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:
- Europe worries,
- the press' love of bad news, and
- how to avoid "no man's land."
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Euro-Worries Are Getting Out of Hand
Posted at 11:41 a.m. EDT, May 17, 2010
Just imagine, for a moment, what would happen if mortgage rates from
dropped to 4.5%. What would happen if gasoline fell to $2.50 or even lower? What would happen if commodity prices came down and down hard?
Would you like the situation? Wouldn't you like the idea that the
would be on hold at these low rates? Wouldn't you like the increased purchasing power you would get, especially at a time when the housing tax credit has concluded? Wouldn't you be looking for stocks to buy that were related to the consumer as they came down because of exogenous circumstances like foreign banks?
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This market is giving you a resounding answer:
Nope. That would be foolish.
. None of that matters. Don't you dare think of buying a
, even as it can buy its products more cheaply with a strong dollar and sell them to you for less. If you are thinking about buying
, you are nuts, because of what's going on in Europe. Attempt to buy a U.S. bank? Are you kidding? Do you know how much
has on the hook in Spain? In Portugal? It might as well be called Portuguese National Bank, right? Isn't
Banco Bibao Trust?
Don't you see the relation between the euro and the price of food at
? Are you an idiot? Can't you see how
is going to get its butt kicked? That
has to slow because of Greece?
The idea that you think that a company like
trades with mortgage rates here and not mortgage rates in Lisbon is just fanciful. You are a moron.
has some exposure. Europe has been weak forever, and you have to ignore what they say about it getting stronger, because, after all, aren't they bozos who shouldn't get the benefit of the doubt? Wasn't John Chambers of
just fibbing when he said things were strong in Europe? Is there a vast national conspiracy among U.S. companies to lie about "the crisis" and how it will crush
sales, even as it doesn't have much overseas except Brazil?
Oh, and it doesn't even matter in the end, because we can only imagine how hard
will be hit by China. We can just speculate on the vast damage to earnings that
will suffer. Are you quaking about
like I am, knowing that there are simply regulations that drive orders to new engines they make, but that's totally overridden by the desire of the Chinese to cool commercial real estate? Are you simply a moron? You have to be more worried.
Maybe you are just brain-dead.
Anyway, if you have the misfortune of owning a stock that is in an index, any index, you will be "helped" by the great liquidity the "dark pools" give you, except when they order a full stop and stocks like
go to zero. Don't worry, the
has your back. They will develop a circuit breaker that kicks in when stocks are down 50%, but only before 2:30 and when each exchange agrees to let it happen. Now I feel safe.
The other day on Twitter I expressed that it can be beleaguering. There was a nice outpouring of people who urged me not to be, but there were the usuals, the people who say, "Why not tell people to go into cash? Get 'em out?" Smart -- like I did in October of 1998, even though I was reacting to being beleaguered? Or is it more like September of 2008, when I said that it was your chance to get out, and reiterated it in October of 2008, at
10,300, before it sold off 4,000 points. Believe me, if I thought it was October of 2008, I would say, "Get out now." I have no compunction about that, as long as it counts if I say to get back in at Dow 6500.
I have no doubt in my mind that the single best thing to do is become Nouriel Roubini. I could do it today. Something like this: "I got you out at 11,000 and 10,000, I got you in at 6500, I am now saying I hate it and will always hate it because of the dominos and how it is all going to crash down as the euro dike breaks. I will have been able to say, 'avoided 4000, caught 4000, sell everything' and my record would be clean to all but the pundit class and the Jon Stewarts who will hate me no matter what, because of snippets easily produced that can make anyone look like an idiot. (Cue the snippets!).
In the end, though, I am stuck with a market that still has a pulse with stocks that can still rally if given a chance
more pressure and more decline. So I advocate defense, and I advocate accidental high-yielding dividends -- another one tonight -- and I advocate a strategy that says to let the pessimism and skepticism build and let some banks fail in Europe.
But never forget that Fannie Mae,
, Washington Mutual, Bear Stearns, Lehman Brothers,
and Wachovia all failed (Wachovia can get some benefit of being bought before the run wiped it out), and
became a ward of the state. (I like Citigroup as it goes back to $3.15 through moronic government selling done by the equally dim sellers at Morgan Stanley) and we still managed to get back to where we were.
