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:
- the apparent paradox of recent bad news and the stock market's gains;
- why commodity producers are a buy right now; and
- how regulators need to ease off on banks.
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
The Big Disconnect
Posted at 9:54 a.m. EST on Friday, Feb. 18.
The fundamental disconnect for me is a simple one: How can stocks keep going up in the face of such awful news? Today's news? Chinese rate hike. We all know that China is the engine of the world's growth, and we know that its economy can't grow as fast and devour as many products, particularly heavy machinery that is really only needed in China, if the Chinese central bank keeps raising rates.
Yesterday's news, stubborn unemployment rate, something that shouldn't necessarily be offset by a Philly
report, given that Philly is primarily a "meds and eds" economy (medicine and education), should have been viewed as heavily negative.
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The argument that Doug Kass
this morning, that corporate profits have peaked, is in the air every minute. Indeed, if you look at a
the other day, you know that there are companies that are simply being crushed here.
Meanwhile, the press keeps up the drumbeat that housing prices keep falling. And does anyone think that rates haven't bottomed and that higher, maybe much higher, rates are coming, in part because of demands by the U.S. government to borrow more and more money?
I think that the biggest issue today in the
, not the economy, is, how can that paradox exist? How can stocks keep going up? How much of it can really be just a short squeeze, which is the only "logical" explanation for how a market can soar in the face of an endless parade of negatives?
Mind you, I am not saying the market is climbing a wall of worry. It is climbing a wall of
that is not good.
So I think it is incumbent upon all of us to fathom why this is. Let me give you my reasons, some of which are meant to counter Doug's thoughtful writings on corporate margins.
First, the U.S. is getting better and stronger, and that's more important to the
than China is. The companies that truly benefit from the Chinese economy can be counted on about four hands. It's almost all about the urbanification of China, and we know that that means more power, more raw materials and more infrastructure. If the U.S. comes alive, that's finance and retail and technology. When you put all of those together with the Chinese demands, ones that might not be slowed that much by rate hikes, you get a reason to own.
Two: The negativity of the analyst community is pretty breathtaking. It is like they all got religion after the research scandals and feel compelled to rein in enthusiasm and to endlessly downgrade stocks, particularly high-growth stocks.
Three: "Money in" changes everything. When you get money in that goes to growth managers because they are outperforming, they can make the
seemingly endless winners, irrespective of the worries.
Fourth: Some companies are able to raise price more than the material expenses and commodity prices. These companies are winners. Period. There are enough of them to go around. I write and talk about them endlessly. My
, managed with Stephanie Link, is chock full of them. And that corporate margin expansion has been demonstrated throughout this period and continues to improve.
Finally, we don't care about rates moving up slowly but surely. We care about improvement in business. Stock markets go up in that scenario. Retail and banking margins expand dramatically, and those areas can drive the stock market.
Just some reasons -- more later -- why the market doesn't want to quit.
At the time of publication, Cramer had no positions in stocks mentioned.
Commodity Producers Are the Best Place to Be
Posted at 5:41 a.m. EST on Thursday, Feb. 17.
Step back into time, to an era when great forges devoured coal and iron to make the world's best steel to meet the demand of industrial growth. The companies with an abundance of these commodities to make steel coined fortunes back then, expanding and raising prices far faster than costs increased, producing record profits for shareholders, despite worries, woes and handwringing from critics that it all must end and end badly.
Think back in time ... to the quarter that
Cliffs Natural Resources
announced last night. That's right, I am talking about the most recent of histories, the October through January history, and I am looking at commodity producer Cliffs which reported a to-die-for number after Wednesday's close, with a 100% increase in sales and a 450% increase in profits.
Yep, the successor to the oh-so-troubled Cleveland Cliffs, the iron ore company with a list of clients that constantly seemed to be seeking bankruptcy, stiffing their premier iron ore provider, the company that restructured repeatedly, is now in its halcyon days because of worldwide demand for iron and coal.
When people ask me, "Jim, what's the matter with
?" or "Why doesn't
go higher?" despite their dividends and consistent growth, the story's pretty simple: Go listen to the words of Cliffs Natural Resources.
Here's a company that simply can't make enough of what it has in abundance -- coal and iron ore. It owns those commodities courtesy of its long-lived iron pellet mines, and its aggressive acquisitions, still continuing, of other coal and iron properties. It's become one of the dominant iron ore and coal enterprises around the world, with a huge customer base, including, of course, Chinese mills that have a rapacious appetite for everything CLF produces. In fact, if you read the release you will see that this once insular company is now a major shipper of product, repeatedly mentioning in its statement that it is taking advantage of worldwide freight to ship it from here, where it's not necessarily needed, to Brazil, India and China, where demand just keeps accelerating as the countries have growth that can't be contained by mild interest rate hikes.
Lilly and Kraft, on the other hand, make too much of what they sell, and there's less demand or not enough customers willing to pay up for their me-too products.
Almost every day it seems there are producers of commodities producing unheard-of profits. On Monday, we got a blowout report from
, a coking coal company. I suspect every company in the iron or coal world to report the best year-over-year comparisons of any industry I follow.
The Kraft and Lilly quarters? They will deliver the most pedestrian of year-over-year quarters, which is why they remain a sale and companies like Cliffs Natural remain a buy.
Yes sir, commodity producers, still the best place to be.
At the time of publication, Cramer had no positions in stocks mentioned.
To Rebuild Housing, Let Banks Do Their Job
Posted at 12:09 p.m. EST on Wednesday, Feb. 16.
If we want housing to rebound naturally, rather than on steroids the way it was done in the last decades, we want prudent lending by banks. Yet when I read the stories about what's going wrong in housing, they tend to revolve around banks insisting on higher deposits.
We can't have it both ways. We went through the inanity of alleged equality, which is that everyone could and should own a house. That led to an encouragement by all parties, from the banks to the mortgage brokers to the state and federal regulators, to let lending standards virtually disappear. It also led to shysters being able to make loans with onerous provisions that fooled people into thinking they could afford homes, only to discover later that the payments were much higher than they thought.
In short, laments about looser terms are bogus. We should be thrilled that the banks are less likely to get in trouble again. Having a housing glut is the price we have to pay for incentivizing homebuilders to put up too many new homes by offering aggressive subsidies to buyers that warped the market and encouraged new supply that wasn't needed.
The tighter strictures, though, have led to another glut, a glut of capital that the regulators continue to press for, especially Sheila Bair, the once-loved head of the FDIC, who is now being revealed as someone who has let community banks slide -- they are the ones still being seized -- while keeping a jackboot on the big boys that have the capital surfeit.
had the audacity, again, just yesterday, to suggest that it be allowed to pay a big dividend. Most of the other banks that have paid back TARP feel the same way, something that
said on "Mad Money" just last Friday.
It is time to let that money be returned. Banks have gotten religion; now it is time to reward long-suffering shareholders for their patience. The regulators should ease up right now, especially as the banks have played by the rules, and say to the banks, "We are no longer in the business of regulating your dividends. We will be regulating your books as always, but feel free to do what you think is right with your capital, now that you are no longer recklessly making loans and insisting on real collateral before people can borrow."
Penalizing the shareholders of banks makes no sense at this point in the cycle, and it's time for the feds to relent, right here, right now, and grant the banks the right to reward those who have stuck with them and those who want to invest in them but have simply been waiting for the government to let go of its all-too-tight reins after how aggressive the banks have been in complying with all of the terms that have been set out for them.
At the time of publication, Cramer was long JPM.
Jim Cramer, founder 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 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.