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 banks' prognosis;
- the right nat-gas play; and
- a pernicious asymmetry in the media.
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Don't Write Off Banks Just Yet
Posted at 10:45 a.m. EDT, Monday, Sept. 27
Banks trade horribly: no kidding. The charts are horrible -- thanks old friend Ralph Acampora for coming on "Mad Money" and showing us the negatives to the group. The headlines, like the one that dominates today's "Money and Investing" section of the
-- "Banks Keep Failing, No End in Sight" -- continue to be nauseating. The worries over earnings just don't stop, with last week's
quarter redefining bad, as Jefferies said trading was terrible, and trading is an integral part of much of the group's earnings.
You can't get more negative than this endless parade of negativity. But think of the other business lines that Jefferies has. First there is merger-and-acquisition activity, which is running dramatically higher than it was last year. People are getting compensated big-time for
( AAI), as well as all of these recent tech deals.
Sure, M&A is up against easy compares. But it is extremely lucrative, of that there is no denying, and I don't think that the M&A that
Bank of America
is doing is factored into the price.
Second we have the biggest IPO week in three years. Doesn't that matter?
Third, despite the endless drumbeat of housing's collapse, it isn't collapsing. The bad loans at this point tend to be concentrated in the collateralized debt obligation world,
the whole loan world, where the trends are definitively better. People refuse to recognize that there were two pipes in housing: whole loans kept by the banks, and sold loans issued by a lot of fly-by-nights and then bundled by the likes of Lehman and Bear. The latter are atrocious and really "out there" -- part shadow inventory, part worthless.
But the whole loans are of better quality and can be more easily restructured.
No matter, the point is that Jefferies lowered the bar for the group, but the group does
look like Jefferies at all.
Could the group break out here? I don't think it can do so until we see the dividends returned. It is ridiculously out of favor. But remember that Jefferies is the most trading-oriented house other than Knight, so the lesson may have to be unlearned as we get closer to reporting period.
At the time of publication, Cramer was long JPM and BAC.
NFG Is the Right Nat Gas Play
Posted at 10:19 a.m. EDT, Wednesday, Sept. 29
If you like the
news of excellent Marcellus shale results -- and the market clearly does -- then you have to circle back to
National Fuel Gas
, which just last week hired a banker to bring out the value of its excellent Marcellus properties. The problem with all of the good finds of the public companies like EQT tends to be the inability to monetize the gas given the low prices and the crackdown against drilling that everyone sees coming.
So why NFG? Doesn't it have the same problems? No, because it is not a one-trick pony. It has a regulated but terrific business away from Marcellus, and for those hungry for Marcellus properties -- tends to be the big majors -- it can sell huge stakes in its own properties or sell them all and still have that terrific prosaic utility business ... and some excellent California properties to boot.
Why NFG over EQT? You get much, much more Marcellus acreage per share, and the whole company is valued at $4 billion, giving very little valuation to the actual utility, while EQT is $5 billion and isn't likely to sell the whole company. Remember, NFG has already hired a banker, Jefferies, to monetize Marcellus. You aren't going to get that with any of the pure public plays that we have seen so far, although some have been active selling stakes. If you get a Marcellus sale by NFG, it could be bigger than the entire company! In the meantime, if it
fall, you get a nice safe yield and a motivated management that feels compelled to take action to preserve value.
So, if you want to buck the trend and buy nat gas companies, reach for NFG first, not EQT, as terrific as I believe EQT is. You avoid the "EPA risk" -- the broad rubric for the wearing down of producers by a very restrictive anti-nat-gas government -- and you minimize the exposure to the awful natural gas price, one that I think will stay awful as long as the drilling continues.
At the time of publication, Cramer had no positions in the stocks mentioned.
I Guess It's Better to Be Negative Than Right
Posted at 3:19 p.m. EDT, Thursday, Sept. 30
Asymmetrical thinking. That's what my friend Tom Keene at
calls the notion of how you're viewed as an excellent thinker and a helpful participant in the debate if you are negative about a stock or the market -- right or wrong. If you are
and right about the stock and the market, it means very little. And if you are positive and WRONG about the market, then you are roundly criticized, often to the point that it ain't worth it. That's how bad the heat is.
We have a classic example in the papers today. In yesterday's
a constantly saturnine writer, Kelly Evans, who writes a very important article on the left-hand corner of the "Money and Investing" section, penned a piece called "Weak Economy Saps Dollar Stores' Strength." In it there were a series of negative thoughts about
, which was due to report the very morning the article appeared.