Now, I know that those aren't as important as the First National Bank of Lisbon/Madrid/Athens and that we should
compare the wholesale crash of the American banking system, save the soon-to-be indicted
(doesn't that have to happen?), to the collapse in a currency that brings money to us. Never. I am not that foolish.
I just, in the end, am stuck with the thought that
is levered to U.S. housing, not housing in Barcelona, and that
makes cabinets here to be sold here and not in Mykinos. I am stuck believing that
is just being conservative. I am stuck thinking that the New York Empire report doesn't counteract so many other regional reports from the Fed. Doesn't matter, for now.
Which is why I am wrong, wrong, wrong, and those who see the impact of the euro on
Housewives of New Jersey
certainly have the edge on this buffoon.
At the time of publication, Cramer was long AAPL, ACN, TEVA, CMI, HD and GS.
Editors Must Love the Dismal Stuff
Posted at 2:23 p.m. EDT, May 18, 2010
Just too hard ... again. It truly is hard because of the governments around the world. We hear that the Germans are about to ban naked short-selling, and instead of saying, "Good, good, they can't drive it down anymore," we say, "Wait a second, holy cow, how bad are things really? Isn't this panic on the part of the Germans?"
You can bet which view takes precedence.
Or the housing issue today. Housing starts going up -- good. Housing permits going down -- bad. So guess which one gets picked up and run with? Guess what people care about. Guess what they seize on.
Tom Graff has some great stuff in Columnist Conversation about
what matters in housing
, but no one is listening. And when we hear about the redoing of mortgages, all we hear about are the ones that fail, never the ones that are holding, which are many. Negative builders with credibility like Bob Toll are saying that things are better. He used to say things are worse. He's ignored. People keep asking if there is financing on housing, maybe there isn't. But it is bountiful. No one listens.
reports a terrific number, much better than
. But what takes precedence? Take a guess.
It is incredible, the prism is three-quarters empty even if the glass is half-full.
Pessimism is building. Skepticism is building.
But we are so not there yet.
Random musings: I agree with
this notion by Tim Melvin -- it is an excellent summary of where we stand.
At the time of publication, Cramer was long Home Depot.
Avoid 'No Man's Land' at All Costs
Posted at 12:57 p.m. EDT, May 20, 2010
We have a huge "no man's land" problem, even if we are down 10% from the
high, which often tempts me to be a somewhat sizable buyer of stocks I like, the so-called shopping list. But here's the problem -- the individual stocks that I like aren't there yet, "there" meaning where there's not all that much risk to bidding for them. We could be talking about
, which just reported great earnings and are trading off badly. But I would like to use some better bellwethers, some companies that reported the single best numbers in the
averages. They stand out as being the best of the best when it comes to the quarter's just announced. The three?
It wasn't just that they all reported fantastic quarters that exceeded estimates handily. More important, all three were unexpectedly upbeat about their futures, with some vision of the problems that are now dominating our stock market. Emphasis on "some." All three of them made it clear that their businesses were on the upswing. All three of them said the upswings were diversified -- not all Europe, not all U.S., not all Asia, not all Latin America.
But where do you buy them? Here's the checklist I use to decide whether to start bidding. It is the prism I like to use to see if it is time to buy. First you check yield: UTX at 2.5%, BA at 2.63%, MMM at 2.59%. None of them qualify as accidental high-yielders.
Now, price-to-earnings multiple: MMM's at 14 times next year's earnings, vs. the estimates out there. So is United Technologies. Boeing's at 16 times earnings. Now we match their growth rates: MMM's growing at 12%, UTX at 11%, and Boeing's at 13% growth. UTX is less than 1 times earnings, which is attractive, but MMM's at a slight premium to growth and Boeing's at a real premium, although I can explain that away by saying that Boeing's at the beginning of a multiyear cycle, the Dreamliner build, which could last as long as seven years, as long as the others.
Now we ask whether those earnings growth rates could be low or high. Given the collapse in commodities, we know the raw costs for all three companies could be low. They were all worried about raw costs on their conference calls.
But the strong dollar could hurt all three, as there are competitive risks -- other companies that will have products that are cheaper if they sell them in euros. Their products now have a competitive advantage. Plus we know that countries' growths are slowing: Europe because of the need for austerity from the profligate ones, something the IMF will mandate; China by design of the government. That means, to me, that none of the stocks seems very cheap on earnings, if the end markets are getting weaker. Plus, I don't want to have a high price-to-earnings multiple in this level of uncertainty, as that presents some genuine risk.
