NEW YORK Real Money -- 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:
- The current nature of the market -- dangerous, but full of great opportunities;
- Why the oil bears are overreacting to Iran;
- Why portfolio managers are unreasonably down on techs and financials.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
The Stock Market Is Treacherous, Perilous, and Ultra-Rewarding
Posted on July 13 at 6:13 a.m. EDT
Now we have a deal. To me, the deal is a deal to stop talking about Greece for now, because this is all about austerity AGAIN, and it hasn't worked before.
Will it help our stocks? Or will at least a cessation of "Grexit-No Grexit" for a bit change things here?
Initially it looks like yes, although I am sure that we will just hear today about how it hastens rate hikes here with no growth there.
I can tell you this, though, we need the help -- both from relief of Greece and Greek news and, by the way, from a healthier Chinese stock market three up days in a row -- because a look through the charts this weekend shows almost nothing but pain.
This is a market where there is no tech leadership, no real financial leadership and no transport leadership; it is problematic. A market that has relentless declines in anything commodity-based, and I mean declines where you can't even see a point or two lift, is just plain painful. A market that has turned in the industrials can be an abysmal one. And a market that has only scattered members of the health care sector is just a plain mystery.
That's where we are with a Greek deal and with the Chinese market rally, which I think we can now officially acknowledge did give you a great trading opportunity despite the much-derided stopgap measures. I guess the day when the New York Times finally flagged the Chinese stock market crash as the lead story in the paper did, indeed, turn out to be a terrific trading opportunity.
This market has turned on pretty much everything except scattered situations: cable companies, some restaurants, some medical devices, the auto parts resellers and some refiners.
In fact, this market is almost entirely special situation, meaning that something's going on that's going to propel that specific stock and no others.
For example, we know that Amazon (AMZN) - Get Report -- a holding of the Growth Seeker portfolio -- has been going up ever since it decided to break out Web Services to show profitability. Netflix (NFLX) - Get Report keeps going up because we have so few global growth stories. General Mills(GIS) - Get Report, Mondelez (MDLZ) - Get Report and ConAgra (CAG) - Get Report are now considered to be takeover targets. Royal Caribbean(RCL) - Get Report is viewed as the only way to play travel other than Marriott Vacations Worldwide(VAC) - Get Report as they are perceived as value for the frugal.
No one thought that a video game company - Electronic Arts(EA) - Get Report -- or a seller - GameStop(GME) - Get Report --could survive in a digital online world. The health maintenance organizations HMOs are being taken over by each other. The hospitals won in the Supreme Court. The drugstores are becoming a fat oligopoly with pricing power.
I could go on and on about one-off situations. The good news is that there are dozens and dozens of them in the chart book.
The bad news?
The S&P's biggest units only have a couple of healthy companies' charts in them, like Red Hat(RHT) - Get Report, Adobe ADBE, Accenture ACN or Akamai AKAM in tech, or a Bristol-Myers(BMY) - Get Report, Abbott (ABT) - Get Report and AbbVie(ABBV) - Get Report in big pharma or Disney(DIS) - Get Report in entertainment. There are no bank charts that seem very strong, except for the credit card companies and Bofl Holding (BOFI) . It's really a dearth of good charts.
Which brings me to the central question: the damage in this decline seems far worse than any I have seen since last October's selloff and at least then there were some healthy larger groups.
I think that's what we feel every day. The weight of a market that simply has too few stocks that are working, terrible breadth and the over-arching need to find the winners because, more than ever, the winners tend to be totally outsized because they are driven by takeovers and consolidation.
It's treacherous, perilous and ultra-rewarding all at once. But the first two most certainly overwhelm the latter, which makes this market so unsuitable for so many except for the most nimble investors and those who can short commodities with conviction that they will never lift.
That's because they sure haven't for ages, and don't seem to be able to as long as global growth is slowing and the Fed keeps talking about pulling the interest rate trigger -- something that will only accelerate now that there seems to be less panic in China and an austerity deal in Greece.
