Jim Cramer fills his blog on RealMoney 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 bulls' victory on Friday;
- Why analysts don't understand Europe; and
- Why some former hedge-fund favorites may be on the ascent again.
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Remarkable Victory for the Bulls
Posted at 5:29 p.m. EDT, Friday, August 6
Can you imagine how much we would have been up if we gained a few jobs? Can you imagine where we would have gone if oil had been up a dollar, something that could have easily occurred? OK, fantasize over this, can you imagine how high we would be if the government had spent as much zeal trying to create
jobs rather than ripping the private sector and hobbling the domestic banks? Needless to say, the foreign banks are now obviously ascendant.
I look at today as a huge victory for the bulls, and the week as an astounding one. We came in red hot from July, and pretty much everyone figured we were due for a selloff. The bulk of earnings were over, we lacked catalysts except downward ones, and we got them, and it still didn't matter.
Now we can sit here and talk about complacency and a lack of selling, but what it seems to be is a case where many who wanted to sell over the years of having the you-know-what kicked out of them have sold, and that the people who are left are either brain-dead or simply saying they can't get a return anywhere else.
I think this is all rather remarkable. We had so many reasons to go down today that it is almost as if the market has said, "Look, Obama and his team will be out in November and all of the radical syndicalism (remember that term?) will be over."
Funny thing. I am finding myself more and more in that camp. That means if we get no jobs, it's good news, because this regime is now pretty much universally despised by the capital class, particularly the part that voted him in, and the GOP will be ascendant. And if we get jobs? Well, see the top of this blog entry!
Over the Analysts' Heads
Posted at 7:22 a.m. EDT, Thursday, August 5
Maybe U.S. analysts just can't understand Europe. Maybe they are baffled by how Europeans think or work. You know there's some big disconnect simply by looking at three particular different companies in three different industries:
in the health care sector,
in travel and leisure and
Earlier this week, Allergan reported a fantastic number, and a great deal of the rally came from strength in Europe that the analysts just hadn't seen. It is true that the imminent approval of Botox for use in migraines titillated the crowd. As Allergan CEO David Pyatt said to me last night on
, the migraine application is the "El Grande" of blockbusters. The Food and Drug Administration is giving lots of hints that we could see approval for the usage this year. But the bread-and-butter ophthalmology business in Europe was a big needle mover in strength, and the analysts simply weren't looking for it. It was as if they didn't know how to model it.
Or take Eaton. CEO Sandy Cutler straightened out a lot of people on his conference call and in his interview on Mad Money when he said that there isn't a "Europe" but, rather, a northern and a southern Europe -- and the former's doing terrifically, which is a big part of the upside for Eaton. Viewing the continent as a monolith is just a mistake, he said -- and it was a mistake that, as with Allergen, caused estimates to be too low.
Perhaps the most glaring example of U.S. analysts misjudging Europe, however, has been Priceline. This company may be based in the U.S., but almost two-thirds of its business is derived from Europe. From the gigantic earnings surprise, one can only conclude that the analysts didn't see the rapid adoption of this company's services as times got tougher on the continent. A surfeit of hotel rooms courtesy of the European slowdown, and huge shift to the Internet, should have been identifiable to some of these analysts, no? These are two gigantic macro trends, and if anyone trying to be thoughtful on the stock should have been aware of them. None were.
You don't see a 20%-plus gain in a stock in a day just because a company did well. You see one because the analysts also did badly.
All of this has me wondering about another, bigger issue: Could the analysts be wrong about Europe and tech? The consensus is that there is a larger-than-normal summer slowdown and that Europe's too strapped to take new product. The two prongs have been stakes in the backs of
among a host of other companies, including
I am now thinking that these analysts may be as uninformed about tech as they were about travel, industrial and medical. The worst that happens? The tech companies simply meet the really low bar that analysts are now setting for Europe. The misjudgment is strictly in the bulls' favor.
At the time of publication, Cramer was long CSCO and INTC.
Posted at 5:16 p.m. EDT, Monday, August 2
Looks like a replay of 2008 today. We have all of the hedge-fund greats ramping right up like yesteryear. Take a look at these blasts from the past that are up hugely today: Joy Global
, National Oilwell
. They are rallying courtesy of a robust commodity market, let by crude going north of $80, something I know very few people believed would happen.
Do they deserve to go higher? Let's analyze. Joy Global never really missed and continued with terrific underground-mining equipment throughout the entire downturn, which took the stock up to $88 in June of 2008, before it came crashing down to $15 eight months later. At $60, with China still expanding, I think the stock makes sense as a buy and, obviously, the company does, too, because it has shrunk its number of shares outstanding by 7 million to 103 million during the last three years.
Freeport had a terrific quarter, and with copper strong and new mines beckoning, FCX seems right, especially because it is rapidly paying down the debt it racked up buying Phelps Dodge at obviously the wrong time in the cycle. The stock, which traded at $125 during the hedge-fund heyday, collapsed to $16 in March of 2009, and it's still got a ways to go if you consider how much better the company is now than it was then.
National Oilwell Varco's a tougher call. The $89 price of 2008 now seems somewhat fanciful as a goal, though the $18 price at the low, when hedge funds just blew it out, seem just as ridiculous. While it was a terrific quarter, I think that the Gulf spill will impact these guys and it's not a favorite at $42 -- not with
only at $16 and change. Just not as much upside, especially because a lot of the natural-gas business it's doing now could slow, as the price of natural gas is just too low to stimulate profitable growth in the industry.
Potash is, perhaps, the biggest quandary of all. The thesis for Potash when it traded at $240 was that China would be a huge buyer because of the need to feed. It was kind of a generic thesis. Now, there's a true food shortage around the globe, and the farmers are flush and they will buy more fertilizer. I like the story very much. But unlike the other stocks trading higher, Potash seemed to burn most people, and hedge funds feel that this management team is
promotional and can't be trusted to be anything but bullish.
Me? I would own it using deep-in-the-money calls -- the December 95 calls for $17 and change. It is a stock I worry about being bagged on, but I want the upside. This stock-replacement strategy, which I detail in
Getting back to Even
, is built for a stock like Potash, because as it goes higher, you can short common against it, and if the darned thing blows up again because of a shortfall, you could make money on the long and on the short below the strike.
The bottom line on all of these stocks is that if you believe, as I do, that China has engineered a soft landing -- as the PMI for China indicated last night -- these four work. Of course, there are plenty of people who simply focus on the residential and commercial real-estate markets and have deemed China a disaster waiting to happen. To me, China is a command economy and it can shut down or scale back real estate at will, especially because, as we read over the weekend, the vast majority of the real-estate programs, the ones responsible for the overheating, are state owned. I do not think that we are at the cusp of a U.S.-style housing bust.
So, if you think as I do -- soft landing, no housing bust -- then you will recognize that all of these former hedge-fund darlings could, once again, become loved. This time, hopefully, you can get out before they turn hated, as I think they will become as overvalued as they were before, if the big boys sense the moment and pile into all four once again. Just to be clear, I do not think that has happened yet.
But judging by the action today, it could be around the corner.
At the time of publication, Cramer was long WFT.
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.