So on earnings I can't get excited. Still no man's land.
Now let's talk about some real risks. The crash two weeks ago showed that there was some mechanical/systemic risk to the market. We don't know if the machines will fail us and back away. We don't know what will happen with the double and triple ETFs. We don't know how margined people are, how margined the hedge funds are. We saw a monster amount of liquidation in 2008 that took stocks down to absurd levels. Maybe we'll get those levels again, particularly if we get something like a
event in Europe, either a country or a bank's failure.
The uncertainty is killing stocks.
We don't know about the plan in Europe, we don't know about financial regulation reform. So we have systemic risk from Europe and we have government risk from the United States and we have mechanical risk that we saw could be quite frightening, so frightening that we saw a outflows in mutual funds for the first time in 60 weeks, according to the keeper of that data (the Investment Company Institute).
Finally we check technical levels for where we can bounce. The oscillator, which indicates whether we are oversold, is at minus-four, not a minus rate that makes me want to buy, particularly when we have seen double and even triple this level in 2008 and 2009. So we don't get that checkoff.
The actual S&P levels, as represented by the charts, give us no support at all that I can see. While I am not a chartist, I don't see anything compelling here. Just -- once again -- no man's land. Tim Collins, who charts for us, says things don't get interesting until $104 on the
SPDR S&P 500
, still a ways a way, and he caveats by saying if that doesn't hold, then we have a long, long way to go before we find a floor!
In World War I, the most dangerous place on earth was no man's land -- too far from their trench, too far from our trench. Caught in interlocking fields of fire. Stuck. Looking for some hole. Shells everywhere. Fear raging.
In war, you could get court-martialed if you refused to go into no man's land. In France, you could get executed.
This is not war. We don't have to go over the top. We can wait. We can see what happens. We can have it play out.
And that's what my judgment is. You can send out some scouts -- that means 100-share buys for us at
where our basis is helped. But why do more? The levels just aren't extreme enough to make me feel that it is worth doing more than that.
When does the "shelling" stop? When something truly bad happens to the other side that causes capitulation, in this case European governments and banks.
When is it worth risking the no man's land? NEVER. We need to see stocks that are so cheap that we expect to cross over and take some casualties on the way. Casualties -- pain -- are part of the game. But we want
casualties. We are not the Russians in World War II, for example, where massive casualties were part of the equation. They sent their soldiers out without weapons -- the equivalent of no dividends, let alone high ones. When we see an MMM or a UTX or a BA down so much that their yields are accidentally high and they are well through their growth rates (something that's already happening with some of the bigger techs, like
) and we see charts saying, "OK, this kind of level has held before," and we see the big, bad events -- whether it be financial regulation or Greece getting the boot or the actual failures of banks in Europe -- then the odds are better.
Not going over the top.
At the time of publication, Cramer was long Intel.
Jim Cramer, co-founder and chairman of TheStreet.com, writes daily market commentary for TheStreet.com's RealMoney and runs the charitable trust portfolio,
. He also participates in video segments on TheStreet.com TV and serves as host of CNBC's "Mad Money" television program.
Mr. Cramer graduated magna cum laude from Harvard College, where he was president of The Harvard Crimson. He worked as a journalist at the Tallahassee Democrat and the Los Angeles Herald Examiner, covering everything from sports to homicide before moving to New York to help start American Lawyer magazine. After a three-year stint, Mr. Cramer entered Harvard Law School and received his J.D. in 1984. Instead of practicing law, however, he joined Goldman Sachs, where he worked in sales and trading. In 1987, he left Goldman to start his own hedge fund. While he worked at his fund, Mr. Cramer helped start Smart Money for Dow Jones and then, in 1996, he co-founded TheStreet.com, of which he is chairman and where he has served as a columnist and contributor since. In 2000, Mr. Cramer retired from active money management to embrace media full time, including radio and television.
Mr. Cramer is the author of "
," "You Got Screwed," "Jim Cramer's Real Money," "Jim Cramer's Mad Money," "Jim Cramer's Stay Mad for Life" and, most recently, "Jim Cramer's Getting Back to Even." He has written for Time magazine and New York magazine and has been featured on CBS' 60 Minutes, NBC's Nightly News with Brian Williams, Meet the Press, Today, The Tonight Show, Late Night and MSNBC's Morning Joe.