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 safety of staples,
- a lack of clarity, and
- the peril of owning stocks at all.
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Nothing Else Working? Look to the Staples
Posted at 11:02 a.m., Feb. 23, 2009
A return to the soft goods and staples? One look at your screen today shows that the market has lost faith in a host of sectors. Even in declining flows of cash into equities, the money has to go somewhere. I think it is flowing back to the staples.
First, the case against the other large
. The uncertainty in the common stock of the financials has turned portfolio managers on to the sell side endlessly. As you can tell from the misdirection in the financials that the government is offering, it is impossible to figure out the worth of the common stock. So, with the exception of
, there is no way a responsible portfolio manager can initiate new positions in the group, even if
seem dirt cheap. This is all Geithner's fault, but there isn't much we can do about it. The destruction of the insurers --
-- remains one of the most astoundingly horrible sectors of the market.
. The early-cycle stocks have simply been demolished on the worries about unemployment and the lack of credit. The end of the auto industry as we know it has further damaged the group and the bogus infrastructure story from the stimulus bill is revealing the machinery stocks as companies without catalysts. Same goes for steel, which is in free fall today.
. The transports have been destroyed. There is no sponsorship whatsoever, and this group goes down pretty much every day. It is frightening to people because the losses are happening so quickly.
. Health care's been rocked by the new Medicare rules. If you look at
, you will see how the stress has just caused the group to buckle. The change in the law that severely limits Medigap, the staple of Humana, is on display today writ large. I would exempt the drug stocks, but they have gigantic strong-dollar exposure -- worrisome. I would say that biotech works, and that's why
been such a strong equity. I think that will continue, but we have to recognize that the group's been strong and Gilead's had a great run -- one that can continue, but a lot of the easy money has been made.
. Retail is under a level of pressure I have never seen, with balance sheets stretched beyond belief. It is amazing to me how many retailers simply may not make it. The downgrade of
today is emblematic of that. The
balance sheet, the
balance sheet ... they are frightening. The bankruptcies here could be monumental.
. The real estate investment trusts, once thought of as staples, are in free fall because they need financing to stay in business, and there is no financing for them. None. So as the debt needs to be rolled over, the market is downright inhospitable. Even the best of these,
, with the best retailers, and
, with the best commercial tenants, can't withstand this onslaught.
. Tech's under pressure from a million sides. When the best of the best --
-- tells people things have slowed dramatically, and the semiconductor industry puts out some semiconductor equipment data that's so dismal it will take your breath away, you know the group can't rally.
. Utilities? Sanford Bernstein put out a piece last week that talks about the need to cut dividends for many once-solid utilities companies because of an inability to fund the amount of debt. A whole sector that is too tough to invest in.
. Media? Oh, please. This area is headed for massive bankruptcies because of a gigantic decline in advertising. There's nothing investible here save
, but I would wait until that stock goes below $300 -- just today Collins Stewart cut numbers on the stock.
. Oil? Investible. A great place to go. As is gold. But there are only a few gold stocks, and the integrateds are the only oils worth trusting because we are going into the spring at a historic low point for nat gas stocks.
Which leaves the staples. Here is a group that is benefitting from almost every one of the things that are working against all other groups. The financings? They have rock-solid balance sheets, they don't need the money. The raw costs? All going in their favor. There should be huge gains in margins as the revenues stay up and the raw costs come down beginning in the next quarter. The advertising costs -- a huge part of the business for a
-- are coming down and at last are negotiable. The transport of the goods to the stores, a step function down as gasoline has gotten so cheap. That's why this group should go higher as the uncertainty in all sectors (save gold and maybe oil) is just off the charts. It is why I own
and PEP and
Johnson & Johnson
and feel confident about the entire group here. Even one of my least favorites,
, reported a decent quarter with good margin growth this morning.
It is, alas, the place to be, as people give up on a 2009 turn in the economy and accept that the only real growth is in staples, drugs (unless the dollar keeps strengthening), biotech, gold and maybe oil.
Well-reasoned piece by Mark Haefele on
, Welcome back, Mark!
At the time of publication, Cramer was long General Mills, Pepsi, Unilever, Johnson & Johnson, JPMorgan, Wells Fargo, Goldman Sachs, Morgan Stanley, Gilead and Hewlett-Packard.
Without Clarity, We're Stuck in a Down Spiral
Posted at 9:26 a.m., Feb. 25, 2009
Are the banks already "nationalized?" My friend David Reilly over at
penned a piece this morning saying it's already happened.
But then the obvious response is, if we are nationalized, then why is there still independence? Why is Vikram Pandit able to say he wants to keep Banamex (which he should), and why is
able to pay that huge dividend, a totally inconsistent payout that Peter Eavis highlights today in an excellent piece about capital ratios and how Wells' is inferior to
yet only JPM cut the dividend.
And why are the same boards of directors and officers that ran
Bank of America
, the two acknowledged problem kids (at least acknowledged by the banks), still there if we are nationalized?
Which brings us to the semantics of the situation. Reilly points out we have nationalization of the system but no seizures. That's an oddity given that Sheila Bair -- my guest today on
, on a show that runs tonight at 10 -- was actually nationalizing banks, in the "seizure" sense of the word a few months ago to prevent runs on the banks. In retrospect, did we need to do that? Did we need to truly nationalize, and how (speaking of inconsistencies) could we not seize
( CORS) or
( BKUNA) and yet seize
How did those banks not get seized and WM and WB did?
