repealed the whole move from September and then some. I think the answer lies, as is so often the case, in the components themselves.
So let's look at them to see why we have that resilience, or at least, where we could stop if the market's bears tag-team the ETFs to take the index below where the components want to go.
Click here to read more about the actual components.
One Tech Stock Can't Reverse the Field
Originally published on 3/20/2007 at 3:43 p.m.
Looking for signs of any turn in tech, I find once again that there are way too few positives. But I know that there's a groundswell to re-anoint
Corning(GLW Quote), and I am on board.
Next week's fiber conference could be a catalyst, but there's also lots of chatter about Corning taking a hard line on glass pricing for big screens and it sticking. Plus you have to like the fact that fiber is being deployed at a blistering pace by
Verizon(VZ Quote).
Tech's still an underperformer here.
Intel's(INTC Quote) really pathetic.
Hewlett-Packard(HPQ Quote) can't seem to keep above $40.
Motorola's(MOT Quote) up, but only on rumors that Ed Zander is out.
Only
Brocade(BRCD Quote) keeps going higher.
Oracle(ORCL Quote) trades up ahead of a good quarter so maybe that's a good sign, but just once wouldn't it be better if it were down first and then reported good news so it could go higher without the quicksand underneath?
To me, the financials and the staples are just much better bets. Can't reverse field, despite the good tone with Corning, because
the calendar just won't allow it.
Random musings: You can't neglect your homework in this environment, and one thing you've got to understand besides the calendar is short interest. Larsen Kusick just wrote
a great explanation for TheStreet.com University. It's not the controlling factor in every stock, but it's always worth checking.
At the time of publication, Cramer was long Hewlett-Packard.
No Real Wins in Satellite Radio
Originally published on 3/21/2007 at 12:11 p.m.
What happens if the government doesn't let
Sirius(SIRI Quote) merge with
XM Satellite(XMSR Quote)?
I believe the two will continue to battle it out until one guy's belly-up.
Whoever is left standing will then be able to raise rates and cut what it pays for talent. It will be a huge win for the one left standing, even if by then the stock is appreciably lower from the bleed-out. And it will be a huge loser for the consumer.
As Mel Karmazin pushes on his tour to get this deal done, I keep wondering whether he should be arguing this case. It's a devastating case to make when it comes to current shareholders of both companies. It can hurt XM more than Sirius, drive it lower, because in a lot of ways XM is doing worse than Sirius.
But ultimately it's a heck of a better case than the promises that he has made to keep prices stable, which no one really believes.
This is a business with ultra-high barriers to entry and high costs that no one else really wants to get into. Everyone who liked it initially has been pancaked, and everyone who wants it now can't buy it with the uncertainty.
Yet it continues to hold a fascination for the public that is exceeded
only by the public's endless unrequited love affair with tech.
Until you know this deal is going through, you can't own the stock. If it doesn't go through, you have two goners.
But you have the end result of the government's meddling in what would be a better deal than the consumers will ultimately get.
Random musings: Lots of people in Texas were asking me how I could be so negative on
Hercules Offshore(HERO Quote) now that it's getting
Todco(THE Quote). Understand that I have been predicting willy-nilly takeovers in the sector that would create better pricing. But I am not going to recommend the acquirer of a company when 1) the arbitrage pressure is great against the stock and 2) there is dreaded Gulf drilling exposure, when
Transocean(RIG Quote) and
GlobalSantaFe(GSF Quote) don't have it. ...
Linens 'N Things buyout woes for Apollo make a logical private-equity buyout of
Bed Bath & Beyond(BBBY Quote) -- the hope of lots of shareholders -- less likely. ...
AT&T(T Quote) has become a go-to stock for those who think the
Fed's going to push us into a recession. Good defensive name, although I like
Heinz(HNZ Quote) better. ...
Fortress(FIG Quote) is run by a terrific guy from
Merrill who really understands fixed-income, particularly mortgage backs. Look for him to start taking advantage of the sickened companies in the industry.
At the time of publication, Cramer was long Transocean.
Pepsi Is It
Originally published on 3/22/2007 at 1:31 p.m.
Sometimes you have to get hit over the head to get the story right. I
have been adamant in these cyberpages that
Pepsi's(PEP Quote) day had come, that the growth engine that is Frito-Lay was going to hit a wall because of health concerns and soon join the slowing ranks of North American carbonated beverages, which failed to grow at all last quarter.
Management at Frito-Lay and Pepsi decided that I had to be schooled, and thought that perhaps if I spent time with them I could better understand where Frito-Lay was going.
So I traveled to Aberdeen, Md., via the company jet -- don't worry, I'm paying for it -- and spent the morning at the company's plant there, where Frito-Lay is revolutionizing snack food. It is producing popular, good gross-margined foods without trans fats, made simply with corn and salt or multigrains and sunflower oil. They're selling more than they can make, even though they are running the plants six and a half days a week.
I have long "used" Pepsi as my single-best consistent growth stock, but I had grown concerned that I was going to get walloped one quarter in the future with a less than 5% growth number from this, the division that drives the stock other than international beverage.
I know now, from this field trip and from meeting with the top-level execs last night and today from Frito-Lay, that I was just dead wrong. I believe that much of the Street is dead wrong about Pepsi, too.
This is the one to own. The upgrades and swap-outs of Pepsi to
Coke(KO Quote) that I saw after the big food conference last month -- based on a small acceleration of international carbonated beverage sales at Coke -- I believe will cause you to underperform.
Pepsi, not Coke, is it.
Random musings: Expect more on what I saw and heard with Pepsi, the great marketing machine, about energy conservation, food trends and baby boomers vs. youth, later this week.
At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.
Cell Phones Get as Bad as PCs
Originally published on 3/23/2007 at 9:29 a.m.
The cell-phone weakness, which Thursday spread to all the component makers --
RF Micro(RFMD Quote) in particular -- has hit another low this morning with
the give-up of
Openwave(OPWV Quote). Some might regard this as a victory for some piece of cell-phone real estate and blame David Peterschmidt for the problems there. I just think it is another sign of a saturation or slowdown on the Web that is taking down
Motorola(MOT Quote) and conceivably could take down
Nokia(NOK Quote).
More important, perhaps, is the notion that when
Apple(AAPL Quote) reinvents the cell phone, it will be in charge of a lot of the cell-phone real estate. I think that will be another nail in Mot's coffin and a further blow against Nokia.
This industry is undergoing rapid and negative change. It is getting as bad as the PC business.
I think it should be avoided, except for Apple.
Random musings: I've mentioned the crack spread gains a lot lately, and. James Altucher's come up with a
portfolio to accent it on Stockpickr, focused on the pure-play refineries that tend to go up the most when the spread widens between natural gas and crude.
At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.
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