Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- Why investors should keep their faith in the biotech sector.
- The diminishing impact of manufacturing on the U.S. economy.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Don't Abandon the Biotech Ship
Posted on Dec. 1 at 5:16 a.m. EST
The all-or-nothing relationship this market has with biotech is stupefying. Consider yesterday. Regeneron(REGN) - Get Report was tagged for an 18-point loss, yet UnitedHealth(UNH) - Get Report decided to favor its anti-cholesterol drug over that of Amgen's(AMGN) - Get Report . That's a gigantic deal, and one that says those who sold Regeneron when CVS(CVS) - Get Report gave its contract to Amgen, should re-think their stance.
Celgene(CELG) - Get Report rolled over again, this time presumably because of a challenge to its blood cancer franchise by Bristol-Myers BMY. BMY is a very strong competitor and it is true that Revlimid, Celgene's offering, came in a tad light last vs. expectation, but we are still at the cusp of what the drugs from Receptos (RCPT) will bring to the franchise.
Action Alerts PLUS charity portfolio holding Biogen(BIIB) - Get Report roared Friday. Maybe that's why it sold off on Monday? Gilead(GILD) - Get Report , if you read Twitter, seemed like it was about to have a breakout on Friday.
Instead, it had a breakdown on Monday. That's why this group seems to have become investible. The volatility is insane. Plus, the company that was rumored to be on the prowl to buy one of these or Amgen, and here I am talking about Allergan(AGN) - Get Report , has said that game's over. It's wedded to Dividend Stock Advisor portfolio name Pfizer(PFE) - Get Report , and has more of an AbbVie(ABBV) - Get Report -Abbott(ABT) - Get Report break-up in front of it than anything involving the takeover of these biotechs.
In that world, where fickle is the watchword and rigorous long-term thinking is all but banned, what do you do?
I continue to believe that Gilead will be able to take the money it is getting from its Hepatitis C franchise and grow à la Pharmasset, via acquisitions, as per Celgene. I don't think Celgene's Revlimid franchise is in doubt. Our trust has a substantial position in Biogen, because it is just too cheap.
In other words, don't abandon ship. There's too much good out there, and while it is overshadowed by the current bad, all of these companies do have earnings power and balance sheets that are good, and therefore are not to be trifled with, or sold if you own them.
Forget Manufacturing, Let the Fed Hike Rates
Posted on Dec. 3 at 6:17 a.m. EST
Does the manufacturing economy matter enough in this country anymore? Does it provide that many jobs? Will that many people be thrown out of work if it slows down more than it already has?
That's what you have to be concerned about on the eve of the all-but-certain rate rise. Think about it. Earlier this week we got an ISM manufacturing reading of 48.6, down from 50.1 in October and the worst reading since June of 2009, in the heart of the great recession. Economists had been expecting a reading north of 50 -- remember anything below that level on this incredibly important Institute for Supply Management' gauge signifies contraction -- so this was a pretty shocking number.
In fact, if the fed funds rate were anywhere about, say, at this point, 2%, we would be buying stocks in anticipation of a Fed rate cut.
More important, those of us who have been around recognize that we would all be talking about how we could be thrown into a recession by aggressive Fed action. Anything but one and done could be a suicide mission for American manufacturing.
But the more important question right now might be, does it even matter anymore? Are there enough manufacturing jobs left in the United States that it matters? We aren't China, where equivalent reports that show readings below 50 cause international repercussions. Their current contraction readings are roiling every commodity and machinery market in the world.
Ours don't even seem to matter.
Last night, as I pondered this moment with my writing partner Matt Horween, we were wondering if the Federal Reserve is simply making a bet that we are a service economy now, and we could be a red hot service economy if the Fed isn't careful.
Forget manufacturing. We need more people in service jobs if we are going to keep wages down and perhaps, with employment this low, we don't have them. If you are just worried about the service economy, then the Fed can raise several times and it might not have the impact many of us used to fear.
Let's face it, ever since we decided to embrace globalization as a religion, ever since we decided that free trade meant no tariffs for what pretty much anybody makes and sends here, we put the "for sale" sign on all of the factories in this country. What can't be made more cheaply in Mexico, with lower health costs and more pollution? What can't be pushed to China, or if that gets too expensive, north Vietnam?
Pre-NAFTA, the Fed's next move could be a disaster. In this world now, though, maybe Alcoa(AA) - Get Report won't need to build another aluminum factory to meet auto demand. The only real industrial marginal hiring that had been going on was in the oil patch, and that's just simply game over, especially on the eve of an OPEC meeting where it is likely there will be no cuts announced.
So, here's what I am thinking. I know that housing could get overheated, and is in some parts of the country. I know that autos are at peak production. But the idea of mass layoffs in the manufacturing sector could occur if the Fed raises rates?
I am not buying it. Nor am I that concerned. Why? Because maybe we don't have masses left to lay off, that's why.
At the time of publication, Jim Cramer's charitable trust Action Alerts PLUS was long BIIB, AGN.