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 Federal Reserve doing the right thing, for once
- What Donald Trump's promises really mean
- How this stock market just won't stay down
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
4 Reasons Why the Fed Woke Up to Reality
Posted on March 17 at 12:59 p.m. ET
What happened to the Federal Reserve since December? What occurred to make them so unsure of themselves about four rate hikes vs. how strident they were just three months ago? I think this puzzle has to be solved because it is the difference between grabbing the next big entry point vs. taking a pass.
To set the scene, there were plenty of people calling for a rate hike all fall, but the collapse in China caused that talk to be put on hold. We can argue whether that's too specific, but when everyone with lots of capital is worried about where the Chinese stock market's about to open and we have an August flash crash that takes the Dow from 17,500 to 15,600 in a handful of days that dovetail perfectly with the Chinese stock crisis ... well, you get the picture.
But then the Dow rebounded and China looked under control. Even as we were getting some softer non-wage data, the Fed took action and the next thing we know, we were taking out those supposed "artificial" flash crash lows, as emerging markets around the world collapsed -- as many said they would do -- our manufacturing sector got pounded and central bankers around the world decided to take advantage of a soaring dollar and throw acetylene on the fire.
At the same time, the one part of the manufacturing economy that had still be doing well despite the ever stronger dollar, the oil and gas industry, simply collapsed. While we want to, at least geographically, contain the issue to a dozen states that depend on oil and gas for their well-being, I think even the Fed was shocked at the manufacturing default risk that suddenly appeared all over the place.
Any thinking person on the Fed would have to believe the hike triggered a wave of deflation that had been hinted about, but turned out to be spot on, coupled with a dramatic and instant decline in the wealth effect that had been buoying retail.
So reason number one for their tempering: The risks tilted suddenly toward deflation.
Reason number two? The lack of actual wage growth. I think the Fed sensed that somehow, as employment got stronger, there had to be a boost in wages. But the data say otherwise. If you strip out mandated minimum wage gains, wages have fallen, not gone higher. That's a fact that the ideologues -- so many of whom have microphones -- have lost touch with, because they are so darned rich they don't even know the real world any more. (Believe me, I might not know either if I didn't have involvement in actual small businesses.)
You just aren't getting what the textbooks say should happen. I think wages would be falling pretty hard if it weren't for the minimum wages gains. So, wage inflation isn't tame, there is no wage inflation at all, as the Fed can't reverse minimum wages.
Reason number three? Our export companies are doing so terribly while there is no wage growth, that the national narrative seems to have changed: The foreign countries want to take our jobs away and they are succeeding, so let's throw the bums out and get protectionist. That's what this election has become about. I was amazed at how little people paid attention to the political dynamic out there when they discussed the Fed's no easy stance. To me, it is front and center.
Finally, I think that this holiday season was all about the digital economy. It became really clear that the digital economy, coupled with the new nightmare of globalization, is producing a lower standard of living, further compromised by both higher health care costs mandated for all but the indigent by the federal government, and a relentless spiral in rents from a critical housing shortage.
These all became too much to bear for the Fed. It didn't want to be the reason why we went into recession just to please a handful of hawks who will never change their minds anyway. In other words, I think the Fed woke up to reality, and we are all the better for it.
Donald Trump Would Have to Overturn Deals to Keep His Promises
Posted on March 16 at 6:50 a.m. ET
Give Donald Trump this: We have been pants'd on almost every single trade deal we have done with our so-called partners around the globe.
For years now, when I get a chance to ask an official of either major party to name, be it one deal in the last decade that we have signed that has given us a surplus, not one party functionary has been able to do so. They all come back with dogma of free trade and then try to embarrass me, as if I never took any economics in college or high school and don't know the first thing about how the world works.
I am now watching some of the same people who tried to embarrass me on so many shows for so many years questioning the free trade orthodoxy they have blathered on about.
So I have no beef when it comes to what Trump says about these trade deals: We have been horrendous negotiators, or we would have at least come up with a surplus on some of these deals.
You don't make it up in volume.
However, let's do go a step further. In his "acceptance" speech Tuesday night -- with quotation marks around the word acceptance because no matter how big this guy wins, the media still talks about him having a bad night this time because he lost Ohio -- besides his bashing of these truly idiotic trade deals, he did visit specific corporate incidents he thinks are travesties and says he will change them if he becomes president.
Let's look them over. First, he says he is going to force Action Alerts PLUS charity portfolio holding Apple(AAPL) - Get Report to make its cellphones here. I don't think anyone, including Trump, knows how he is going to make Apple do this. We don't have the workforce in this country to assemble all of those phones and most of the component makers reside in Asia, not here.
He would have to let Apple repatriate its foreign dollars with almost no tax and demand the money be used to build factories, but even then he will have to help Apple train a workforce to meet the demand.
