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:
- More boxes he can check off on his list on how to create more rallies
- How the oil companies today remind him of the 2009 banking crisis
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
We Accept Checks Here
Posted on March 2 at 3:16 p.m. ET
It sure feels better, but is it better? That's what you have to ask after a day like Wednesday, a consolidation day after Tuesday's big run.
That's why we have our checklist, the one that makes us more emboldened or makes us play keep-away from stocks.
1: We say the Fed has to give us clarity about where it stands on rates. We have had two primo hawks, James Bullard from the St Louis Fed and Bill Dudley from the New York Fed, downgrade their views of the economy. Short of a smoking-hot employment number on Friday, this is good enough for government work. I'm checking it off.
2: We need some resolution in political uncertainty. The last time we went down the list, we had no certainty in either party. Barring something extreme, now it's Hillary v. the Donald. Now we can start creating portfolios for either eventuality. Check.
3: We need China to get better. It's actually gotten worse, but the Baltic Freight Index has been creeping up and there's a big parliament meeting this weekend where we expect aggressive stimulus. Meanwhile, the decline in the Chinese market hasn't hurt our markets. Big change. Half check. Maybe full check on Monday.
4: Do we have a commodity bottom? The commodities have rallied of late, led by copper, which is breaking out. I am feeling more and more confident that this group may be done going down. Check.
5: Oil has to stop going down. The relentless slide must end. Hmm. We had a big inventory increase today and oil didn't get hammered. It went higher! The stocks have stabilized. I am feeling good that a bottom may have been reached at $26 and it won't be breached. I don't expect a big rally but the downside seems to be quantified. Check.
6. We need to see some improvement in the political scene. Here we have a definitive check. North Korea's been quiet. There's a cease-fire in Syria. The less-hardliners are winning in Iran. Not bad for a couple of weeks' work.
7. We need the zombie companies to be put to death. Here's something I didn't expect: Many of them have gone up enough to get more liquid. There have been equity offerings for the oil companies that have saved their balance sheets. That, in turn, has buoyed the stocks of the banks that have lent them money. There are plenty of smaller oil companies that are going belly-up, as well as some smaller coal companies, but I think there's enough equity money to keep a ton of dying companies alive until oil eventually goes higher. Let's give it a check.
8. We need relief from the freaking strong dollar. It's funny, this was the one thing that had been going right just a few weeks ago. But the euro's gotten weak again, and while some emerging-market currencies have been stronger of late, there's no check in sight for this important box.
9. We need more mergers and acquisitions. Let's see, we have some. We've gotten Johnson Controls (JCI) - Get Report and Tyco (TYC) and we got a Chinese company to buy Syngenta (SYT) , the seed company. Then again, we had a failed deal when United Technologies (UTX) - Get Report rebuffed Honeywell (HON) - Get Report . I want to say things are getting better here, though. Half check.
10. We want to see a healthy IPO market. Nope. No check whatsoever.
11. We were afraid of peaks. But we have seen some resurgence in the homebuilder stocks, perhaps because interest rates have come back down. We have had a split decision on autos, Ford (F) - Get Report showing nice acceleration but GM (GM) - Get Report faltering. And aerospace, according to both United Tech and Honeywell, remains strong. I am no longer taking my cue from Boeing's (BA) - Get Report stock because there are issues involving accounting, and when I see those I run from -- not go to -- a stock. Cellphones? Still getting a bad read on them, but I think Apple's (AAPL) - Get Report stock may have put in a bottom because the iPhone 7 beckons in the second half of the year. Let's say half check.
12. We needed to see more negativity. Two weeks ago Thursday, we had a level of negativity that I hadn't seen in ages, a genuine flight to quality that included what many thought would be a credit crunch. Oil threatened to take down the banks. We began to hear about freeze-ups in lending worldwide. That fear has dissipated. I think we have seen peak fear and negativity for this cycle.
13. We need more sector leadership beside FANG, my acronym for Facebook (FB) - Get Report , Amazon (AMZN) - Get Report , Netflix (NFLX) - Get Report and Google, now Alphabet (GOOGL) - Get Report . I think we are getting it. We saw the cloud stocks, which had been decimated by terrible performances with LinkedIn (LNKD) and Tableau Software (DATA) - Get Report , come back to life with back-to-back superior quarters from Salesforce.com (CRM) - Get Report and Workday (WDAY) - Get Report .
We have seen some leadership of late in the cyclicals, especially Honeywell and United Technologies as well as General Electric (GE) - Get Report , Ingersoll-Rand (IR) - Get Report and Parker-Hannifin (PH) - Get Report . We lack the drugs and the biotechs. The banks are still stalled. But we have seen some retailers and restaurants bottom and go higher. I am checking this box off. (Apple, Facebook and Google/Alphabet are part of TheStreet'sAction Alerts PLUS portfolio.)
14. Finally, we wanted to see some of our favorite companies do better because of lower energy prices. Other than a very small handful, this just hasn't happened. We have seen the downside of lower oil but very little of the upside. No check.
Let's put it all together. We had 14 boxes that needed to be checked before we want to hold on to stocks when they rally and buy them more aggressively when they come in. I make it so there are three boxes that are definitely vacant of checks. The others are full or half checks, eight and three, respectively.
You are never going to have all the planets align at once. But are there enough checks and half checks for me to say the dips must be bought and the rips? I wouldn't be so quick to sell them. They might be the real deal.
Position: Long AAPL, FB, GOOGL
The Oil Companies Remind Me of the Banking Crisis of 2009
Posted on March 2 at 11:23 a.m. ET
It's gotten self-fulfilling. Devon (DVN) - Get Report does a company offering of shares, and it works. Pioneer (PXD) - Get Report does one and it works. Marathon (MRO) - Get Report does one, Hess (HES) - Get Report does one, Newfield (NFX) does one and now it is Weatherford's (WFT) - Get Report turn.
I am talking about the insatiable appetite of buyers to snap up "in-the-hold" offerings from cash-strapped companies, something that makes it likely that unless oil plummets again to the mid $20s, these companies will be able to hold out until prices go higher or they are taken over.
This equity market has obviated the need for bank loans. In fact, these deals are done because of existing bank loans.
They are so bountiful that one could argue that even some of the worst of the worst, like Freeport-McMoRan (FCX) - Get Report , which has been doing at-the-money equity selling, could easily sell 150 million shares in the hole and give themselves more breathing room. The higher it goes, the more longevity it has.
It's been a long time since companies have had to tap the equity market for balance sheet purposes, but these remarkable deals are showing how effortless it has been if your stock is down enough and the company's willing to price the merchandise low enough.
Without this fountain of capital, you would see the oils and the banks down big.
Recently, Exxon (XOM) - Get Report came out with amazing news: higher production, much lower costs and a possibility of a raised dividend. The fact that it could sell $12 billion in bonds so easily is a sign that not everyone overspent their cash flows with the endless expectation of forever higher oil.
Now there are some stressed out companies like Encana (ECA) - Get Report , Linn Energy (LINE) , Chesapeake (CHK) - Get Report and Ultra Petroleum (UPL) , well chronicled by Carleton English, which could use more capital - urgently, frankly -- and that's going to be very difficult.
(Encana, by the way, is the company that settled in an investigation by Michigan state a few years ago, which resurfaced in the Aubrey McClendon Sherman antitrust saga).
In the meantime, though, as long as oil stays up, and the equity offerings work, you are going to see an amazing transformation to where we were less about oil, because the majors are all liquid.
Remember, none of them wants to do this. It's like the banking crisis of 2009. But they did. With these companies, it will be no different.