Jim Cramer fills his blog on
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 lending nirvana;
- a potential revaluation;
- the next short-killer MGIC;
- running with the Dow bulls;
- how to handle earnings; and
- winning with Yahoo!.
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Originally published on 4/16/2007 at 11:11 a.m.
Lending's back! Seven weeks ago we heard that there was a dramatic revaluation of "risk" because of the decline in the market.
Could that have been more wrong? I see a dramatic increase in the valuation of all lenders. Look at
. Credit card and midmarket and student lending. How about the lending associated with this breakthrough
deal? What a debt pile-on.
Take a look at the
quarter: more leverage rolled into a quarter than I can remember.
And most of all, the newfound securitization of bad housing loans. The fact that these can be packaged and sold tells you that default risk has been re-discounted in a positive way!
Some of this is the
massive pumping of cash into the system to make up for the housing shortfall. Some of it is a recognition that subprime is not spreading beyond subprime. (If you disagree with me, go to the Web site of any of the major homebuilders and you will see that none of the $400,000-plus houses are being firesaled. The quick sale pages of these sites tell you that.)
We are in lending nirvana. The aversion of risk was just a classic bad call made at the bottom by lots of people who will never be outed for their "prudent" statements.
Makes me angry. How in heck can these people who said there would now be a dramatic aversion of risk still have jobs? Still be quoted?
I think it is because no one ever gets called out for being negative or cautious, even if it costs you money. The asymmetrical nature of the prudent/reckless dichotomy shows its face again.
Just plain farcical, if you ask me.
General Electric owns CNBC, for which Cramer is a featured commentator. At the time of publication, Cramer was long Capital One.
A Potential Real-Deal Revaluation
Originally published on 4/16/2007 at 3:23 p.m.
Time to consider something here: Are we in a market move of historic importance? Are we experiencing a major revaluation of equities?
We've all become convinced that the moment you write that first paragraph, you are going to be taken to our version of the politically correct cleaners. But this move -- which is now much more than just a correction of the, ahem, correction that was caused by the machine breakdown (can there be any question at all about that now?) and a Chinese margin call (oh, how tangential in retrospect) -- is beginning to make me feel that there's something larger afoot.
We know that the majority of the
could easily go private. We also know that the earnings estimates are way too low, based on a false concept that has plagued analysts for years now: a radical dismissal of overseas earnings as somewhat ephemeral in nature. In reality,
domestic earnings are more likely to be ephemeral, owing to the collapse of most of our industry over the years now, joined by autos and housing as moribund sectors. Other than health care and aerospace, you have to ask whether we have any real pull in the world as a great marketplace, even as we are the largest. That's because we aren't growing, and as I say tirelessly, growth is crack on Wall Street.
Paper, the equity paper, is proving to be too cheap. The companies themselves don't need to be public. The money is there to take them private and then just bring them public again for big dollars, as you can't have a much more hapless set of multiples to earnings than we have.
I want to cut back to the fallacy of the market for a second. When I look at the valuations of
Polo Ralph Lauren
and then look at the valuations of
, I am embarrassed by our markets. How can you pay 30 and 26 times earnings for what could be fads, and 8 times earnings for what could be a multi-year move to revaluate equities for which Goldman -- not Ralph Lauren or Coach -- is at the fulcrum? Goldman's a banker to the world, not a residential lender to deadbeats.
I select Goldman because, now that the steel stocks have ramped, it is the lowest multiple I have on my screen. This is a travesty, and one that I see being corrected right now, along with some of the revaluations of industrial companies that are more plays on the world than on our economy.
This revaluation is playing out right under our noses. We have been going up for quite a while now. We are making a mockery of those who sold at the bottom or those who told us that any number of ironies -- hedge funds going public, buyout funds going public, bubbles being burst in housing, yet no effect on the markets but it will be felt soon -- should make us sell.
I am thinking that if this is the case, we are going to start taking out some very exciting levels.
Of course, it will be important for most people not to talk about, particularly the people living in the post-2000 world where cheerleading allegedly crushed savings (I would point to margin debt and a lack of diversification as the more germane culprits), but this could be the real deal.
And if it is, the scale out has to be much slower than I would normally countenance.
Uh-oh, real cardinal sin here: It's quite exciting.
At the time of publication, Cramer was long Goldman Sachs.
The Next Obvious Short-Killer
Originally published on 4/17/2007 at 11:33 a.m.
We would always be worried about it being too easy when I was at my hedge fund.
? Was that so hard?
? What were we thinking selling that at $195? Did anyone really think that
wouldn't come back when the insider selling let up, which it seems to for a day or two?
This market is a short-killer because it is
. Once some factors were priced in -- inflation and the subprime chaos -- anything good would trigger a monster rally.
Let's take the case of
. How could people
have covered on these the moment that
said things were OK? Moody's is levered to leverage buyout bonds,
residential mortgage bonds, although the latter will live again as repackaged bonds with an equity kicker.
I'm glad I
told you about Moody's and McGraw-Hill Monday. Hope you did them. I have the next one:
Let me reiterate that MGIC, which didn't go down on that last quarter -- one that was just plain toxic -- will now explode to the upside for the same reason that the ancillary plays like Moody's and McGraw-Hill exploded.
My level of conviction? I would buy the
60 calls. One call, and you have 5 points to the upside.
Who wouldn't take that risk reward?
OK, let's get over it. It wasn't a meltdown. It was just a series of corrupt companies writing bad loans and thinking they could get away with it. If it were a "meltdown," wouldn't
have taken out its low? ... Some fun stuff
on video with James Altucher about who taught me to buy down. Never talked about that before. ... There's almost no open interest in the
April 200s. That's a good sign. It means there is no cap on the stock, because people won't get long as it gets higher. I bet the stock doesn't stop here.