I like the idea that he can solve the repatriation tax issues, but he would be best just letting Apple continue to do exactly what it is doing, which is putting millions of people to work all over the place, including the U.S., designing and creating and selling apps.
Plenty of people work for Apple in this country, including in manufacturing jobs. Donald, go look at the brand new headquarters Apple is building, one of the largest ongoing construction jobs in the United States right now, if not the largest.
I say it's low on the list of problems.
Second? Carrier. Earlier in February United Technologies(UTX) - Get Report notified union workers at a Carrier heating ventilation and air conditioning plant near Indianapolis that the work is being shifted to Monterrey, Mexico. You may bemoan this -- and the video that's on YouTube is a tough one.
But, welcome to the world of Nafta. You can make this equipment so much cheaper in Mexico, it is a wonder anyone makes anything here. Great workforce. Well trained. Loyal. Low absenteeism. Five dollars an hour. Questionable environmental standards. Health care paid for by the state. Train line ready to take products north, just as easily as any train coming out of Indiana.
Honestly, this one's about free trade in a nutshell. If Greg Hayes, the CEO of United Tech, wants to make his numbers, wants to raise profits, wants to grow the company, it just makes more sense to move that plant to Mexico. You would have to re-write Nafta to stop that truly no-brainer decision.
I want to re-write Nafta. I know that sounded foolish when I first articulated it not long after I started Mad Money 11 years ago, but that's the way the law works. Mexico's just a fabulous place to do business. Take it from me. I do business there. Raising numbers, United Technologies.
Back in May of 2012, when Eaton(ETN) - Get Report bought Cooper Industries, it chose to move its headquarters to Ireland. The company did so to save $120 million in taxes. So when Trump went to Ohio, it was easy to take a swipe at the Cleveland company for doing so.
While I can take issue with how well that merger has performed, I can't take issue with the decision to move the headquarters, because if our government was dumb enough to allow companies to shift headquarters so easily to avoid taxes and not evade them, which is a criminal case, then Eaton was right to do so.
I blame any headquarters move on the inability of Republicans and Democrats to make common-sensical policies that disadvantage American companies by keeping their headquarters here instead over overseas, particularly when they are international companies. Sure, it's just a mail drop: Eaton's very much a Cleveland company. But the fault is in Washington, not with Eaton.
Finally, there's Pfizer(PFE) - Get Report . Here's a company that merging with another company that has a foreign headquarters in Ireland, Allergan(AGN) - Get Report , and it is playing by the exact rules that Treasury set up to meet the new tests of inversion. The deal is structured precisely the way the Obama administration established its safe harbor for inversions.
If Trump gets to be president, maybe he can rewrite the IRS rules to allow it so that the next company can't do what Pfizer's doing. But it would be impossible to undo the Allergan merger by January. It will be closed.
So, Apple, United Technologies, Eaton and Pfizer -- all under attack by Trump -- will, hate him or like him, all be unscathed in a Trump presidency, unless real laws are changed and real deals are overturned.
For a different outcome, with the possible exception of future deals like Pfizer's and an aggressive use of Treasury rules, nothing will change with a Trump presidency unless he updates The Art of the Deal to prove he can buffalo everyone in the room, Democrats and Republicans alike.
Call that wishful thinking.
Position: Long AAPL, AGN
Rocky Balboa Would Envy This Market's Chin
Posted on March 15 at 3:29 p.m. ET
Why is this market so hard to kill? Why won't it go down and stay down?
I am going to just tick off how much bad news this market takes on a given day after a very big run and the darned thing just keeps fighting. It can take a jab, absorb multiple uppercuts and it just won't stay down, let alone lay flat on the canvas.
First, one of the absolute favorites in this market, the stock of Valeant (VRX) , an aggressive pharmaceutical company, was almost cut in half Tuesday. Here's a stock, already down from $263 less than a year ago, that fell from $70 yesterday to $36 in one session.
Valeant has the backing of some of the best minds of the era, including hedge fund billionaire Bill Ackman. It has been one of the best-performing stocks of all time, but it has been in an amazing tailspin since last August.
You would think that this stock -- which has been a political whipping boy of Hillary Clinton, who has been trashing the company since January -- could shake up the whole market with its gigantic losses. But Clinton's wrath against drug companies hasn't really resonated beyond this poster boy.
Don't ever say you can't make money from this election. If you listened to Hillary, she got you out of this one at $86 when she lambasted it as a serial raiser of drug prices. The pin action here is so minor. In another era, the spin coming off the head pin would have been a strike against the group, or even the whole market. But this one knocked the head pin into the gutter and left the rest of the field unscathed. Sure, not everything was spared -- sorry, couldn't resist -- but there truly wasn't much follow-through for an awfully close-knit sector.
