NEW YORK (
) -- 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:
- rising compensation costs and why they shouldn't be a concern;
- more evidence of housing's turn; and
- unwarranted negativity surrounding earnings.
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Rising Compensation Costs Not a Bad Thing
Posted at 6:39 a.m. EST, Friday, Jan. 21
It's the costs, the compensation costs. That's what peeved so many analysts Thursday, whether it be the cost of opening new mines at
or hiring new workers at
or the compensation costs at the banks that are growing.
To which I say, give me a break. When a company like Freeport sees opportunities in opening long since closed mines or scaled back projects in America to meet voracious copper demand in China, it's going to do so. And if Freeport thinks that construction is going to pick up in this country, it better open those mines. If Union Pacific is going to let others take business because it won't bring back the 9,000 people it laid off, it's not as great a company as I thought. And if the banks that survived want to stay in the game and take share they should be paying good people to stay and getting good people in to do the work.
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But somehow the analysts seem to want it both ways, more business, much more business, without any new costs. That's unrealistic. And you don't own stocks just because costs keep getting cut -- you own stocks because businesses are growing and they need to expand because they have such demand.
We got fat and happy with the idea that companies can keep making numbers through productivity. But we aren't at that stage any more. When Chuck Bunch, the great CEO at
, has to bring in more people to meet the demand he's doing what's right for the business, not what's right for the analysts. And if he didn't have any new business at this stage of the economic expansion you don't want to own the stock anyway.
bringing in 7,000 not-as-highly-compensated employees because it, too, wants to meet demand.
We are now going to see lots of selloffs because of this economic expansion moment. The explanation will be simple: How can this company incur costs knowing that China and Brazil are slamming on the brakes and they will be hung at the wrong time?
The answer to that is that if U.S. demand comes back they won't be able to meet it and they will lose sales, and because the contraction is over.
I reiterate that when companies have too much money and they have too much demand they are going to spend some of that money on capital expenditures and hiring and they can't go on forever with such stretched work forces. Ultimately it will be good for the country and make for a better economy.
There is a price to pay for economic expansion. It's called incurring costs to train and hire. You hope the government doesn't make it cost too much more than usual. But you'll be glad that there's demand because the other way, the cost-cut way, is no longer sustainable.
If you can't handle the increase in costs then go buy MLPs or tobacco companies or munis. They are back. They are the price we have to pay. It is OK if you want to sell and rotate into
if you can't handle these new expenses. No harm. We've moved a lot.
But in real bull markets with real demand based on real business, stocks can go higher, not just lower. Remember
from $200 to $700? That's what happened. It wasn't a short, it was a long.
As it is today on similar news of more hires to meet more demand.
It's called the cycle. Dust off the texts. It's a good thing. Not a bad one.
At the time of publication, Cramer was long Abbott
More Proof of a Turn in Housing
Posted at 2:18 p.m. EST, Thursday, Jan. 20
Let's talk truth about housing. Today's December existing-home sales data, which rose sharply -- continuing a six-month trend higher -- simply isn't supposed to happen. We heard all summer that when the tax credit expired, we would begin to see a sharp degradation in purchasing of existing homes AND a huge price decline, perhaps as much as 20% to 25%.
We are getting the opposite -- a gigantic increase in sales, and prices that are holding steady to actually UP. When you look at the median full-year price for 2010 -- the most important way to look at it, I think -- you get $173,000, which is up 0.3% from 2009. OK, that might not look like a meaningful increase, but it sure is if you are looking for a 10% to 25%
. It's also the first gain in four years -- this despite the fact that more than one-third of the homes are "distressed homes," meaning foreclosed properties.
When you link this existing-home sales number with the incredible shrinking housing starts, you get this monumental shift that explains the increase in sales and the increase in prices
that aren't supposed to happen
Now, layer on that we are supposed to have this gigantic shadow inventory, and you can only conclude that the housing market's on the mend, and the bears who kept saying that the market would fall off a cliff after the tax credit were just plain wrong. What's more, they owe us all an apology, because they kept you out of a remarkable move in the big companies that sell into the existing housing market, from
I am sure that the rearguard housing recidivists will say this number is being boosted by the inability of banks to throw out more disclosed homes because of the mortgage morass. This is more claptrap, like the idea that the end of the tax credit would spur a big decline in sales. People are smart. If they thought a huge amount of houses were waiting, they simply wouldn't be buying.
These numbers can't be denied. The people who wrote these negative stories are now defrocked. The decline in value of homes is over. It ended a year ago. I await someone --
-- to come out and admit they were wrong this summer. But they never will. They have no accountability. It disgusts me.
It should disgust you, too.
At the time of publication, Cramer had no positions in the stocks mentioned.
The Scuttlebutt Can Steer You Astray
Posted at 10:16 a.m. EST, Thursday, Jan. 20
Boy, does the stock market get stupid during this period. It just loses its mind.
People are blasting out of stocks on headlines that numbers are disappointing or lower than they should be, and instantly the scuttlebutt is that things are bad and getting worse.
Case in point:
. While there are always, always,
going to be lines that people don't like in a bank earnings statement -- in this case, expenses are up a bit more than we would like (all detailed in a note this morning for
subscribers) and some obviously higher legal expenses (you read the papers, you know the mortgage morass).
But credit's much better, with nonperformers falling a staggering 6%; balance sheet is industry-best; reserves are coming down, showing how prudent the company really is; and most important, there's actual loan growth -- more, you could argue, than even
"Blowout" would be the word I would use.
But the stock's down, down badly, just like Wells Fargo was down, down badly, yesterday.
Now, look at Wells. Look at what it is doing. It is rallying. Why? I would say because people are going through the quarter now in a thoughtful way and recognizing that Wells Fargo did a terrific job, and the bank's really in great shape -- something that no one seemed to believe yesterday.
I believe PNC will have the same exact reaction.
This process is being repeated throughout the Street today. We still have a lot of work to do for AA PLUS -- full analysis coming for subscribers -- but
fits this same PNC/WFC pattern: a great number that people are now scrambling to find something wrong to justify the loss. It's just had a big run. It's fine. No, better than fine.
. It's very clear that it is a monster quarter. Beautiful. It is very clear that the company maintains its very proshareholder stance. It is very clear that demand for copper remains unabated. It is very clear that, once again, the company is cautioning in Grasberg, a key mine in Indonesia where the company has indicated from time to time that there could be some ore degradation that hasn't hurt the company but could. That's the same old song.
Of course, it gets hit on that conservative Grasberg guidance. But should it be down this much? I don't think so, if you believe that copper and gold will stay strong.
Nonetheless, it doesn't matter: People who haven't thought much about it or don't know the way the company works -- very, very conservative -- just blow it out.
This is why I can't stress enough that you have to do the homework, as I did yesterday on Wells Fargo. I don't have time to do more than a half-dozen calls thoroughly, and Stephanie Link, the research director of Action Alerts PLUS, has a much better handle on more companies. But I recognize when things are too crazed and nobody's taking a breath. They are just acting.
On PNC, read our note. Know the opportunity. Stop taking cues from the action, as I saw yesterday all day with Wells Fargo.
It's a sucker's game.
At the time of publication, Cramer was long PNC and JCI.
Jim Cramer, founder and chairman of TheStreet, writes daily market commentary for TheStreet'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 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.