At the time of publication, Cramer was long Goldman Sachs, AIG and Sears Holdings.
Should've Been Even More Bullish on the Dow
Originally published on 4/18/2007 at 8:48 a.m.
At the beginning of the year I was predicting big double-digit gains for the
Dow Jones Industrial Average
in my annual forecast, a forecast that quickly got me rebranded as a ridiculous optimist.
Now I'm looking real right.
Should have been even more bullish. Take a look; there are no holes in this index. When the worst you get is a not-great number from
, you know you are off to the races.
had its best quarter in a decade and will go to $60 at this pace.
Johnson & Johnson
was supposed to be weak, but instead blows numbers away on drugs that we didn't even think were doing well.
J.P. Morgan Chase
comes out with a magnificent number, arguably the best of the banks and a heavenly dividend boost.
is reinvigorated with a growth that we would expect from a small-cap restaurant chain, better than that!
You have to think that after that beautiful
number, the stock is ready to break out to $70.
came in with its first upside surprise in ages, and the stock is on the move.
the best Dow stock so far and it's not done. It won't be independent next year at this time -- that's my forecast and I'm sticking to it.
losing share so I am not worried about that one.
and IBM didn't do better than I was hoping, and both were upside surprises of a sort.
I think the best is yet to come, there's more great Dow ink. I believe these companies will vastly exceed the numbers:
- Honeywell (HON) - Get Honeywell International Inc. Report
- Pfizer (PFE) - Get Pfizer Inc. Report
- Procter & Gamble (PG) - Get Procter & Gamble Company Report
- Disney (DIS) - Get Walt Disney Company Report
- AIG (AIG) - Get American International Group, Inc. Report
- Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report
- 3M (MMM) - Get 3M Company Report
- Hewlett-Packard (HPQ) - Get HP Inc. Report
- Verizon (VZ) - Get Verizon Communications Inc. Report
- DuPont (DD) - Get DuPont de Nemours, Inc. Report
- American Express (AXP) - Get American Express Company Report
Yep, shoulda been even more bullish.
General Electric owns CNBC, for which Cramer is a featured commentator. At the time of publication, Cramer was long AIG and Hewlett-Packard.
How to Handle Overwhelming Earnings
Originally published on 4/19/2007 at 9:19 a.m.
Too hard right now. That's why earnings season can get so overwhelming.
as good as it looks?
as bad as it looks?
really all that strong?
The New York Times
stank out loud but the company couldn't have been more upbeat.
looked OK, said business was exceedingly strong.
looked light on volume, high on selling price (a la
what Tero wrote) and simply not so hot, but the stock's running. More work needed.
weak, but guidance is better. How the heck can that happen?
The problem with every one of these quarters is that the releases all read exactly the same: better than expected, or record earnings, or really fabulous growth.
Not one of these companies ever says anything disappointing, even when the quarterly results are
disappointing. The disinformation about, say,
was extraordinary. The
release, the interviews, were all exceedingly upbeat. I sat through a Sue Decker interview on
that was extremely bullish and totally wrong. I read through a
release and conference call and they are
about how they did? Meanwhile, United Tech is subdued about its performance even as it looked fabulous to me. UnitedHealth squawks how great things are but the growth is anemic.
Washington Mutual's quarter and release were totally emblematic of what makes the moment so difficult. Here's a company that had no business being upbeat, given the hideous subprime exposure. But it was. And the quarter wasn't a disaster. Yet the stock performed better, on a percentage basis, than any I follow.
CSX had declines in most major businesses but the costs were so under control it didn't matter. Again, a close textual analysis needed to be performed to see what people
All of these reports take hours and hours to figure out. You can't just look at the consensus and look at the number and draw any conclusions. You can't even listen to the questions and answers and make a judgment, as anyone who listened to the United Tech call knows -- that went quite poorly during the Q&A.
So, you can't make solid judgments. They don't hold up to scrutiny. They are too on-the-fly vs. the typical non-earnings period thinking.
I counsel taking a breath and focusing only on the clear blowouts:
and American Standard, for instance, and then hope that the market takes them down so you can get in them closer to where they were
they had game-changing quarters.
Really more of a jumble of short-covering, futures take-up and a sense that things are simply not as bad as expectations would have indicated. And you can abandon stocks that miss the guidance from the fourth quarter. They are as truly bad as the ones that blow away, sizably, the guidance set at the same time.
If you feel overwhelmed right now, you are. Which is why I always say that earnings season is the
time to make money.
At the time of publication, Cramer was long UnitedHealth Group, Yahoo! and Altria.
Three Ways to Win With Yahoo!
Originally published on 4/20/2007 at 9:41 a.m.
Reluctantly, with full recognition of their own incompetence, it is time to buy
again -- if only for a trade back to $30.
Hear me out on this.
First, there are two people at the company who are
incompetent bozos: Jerry Yang and David Filo. These are the founders. I believe they must have a degree of pride.
I know that they have been told that the problems at the company were related to a couple of underlings who were messing up. They were all fired. It turns out that the problems had little to do with these underlings at all. The problems were in the stars: Terry Semel and Susan Decker.
Yang and Filo can fire them and see the stock back up at $30, when it can be sold.
Second, the aggressive, emotional selling of this week is simply too panicky. The stock doesn't belong at $32. It also doesn't belong at $27, given the potential,
-wise, to ever get it right and the scarcity of Net properties.
Finally, while the company is very expensive, once again the expectations have been washed out of the stock, just as when it was at $23.
Worth it to start buying this hated monster on the "three ways to win" theory.
At the time of publication, Cramer was long Yahoo!.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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