Oh, and while we are at it, why did the government seize the deposit institution that was
-- it had billions in deposits -- and not seize
, which had no deposits and was totally rogue?
All of these must be on the agenda. Someone has to clarify what the heck happened. Someone has to explain whether the principal method of bank funding -- preferreds -- gets wiped out, because if you wipe out preferreds,
you are seizing
and "nationalizing" in the old sense of the word is here.
I am puzzling over all of this, because last night Obama talked endlessly about the need for private investment, but if you seize big banks, why not wait until the government gives away the good parts and keep the bad parts? Without clarity, say, on Citi, why not wait until it is seized and then hoodwink the government with a lowball bid for Banamax or for the clearing business or any number of the well-run execution pieces of the pie of Citigroup?
What the government has done is FROZEN investment in banks, because by waiting for the banks to be shorted down to oblivion and perhaps causing runs, the ostensible reason for the seizure of WM and the attempted seizure of WB, the private sector gets the best of all worlds: It cherry-picks the goodies from the government and it doesn't have any risk.
That's where we are.
Unless Treasury and the
and the FDIC get into a room and offer what happens if a bank fails a stress test -- seizure, change of boards, wipe out of the preferreds, cram down of the bonds, a sell and breakup to JPM and
and Newco (a fictional bank created by privateering private equity people) -- we are not going to get to the world that Obama outlined last night.
Which means, again, the trick is to watch the
ProShares UltraShort Financials
ETF, watch the trading in the
PowerShares Financial Preferred
, the bank preferred ETF, and keep shorting, because the lower the banks go, the more likely that Tim Geithner tells his favorite reporters that any capital injection wipes out what's left of the common!
: It doesn't have to end like this. Check out the plan a bunch of old-hand bank regulators who helped save the S&L system in the 1980s say here in
an excellent op-ed submission.
At the time of publication, Cramer was long Wells Fargo, JPMorgan and Goldman Sachs.
Don't Need Stocks? Don't Own 'Em
Posted at 6:30 a.m., Feb. 27, 2009
Fall back. Fall back to basic principles. What do people
to do whether they want to do it or not? What do governments have to pay for whether they want something or not? What must be used whether you like it or not?
That's where we are right now in the helter-skelter pell-mell race to take all stocks to single digits as the notion of a worldwide global depression sinks in.
So many of you -- some incessantly, for heaven's sakes already -- have asked me, "Why bother?" or "Why not sell everything?" or "What's the point?" To which I say, patiently, and endlessly, and I'm on record on this, that if you need money for anything important, take it the heck out of the stock market.
As far as I can tell, I am the only one who has said, "Get it out of the stock market," and judging by the firestorm with which it was received -- including a national ad campaign against me -- I can see why people don't do it.
I am reiterating again that it is right. You need that money in the next four-and-a-half years? Go. Sell some. Maybe we get a lift, sell more. We don't get a lift, sell anyway. The market's horrible.
But there is such a thing as asset allocation. You can have 100% of your money in cash, and that's been terrific. For now. You can have lots of shorts on, that's terrific too. For now. You can own some stock and have lots of other assets, like gold and Treasuries and municipals, and that's also fabulous. For now.
The main thing for the stock portion of your portfolio, if there is one, is to think and remember what people have to do to exist. Think also what governments have to do to exist and, if you have to own stocks -- and maybe you don't (so stop reading here) -- you have a better chance of buying a survivor than not.
Mind you, that doesn't mean, "OK, go buy
." It doesn't mean that because the "what must" people buy doesn't mean the stocks making the stuff are cheap. The competition is fiercer than ever. The retailer and the consumer are squeezed and squeezing the suppliers. Think
. Think private label, like
( RAH) before you think Procter & Gamble.
Whatever the government can buy less of or pay less for it will -- the latter is a new thing when it comes to President Obama. That's why
have been decimated and are going to get decimated again. That's why
( GENZ) could be in for trouble along with
and the others that have high-priced drugs that need taxpayer support. It's why I don't trust
Many companies make useful products, but they will not survive in their current form. Too much debt. Too little cash. We will need what
makes for sure. But the way the companies are structured, you won't benefit.
We need cars, but we just don't need
. Or at least all of them, perhaps just maybe two or three of them.
We will shop, but why must we shop at
for that matter? We have Wal-Mart.
And, as always, think both ways. When I say I don't like a stock, you don't have to have me drill it into your head to short it. The opportunities here on the short side are much better than on the long side. Still. I don't think that will change until we repeal all of the gains since the mid-1990s.
Only then will we get to prices where selling may simply not make sense. Right now, shorting makes all too much sense, so selling will certainly make sense.
So, if you don't need stocks now, don't own them. If you can short them, short them. If you have them as part of an allocation, be defensive and diversified. But don't get your hopes up. On Thursday, with this budget, we saw the true colors of this administration.
It wants lower stock prices and less money for the wealthy.
That's never a prescription for a bull market.
At the time of publication, Cramer was long Wal-Mart
Jim Cramer is co-founder and chairman 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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