The Underlying Business Doesn't Matter Anymore

Watching Black & Decker (BDK - commentary - Cramer's Take) crash through to $30 yesterday -- a sickening slide if there ever were one, brought on by management's kitchen-sink forecast -- I was reminded that there is no fundamental worth to any company anymore.

The idea that this company -- the best brand name in the business, one with a long history of conservative management -- now trades below $2 billion is simply unbelievable. The brand equity alone could be worth a quarter of that, and the cash flow is huge.

But it doesn't matter anymore. The stock price is only determined by those who are willing to value it on its current earnings stream, not its net work, courtesy of all of the financing problems for just about anything and the immense number of private equity blowups that we haven't even heard about, although Blackstone (BX - commentary - Cramer's Take) at $4 might give you a real heads-up of what is to come.

We see this pretty much everywhere. Is Textron (TXT - commentary - Cramer's Take) really only worth $9? Is it worth $9 to everyone out there, or just to the stock traders that dominate? I know that Hartford (HIG - commentary - Cramer's Take) is a troubled stock, but it has a property casualty book value that is in the 30s.

We see Morgan Stanley (MS - commentary - Cramer's Take) trading immensely under book even though it has sold pretty much everything that could impair that book -- but that doesn't matter.

There's no strategic buyer for that one.

Or how about all of these oil and gas companies that have been trashed? Last night a caller asked me about Berry Petroleum (BRY - commentary - Cramer's Take), a stock that traded at $62 that is now at $7. It's got a $13 book, it is immensely profitable and it has a 4% yield. Doesn't anyone care?

No.

I hear these people come on TV all day. They're saying that stocks are cheap, and they sure are as ONGOING BUSINESSES, but obviously they are not cheap as stocks, and that pretty much defines all that matters right now unless you can forget about performance.

The problem with that, of course, is if you forgot about performance last year, you lost an ungodly amount of money. You might not have enough left to profit from the Textrons and Hartfords and Berrys and Black & Deckers when things turn up and go back to normal.

At the time of publication, Cramer was long Black & Decker and Morgan Stanley.

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