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Sometimes it is so bad that it is BAD! Don't laugh at that seeming bit of counterintuitive logic. Every investment professional knows that because of the way economic cycles and central banks work, you are often looking for signs of such stress and negativity that it is so bad it is GOOD because of what the banks can do and what a bottom looks like.
This time it hasn't worked out that way. This time, what's bad is bad and getting worse. This weekend, David Carr in
The New York Times
wrote an excellent piece about the mistake of looking for a silver lining, something that news media does.
The piece was caustic and skeptical -- rightly so, as you have to ask yourself, "Is it even worth it to look for the silver lining?" As the piece was about my friends on "Power Lunch" at
interviewing two noted bears, I found the logic even more poignant than Carr might have realized.
That's because it has
paid, in the last 28 years, to look for the silver lining. Empirically, it has paid. Historically, if you look at all the work Jeremy Siegel did in
, it has paid. The attitude of the hosts toward the bears, one of skepticism, has been the most intelligent approach to take since September 1981, a really long time to measure things.
But as we look today, with the so many of the Dow stocks alone threatening to be reorganized (see
) and layer on the fact that the U.S. is probably in
shape than most of the world, you come to a brutal conclusion that we are simply in the prelude still, which is why -- much to the chagrin of the hedge fund community -- the outperformance, as meager as it is, has come from the stable growers, particularly in the health care segment, which cannot be stopped unless you are willing to let people die, something that has always trumped the cycle and always will. (See
If you add more classic
New York Times
insight, this time from a great piece in the Book Review by my friend Joe Nocera about how the central bankers of the biggest Allied powers all thought things couldn't get worse than they were in 1931, you see the reason people think that S&P 600 is a given.
To be contrary to that negative view is to be "right," so to speak, historically. Hence the correct emphasis of "Power Lunch."
Normally we would go about picking winners right now amid the chaos. That's why, for example,
outperforms, because the chaos of
and many of the other European banks too numerous to mention, create openings. (Goldman just pulled one of its key Middle Eastern bankers and sent him to Europe to take advantage of all the investment banking to be done.) We should also be betting on mergers, but the market's participants are too shellshocked to take advantage of the economic tsunami except in rare cases, like
Johnson & Johnson
In short, we are still in a time where picking winners is perilous and shorting losers is paramount.
Or, to sum it up, the people who want to buy because historically it is right to buy because things are so awful are not counting on the obvious: They are awful and getting more awful, which is why cash, some gold (for the inevitable reflation) and the staples that
absolutely cannot be lived without
, will do best, although they won't make you much money, until ... well, we don't know when. That's the smarter approach than calling a bottom.
Bizarrely, the bottom may simply come when all those who seek to take advantage of the crisis to buy decide they can't take the pain. That means it is out in time and out in price for all but those who have a timeframe that is more than just the next six months to a year.
You know who gets this? The technicians only (Helene Meisler, Dan Fitzpatrick and Bert Dohmen to name three). The fundamentalists are using a historical model that may be obliterated by events, at least until it is so low that to not buy is to presume that everything goes under. As bad as things are, that won't happen, although the possibility of a wholesale repeal of all of the gains since the early 1990s has suddenly and brutally come back on the table.
: Given its huge multiple and capitalization,
may not be able to handle this morning's estimate cuts. ... Going through
for the possibility of betting that oil may not hit the levels the bears believe in and the contracts are still ironclad, but remember, RIG is like
when the contracts come "off patent," which is a 2012 experience. ... Many people have criticized me for the change of course I took on Tim Geithner's plan. But
The Washington Post
today talks about his radical change of course to a public/private plan from other methods, and it was his radical change in course that made me like what he was up to. More later on why Geithner's having such a hard time selling it...
At the time of publication, Cramer was long Goldman Sachs, Gilead, Abbott and Johnson & Johnson.
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