People Are Too Negative on Oil
Posted on July 14 at 11:00 a.m. EDT
Iran does not flip a switch and come back on line. But U.S. companies that want to cut back oil can indeed flip a switch and people keep forgetting that.
As I look at the landscape, I remain shocked that people really expected that a deal with Iran would drive oil down, which is what former U.S. Energy Secretary Bill Richardson said yesterday on Squawk Box.
The market doesn't work like that. The market sizes up what Iran is going to do ahead of when the deal is made and then once the news is baked in, it tends to change direction.
Now there might be some people who feel that the Iran deal won't pass muster in Congress. However, the European Union will break ranks with the U.S. if Congress stops the treaty, so it might not even matter.
To me, the big issues are demand, which I think will accelerate now that Europe might be focused on growth and the recovery continues in this country, and supply, which I believe peaked in production away from OPEC.
They are both positive read-throughs for oil.
Now we know the oil stocks have plunged within or well below when oil was lower before. That's meant nothing. But I believe that many got ahead of the short call off Iran and are now covering.
Either way, I think the stocks have bounce here and I would buy them. For the first time, I wish I had made no sales. People are just too negative about this commodity.
What Are Portfolio Managers Afraid Of?
Posted on July 16 at 2:51 p.m. EDT
Nobody likes the techs and the fins? Yet it's the techs and the fins that are flying and leading this market. What's going on?
When I say the techs and the fins, I am speaking of the technology stocks and the financials. When I say nobody, I mean most of the big-time money managers and activists we interviewed yesterday at the Delivering Alpha conference just didn't seem to want to go there. They didn't seem to like or trust the businesses.
For example, Bill Ackman, smart guy, who has made fortunes investing in restaurants and chemical companies and railroads, just feared buying into a business that could be wiped out by a disrupter. He likes companies with moats, that Warren Buffett description of a business that can't be taken down by the proverbial better mousetrap.
As for the financials, I think the managers who have repeatedly gone back to these stocks as "cheap" vs. their historical levels have just given in, beaten up, not able to take the pain anymore.
They are too hard to analyze.
And you know what? These managers might very well be right when it comes to their targets. But I think it's time we speak truth to power and say just how wrong that's playing out right now.
The hottest stocks in this market, other than the targets of takeovers, are the stocks of companies with disruptive technologies and the financials.
Now I know that you could easily miss them both. I am very sensitive to what these managers think of as tech and what they fear. Take Intel(INTC) - Get Report. Last night, after Intel reported a big upside surprise, the stock jumped almost 10%. As always, the people who bought the stock didn't listen to the conference call and revealed themselves as the special kinds of idiots who belong on some wall of anonymous shame because we can't identify who they are.
But when you listened to the conference call, you realized that Intel, far from being a buy, simply was a tale of woe, a business that's still so levered to the personal computer that all of the good work it's doing away from the PC isn't enough. Stacy Smith, the sensational CFO of the company, said Intel had been modeling mid-single-digit declines in personal computers, but, woops, it turns out that it is, and I quote, "kind of down in the high single digits." Ouch.
The only other business that is declining at that rate is the coal business. I am not kidding, go listen to the CSX(CSX) - Get Report conference call and you will see that the railroad, after getting used to low-single-digit declines in coal, now sees it declining in the high single digits. Lumps of coals and PCs. Who woulda thunk it? Microsoft's(MSFT) - Get Report in a similar position, frantically trying to reduce dependence on personal computers by offering cloud-based products. So is Hewlett-Packard(HPQ) - Get Report. But they can't outrun the decline.
So I totally get the reservations by the big-money men because the tech they know is outdated.
