Ever wonder what the market would look like when all of the mutual funds finished selling? Now you know.
Monday's rally had the greatest absence of sellers that we have seen since the October headfake. The papers will want to portray the rally as a reaction to the Japanese saying they will do whatever is necessary to save their financial system, or possibly to the Korean government's willingness to embrace a bailout.
We simply got the mutual funds to complete their selling and we had tremendous inflows of capital into these firms, now that many distribution dates are past. We also have no underwriting calendar to speak of to sop up the demand. And we have managers well behind the averages who need to generate performance. Now. They will buy anything that is going up.
In fact, ironically, on Monday we saw further deterioration overseas as it became evident that some Japanese banks are repatriating U.S. bonds to shore up their own sorry balance sheets. There is no Korean rescue plan. Business is softening worldwide.
To which I say: so what? With oil going to $16 and gold crashing, there are more than enough Treasury buyers around to compensate for Japanese sellers. Let Korea take its time. These problems will no longer put the hurt on our market, because the inflation backdrop has never been more benign. That's great for the financials and the drugs and the transports and the utilities and not bad for tech. In fact, it's good for most of the
, except for the oil patch and the golds. The earnings? With the exception of some drive companies and scattered ne'er-do-wells, it looks like things are coming through okay. In fact, analysts probably have cut earnings estimates too much relative to how the quarter is concluding.
So far everything is playing out on schedule. We had the miserable October sell-off to engender fear. We had the massive put buying to compensate for the last war. We had the vicious options ramp up, courtesy of the bears, and then the hangover, then the backing and filling until December and then the mutual fund selling conclusion. From the looks of things we may even be done with most of the tax-loss selling.
What happens now? Well, remember back at the beginning of the year, some 3000 points ago, when I
predicted that the
will go to 9000? After losing our course for a couple of months, courtesy of a bout with overconfidence, we are now on schedule to complete the mission.
See you there.
What ammo do we have besides new money coming into the market? Unfortunately, we have the cash raised from selling the oil and oil related. I still think this group can move up eventually, and I am taking my licks. But I am not deploying new capital to it as it is asking for too much to believe that money will flow into this sector given the confluence of negative factors for crude.
How can I be so standoffish? How can I not urge you to buy and buy and buy? Simple: because I am not blind. I retain the right to be flexible in the face of potentially deteriorating fundamentals. It's called being smart. Never tie your hands behind your back and think you can trade as well as the guys with two free hands. Never forget: conviction can be the enemy of performance...
Check out the story in
about me and
As for that piece, memo to Alan A. at
. Personal foul: unsportsman-like conduct in the
article. Given your unbelievable negativity about the stock market since Dow 1200, I won't even dignify your mean-spiritedness with more than a yellow flag...
Bank traders: told you that Salem's downgrade should come with a cancer warning on its side.
James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mr. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to