Stocks Are 'Cheap' -- But That Isn't Enough

You always need some sort of thesis, some worldview, to make you buy stocks. You can say, "With the amount of money being pumped in, something good can happen." Or you can say, "Stocks are cheaper than they have been in years." You can see Alcoa (AA - commentary - Cramer's Take), Textron (TXT - commentary - Cramer's Take), International Paper (IP - commentary - Cramer's Take) -- great American companies in single digits -- and conclude, "You have to buy something."

And then you look at what's underneath: a stimulus plan that's stimulates next to nothing, not even Wal-Mart's (WMT - commentary - Cramer's Take) earnings, it is that small; stocks of companies that no strategic buyer can afford to buy and the Blackstones (BX - commentary - Cramer's Take) -- see that stock's price? -- aren't able to either, even though they claim they can; and the debt situation of all of these single-digit stocks, which require bankers and bond holders to show forbearance and let things roll until the economy gets better. The research is equally as negative, hence the downgrade down here of IP over at Goldman Sachs.

I keep coming back to this Textron quarter. They have so much money due that I don't see how they can justify saying it's not a problem. Textron reminds me of another lender that's been chronically short of capital: CIT (CIT - commentary - Cramer's Take). If you follow the CIT route, then you know that means you need more capital and the equity market is the logical one to tap, hence why Textron's common stock is down to 9.

The aggressive shorts and the scared longs look at any company that has debt coming due or needs more credit, and presumes that the money will not be there.

Last week, for instance, I heard that some smart short-sellers were buying credit default swaps on JC Penney (JCP - commentary - Cramer's Take) to freak people out -- yes, that's legal as they are currently configured -- swaps which then crushed the common. That triggers worries from the agencies, which spikes the cost of borrowing, which makes the company -- unless it has a great quarter -- susceptible to all sorts of whims in credit markets.

This process is playing out everywhere, so it makes a worldview of cheap stock buying coupled with government-stimulated demand seem like a false theory to base buying on.

Until something "good" happens, we will be in more of the same territory, relentlessly, and that means days where you simply can't afford to take advantage of the dips without risking annihilation.

Random musings: If you really believe in the energy portion of the stimulus package, you should believe in Owens Corning (OC - commentary - Cramer's Take) as an insulation play -- there's money in the bill for it. I don't think it works because of the decline in oil prices. But at least it's a play on it!

At the time of publication, Cramer was long Goldman Sachs and Wal-Mart.

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