But I wonder if they know Tableau Software(DATA) - Get Report, the company that offers analytics software that is better than anything legacy. It hit another all-time high today, up 48% for the year. I wonder if they are familiar with ServiceNow(NOW) - Get Report, only a few points off its high and one of the fastest-growing information technology companies out there. Sure, these companies can be disrupted, too, but not yet, not in their formative periods. ServiceNow is part of TheStreet's Growth Seeker portfolio.
Or let's get less abstruse. I didn't hear anyone like Facebook(FB) - Get Report. Yet companies keep writing checks to Facebook for $100,000 and getting $200,000 back in business. It's the preferred way for everyone to get customers. Every time I am out with a consumer products company exec who is trying to reach millennials, he or she just turns it over to Facebook advertising people with computer science degrees who are smarter than they are about reaching customers. They then keep the customers with the help of Salesforce.com(CRM) - Get Report. Again, that's another company that doesn't come up.
Let's not just use information tech. How about biotech? Where were those big-time portfolio managers on the next Receptos (RCPT) , which I might have next week, or for that matter on Celgene(CELG) - Get Report, which is up again today on the acquisition of that terrific company.
Nah, they see pharma as Merck(MRK) - Get Report or Glaxo(GSK) - Get Report or Pfizer(PFE) - Get Report, no-growth businesses with uncertain prospects and dubious pipelines. They are looking at old pharma, not new pharma. Merck is part of TheStreet's Trifecta Stocks portfolio. Pfizer is part of the Dividend Stock Advisor portfolio.
They were nowhere, that's where. Oh, and let's go there because I have already. I didn't hear anyone talk about the most important disrupting technology force in entertainment worldwide, Netflix(NFLX) - Get Report. Sure, the tech is suffused with creativity, but it is tech nonetheless and its moat reminds me of the Pacific Ocean with no Pearl Harbor in sight.
Or how about the banks? Everyone's giving up on the banks just when the most important expense is coming down and coming down hard: the legal expense. The Justice Department's bank grand inquisitor, Tony West, has gone to PepsiCo(PEP) - Get Report, and that was the signal, right then and there, to raise numbers. Sure, we care about net interest margin, what they make, effortlessly, off your deposits. Yes, the yield curve, the shape of what interest they can get on those deposits, is going higher because of money demand and because the Fed will soon raise rates.
But what these managers missed was the fear and loathing of the Justice Department and, believe me, it would have taken the artistry of Hunter Thompson to describe the bizarre world of how Justice arrived at those sums that the big banks have paid.
Some of these banks have spent billions in defense just to end up paying billions to the United States in fines. I could have argued, like my personal hero, Dick Kovacevich, former CEO of Wells Fargo(WFC) - Get Report, that West would have done better putting some bad guys in jail rather than just having the shareholders bear the brunt of the fines. But you want to have some fun? You caught the beginning of a major run in almost all the big banks when West left the Justice Department for the greener pastures of PepsiCo. Right then, the analysts should have gone Hold to Buy, but they were too busy thinking inside the box and worrying about earnings per share based on lending and deposits. The swing factor was expense, legal expense. Go ask the execs at Bank of America(BAC) - Get Report or Citigroup(C) - Get Report or JPMorgan(JPM) - Get Report if you don't believe me. Facebook and Wells Fargo are part of TheStreet's Action Alerts PLUS portfolio.
Now, I am not saying there aren't lots of things I heard yesterday that make sense. I thought Bill Miller was spot on when he said Delta(DAL) - Get Report can go higher. That airline is growing at a phenomenal rate and sells at an amazingly low price to earnings multiple. I understand all the financial engineering that execs want to do with foods and restaurants and retailers.
But in the end, I come back to the fact that these portfolio managers seem to be scared of the past, so they come up with creative ways to cotton up to dowdy situations. I always say there is more than one way to skin a cat. However, the big cats, the lions and tigers, they don't live in the cages these hedge funds hunt in. They are in the great open spaces where they are harder to find but a heck of a lot more lucrative when you do so.
At the time of publication, Jim Cramer's charitable trust Action Alerts PLUS was long FB and WFC.