The Consensus View Looks Too Gloomy

Sometimes it pays to know the consensus thinking of the big boys, the smart boys who trade every day. So let's detail it before we critique it:

1. Someday the companies that report bad earnings are going to start going down again. This is the Parker Hannifin (PH - commentary - Cramer's Take) dilemma I keep alluding to, a company that skyrockets on terrible numbers no matter how you cut it.
2. The market will now recognize that the stress test is a big joke, everything's a phony, and the banks will fold again. Roubini's right; Geithner's a lightweight.
3. We have to come down because we have gone up too much for no reason.
4. The public-private partnership is a joke and will be revealed as such.
5. Nothing good is happening, and the "beats" are phony beats that have to do with lowered expectations.

Here are my comments on the consensus:

• PH -- it's pretty hard to argue that this company is doing all that poorly, given the severe, down-30% business climate. It is pretty easy to argue that a year from now, when aerospace orders kick in and stimulus kicks in, that this company's stock, which had been hammered gigantically, will still be as low as it is. Easier compares than Procter & Gamble (PG - commentary - Cramer's Take), General Mills (GIS - commentary - Cramer's Take), Coca-Cola (KO - commentary - Cramer's Take), etc.



• Is the stress test a joke if the government says Fifth Third (FITB - commentary - Cramer's Take) or Huntington Bancshares (HBAN - commentary - Cramer's Take) or KeyCorp (KEY - commentary - Cramer's Take) shouldn't be allowed to continue independently? Is the stress test a joke if SunTrust (STI - commentary - Cramer's Take) gets a warning that it should merge or die? It only takes a couple of companies to bite the dust to say the Treasury secretary is serious. What do the bears do if this happens? Plus, you could argue, a la Tony Crescenzi yesterday in these pages, or Bob Toll on Mad Money, that the end of the inventory glut housing crash is soon upon us. This is a contrary view, but has anyone been more thoughtful and less "agenda-filled" than Crescenzi? Has anyone been more bearish on housing than Toll? Doug Kass agrees with this, by the way.
• We rallied because we came out of a depression that brought the stock market down 53%. We went down too much, given that the depression ended in March, and too many companies, particularly tech companies, have reported upswings or stabilization, and the unemployment claims seem to have stabilized.
• I want in on the public-private partnership, because I know so many others who want in, because we recognize it as a relatively risk-free way to make a lot of money that reminds us of the huge sums that were made in 1990-1991 during the equivalent of a public-private partnership to take assets off the books of the troubled banks.
• The legendary Steve Galbraith, the analyst I think that has done more work on bottoms than anyone I have ever met, says they always include a moment when the earnings estimates are so low that they can be beaten. In fact, it is the single best coincident indicator of the bottom.

So, you now have the conventional wisdom. You now have the refutation. To me, buying right here makes sense, and buying down 5%-6% would be fantastic, especially because I know so many hedge funds that are betting on the top 5 points and so few on the bottom 5.

At the time of publication, Cramer was long GIS.

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