The incredibly cautionary article talked about how the "discount space is looking increasingly crowded," and there already may be too many stores. Then the article gets more negative: "More troubling, the squeeze on dollar stores' core lower-end shoppers is getting worse as unemployment continues to hover just below 10% and the economic rebound proves anemic." That macro backdrop, Evans writes, "is likely to put pressure on margins." More woes: "Bargain prices on food, drinks and other 'consumables' may get customers in the door, but discount retailers rely on higher-margin discretionary purchases for profit growth." We then get a cautionary note from a William Blair analyst Blair that says expiring jobless claims could hurt growth going forward, maybe by as much as 3 percentage points.
The conclusion? "A weak economy mightn't turn out to be quite the gold mine for dollar stores that many investors seem to think."
Five minutes after I read this article, Family Dollar reported and blew the numbers away. Let's just go through the cautionary comments laid out by Evans and what really happened.
First, right to the headline: "Weak Economy Saps Dollar Stores' Strength". Just flat-out wrong. The weak economy continued to bolster FDO's strength as more and more people trade down to the store and the people who are already impoverished stick with it.
The exact opposite of the piece's main thrust occurred.
Now if the economy had gotten stronger there would be a chance for a trade-up. We didn't get that. The correlation with a weak economy, precisely what drives investors to these stocks, continued unabated, if not accelerated.
Now, the contention of how "the discount space is looking increasingly crowded," was prima facie rebutted by a decision to expand more rapidly than in the past, putting up 300 stores in the new fiscal year. I had been expecting about half of that growth.
Before you think they are being too aggressive, remember this is a decision being made by the always-prudent Howard Levine, the chairman and CEO, whom I know to be the most knowledgeable exec in this field. Believe me, if the segment were getting too crowded, he would keep growth plans the same or throttle them back. The segment, if anything, is under-stored. Another negative canard.
Now how about the idea that "the squeeze on the core low-end shoppers is getting worse," with an anemic economic rebound and high unemployment issue? Again, it is exactly that "squeeze" that drove the sales higher than expected.
A positive of FDO turned into negative by Evans. I don't get how that even gets in the paper.
The squeeze on the consumer was supposed to put pressure on gross margins. But gross margins actually move up slightly, from 34.5% to 34.7%. No, not a great increase, but it was an increase and that's what matters.
The consumables, the food and drink categories, were supposed to be pulling down gross margins, offsetting the higher-margin discretionary purchases, but this, too, is untrue. The rapid escalation of food stamps in this country has created a whole new class of buyers who are less sensitive to price, and the consumables are not particularly low-priced at FDO. I have to believe that Evans simply hasn't shopped at an FDO or any of the other dollar stores, or she might not have reached this erroneous conclusion. The stores are increasing consumables, not as a loss leader but as a profit center.
So today I pick up the paper. Does Evans say she got it wrong, as I would have to do (and have done on "Mad Money" and on these pages)? No, she is on to the next story. Is she called out for it? I don't believe so, except here.
Such is the case if you are negative and get it wrong. It simply doesn't matter. There is ZERO accountability for what I regard as a travesty of reporting and opinion. A totally bogus analysis with no rigor whatsoever that would have cost you money had it come out the day before. Fortunately Family Dollar reported so early that the article couldn't affect your thinking or throw you off the money-making scent, as the stock rose in a tough day for equities.
Now, let's imagine a rosy piece about FDO that comes out just before FDO falls short of expectations. She could have been laughed at, scorned, perhaps even called onto the carpet internally. She would have had been widely ridiculed, perhaps even to the point that she might have had to eat crow. Again, contrast this with "Mad Money," where I keep a fake crow in my prop closet adjacent to the set (along with some Grey Poupon to be sure the taste isn't totally abhorrent).
I am not writing this to exonerate myself or excuse myself or praise myself. I am doing it just to point out a crude and all-too-consuming asymmetrical relationship between what happens if you are negative and get it wrong vs. if you are positive and get it wrong.
They are just crazily imbalanced. And the result is that far too often, the press keeps you out of good stocks, and doesn't even attempt to put you into them. Why is that right? Shouldn't the point of analysis to be to try to make you money? It isn't just to be cautionary ... especially when there is no reason to be so, as was the case with yesterday's excellent results from Family Dollar.
: Jefferies totally debunks the "
" story making the rounds today. Hence the stabilization. ... JMP talks about how
is finally getting some volumes on its new LED lightbulbs but the computer backlight business still too competitive for the numbers.
At the time of publication, Cramer was long Apple.
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.