Active Trader Update

Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW

Makings of a Melt-Up

10/27/06 - 08:57 AM EDT

Jim Cramer

This column was originally published on RealMoney on Oct. 27 at 7:42 a.m. ET. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

How do you get a melt-up? You know that's what we are having. You see it in the way buyers are willing to pay above the offerings for stocks. You see it in how little buying power it takes to move a stock up.

I have two theories, and they work together. First, you shrink the supply. You take out the natural sellers who don't want to own stock anymore. And then you make demand bigger, by attracting more money. Both are happening now.

When we look back at this period, we are going to call it the post-capital phase of investing, where the major companies in America simply don't need any capital to run their businesses. Instead, they generate endless amounts of capital, or at least it seems to be the case.

If you think back five, 10, 20 or even 30 years ago, companies used the stock market to raise capital to expand. Not anymore. If I didn't know any better, I would say that they use the stock market to buy back stock. That's the theme of quarter after quarter.

You have to listen to the conference calls or read the transcripts to know what I am talking about. Every one of them sounds almost the same: "We bought back 2% to 3% of the stock so far this year, and we want to buy more." How many companies simply said, "We think our stock is so cheap, we had to be aggressive"? You get anomalies like Comcast CMCSA, long an issuer of stock, buying back billions of dollars' worth as it goes up; it's the best use of its capital because the future is so bright.

Previous «
1 2
At the time of publication, Cramer had no positions in any of the stocks mentioned in this column.

Jim 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. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.


Active Trader Update


10/27/06
Three Stocks for the 300 Millionth American

Americans are living longer; here's how to play it.


10/26/06
Thursday's Blog Watch

Read all about Jack Welch, and doing no right at Amazon.


10/25/06
Google May Just Be Getting Started

Chart analysis of the Internet giant, plus SPDRs, SimpleTech and Datalink.


05/19/08
Cramer on Top Searched Stocks: Yahoo!

Yahoo! is among the most searched stocks on TheStreet.com. Here's what Cramer had to say about the stock recently.


05/17/08
Jim Cramer's Best Blogs

Catch up on his thinking on the hottest topics of the past week.


04/26/08
Coming Week: Make or Break

Investors will have to deal with a Fed meeting and another flood of earnings and economic data.


05/19/08
Top Rocket Stocks: Ensco

Ensco International and Echelon have the potential to move higher in coming days.


04/28/08
Monday's Analysts' Upgrades, Downgrades

See who made what calls.


05/19/08
Telecom Giants See a Savior in Video

The addition of video is helping telecom companies compete against cable and satellite companies.


05/19/08
Contract Expiration Tempers Oil's Rise

The June West Texas Intermediate contract reflects selling pressure ahead of Tuesday's expiration. But stocks in the sector are generally trading higher.


05/19/08
Analysts' Upgrades, Downgrades: Amazon

See who made what calls.


Back to Yahoo

Your Recent Quotes: Quote Up0 | Quote Down0
Dow S&P 500 NASDAQ
Oil*
Gold
10 Yr
0.00%
%
%
%
Data delayed 20 min
Sign up for our FREE newsletters now.

Keep on top of the market and the critical information you need to make more profitable investing decisions.

  • Cramer's Daily Booyah!
  • Before the Bell

Privacy Policy

See All Free Newsletters

Premium Stock Ideas
Access Action Alerts Plus to find out Cramer’s latest picks now!