You know what's really incredible? The presidential front-runner for the Democrats wants to cut prices of drugs pretty dramatically, while the front-runner in the Republican Party wants to save $300 billion by having Medicare negotiate with big pharma over drug prices. There's a Hobson's choice that seems to elude most buyers of drug stocks.
Second, we had really horrendous retail sales. February retail sales fell 0.1% but, more important, January retail sales -- which had been surprisingly strong at 0.2% -- were revised to down 0.4%.
I cannot stress to you how horrible this news is. First, we are beginning to see a big inventory buildup throughout the retail system because of these weaker sales. Second, and more important, we got a sizable rally the day when the original January retail sales came out. It was a sign that the economy wasn't as weak as many feared. Indeed, there was genuine joy at the time.
Now it turns out that our joy should have been sorrow and the rally shouldn't even have occurred. But was it repealed? Nope.
I was jumping up and down about it, so concerned that people would freak out, especially because it's a sure sign that auto sales have slowed and those are so crucial to the economy. No one even seemed to care. How is that possible? You go up big on a piece of false news and then it is blasted out of the water by a cold, hard reality negative, and it's ignored? Is that a sign of strength or what?
Just when we had become conditioned that every tick down in oil takes a big chunk out of the bull, we get a nasty spill in crude and the market overlooks it? We were threatening $40 a barrel the other day, where we know that a lot of oil companies can survive if not even thrive given some of the lower breakevens and the ability to raise equity.
Now we are slouching back to $35, down a pretty big 73 cents on top of a more than dollar drop yesterday, and the pain is limited to some of the more indebted drillers, independents and master limited partnerships. Exxon Mobil(XOM) - Get Report has spent most of the day unchanged or higher! There seem to be buyers lurking underneath everywhere in oil these days.
Europe was hammered this week, with the average bourse losing almost a full percent. We have traded almost lock step in Europe as of late, even though that makes little sense because they are easing and we are tightening. Literally, their central banker is determined to send their currency lower versus the dollar and get banks lending like mad. Our central bank is going the opposite way.
Which brings us to the last of the litany: If Janet Yellen & Co. thinks the economy is too strong, then we are going to get a rate hike, maybe as early as June.
The fact is, though, a hard-line statement saying inflation is going to come back because oil has come back could be horrendous for the stock market. How about if the governors think as a group that the economy is getting weaker? What can they do?
They aren't going to take the last hike back. Plus, there are always going to be hawks who will say, "We need to tighten regardless." I heard a bunch of people talking in the last few days about how a rate hike would be good for the market. Where were these people when we got our last rate hike?
Did they forget the tsunami of selling that came after the hike? Did they forget the horrendous January, the one that had people saying, "So goes January, so goes 2016," predicting a miserable next 11 months? How quickly they forget. Numbskulls. Oops, I meant ill-advised individuals.
Oh, and let's be sure, if the Federal Reserve doesn't talk about the need for rate hikes, then the banks and financials -- one of the largest groups in the S&P 500, the one that needs higher rates -- could be crushed, with numbers coming down across the board.
But no one seems to care. That group hangs in well today.
Why is this? Why can buyers be so fearless? A couple of reasons.
First, every time you could count this darned market out, something new pops up that's positive.
For example, a Chinese buyer comes in and busts up a huge hotel deal, Marriott(MAR) - Get Report to merge with Starwood (HOT) , by paying up gigantically for the latter. It was a stunning bolt of foreign lightning.
Second, you get situations such as The Fresh Market (TFM) , the weak natural and organic supermarket chain; it got a bid from private equity simply because there is so much money chasing so few goods that can be bought and that money is willing to purchase wounded properties and turn them around. Apollo(APO) - Get Report is paying $10 more for the stock of Fresh Market than it was a little more than a month ago!
Third, there's always something going right. Morgan Stanley came out with a report saying that Apple(AAPL) - Get Report i-Phone sales are running ahead of plan. That was a shocker, and there are so many companies that are levered to sales at Apple, which is part of the Action Alerts PLUS portfolio, that you got a rosy hue for almost all of tech.
Finally, there are enough retail outfits doing well that you can overlook the overall number. Today, it was Children's Place(PLCE) - Get Report reporting a monster good number. Last week it was Dollar General(DG) - Get Report . The week before, it was J.C. Penney(JCP) - Get Report and Target (TGT) - Get Report , which also is part of the Action Alerts PLUS portfolio. The aggregate numbers may be disappointing, but it is hard to stay negative when good ones keep popping up and surprising you.
In other words, as much as buyers should be more cautious and there should be more fear, and there should be more profit-takers every time it looks like this fighting stock market is about to go down for the count, it shakes off the punches and comes right back at you. Sure, today's a draw, but it should have been a knockout, and the fact that it hasn't been is a huge victory for the Raging Bull.
Long AAPL, TGT