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:
- why investors are taking the wrong cues on retail stocks;
- the real LinkedIn trade; and
- the need for exchanges to lift margin requirements on commodities.
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Illogical Selling in the Retail Space
Posted at 11:52 a.m. EDT on Friday, May 20.
Today we are taking our cue from the worst of the worst -- namely, from
, both of which talked about hideous margin pressure and cut outlooks drastically. Of course, that cut their stocks dramatically. That's charitable when you consider these declines.
Why is it wrong to take a cue from these? First, they are terrible executors. They are frequently blowing up. They play in the commodity space. They are easily traded away from. They are secular failures in a cyclical business. They are like
; they will use any excuse but "we stink" as a justification for poor performance.
Second, cotton, one of the crucial components of their margin squeeze, lately has been on a downward spiral. Now, it is up huge year over year, almost a double, but it is down one-third from its peak in March. And the trend, which is your friend in this game, looks awful for the bulls.
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Finally, these companies' quarters didn't benefit from the decline we have seen in gasoline, one that I think will continue and will accelerate if some adults demand an increase in margin.
So, I think that those selling
down almost two points or
down almost a dollar or
down a buck and a half may regret the trades. We can't re-evaluate the good ones with the prism of the bad ones. That's just sloppy. But in a world where the market is thin, people do very little homework, and they tend to trade with baskets, such as ETFs; I guess this is just the way it's done these days.
I say, fine. They are letting you into Kohl's at the same place when we learned how well it was doing.
That's pretty remarkable and stupid. We don't know when the linkage breaks down, but we should at least recognize the illogic of what's happening.
At the time of publication, Cramer was long KSS.
The IPO Trade Is a Big Game of Chicken
Posted at 9:46 a.m. EDT on Friday, May 20.
You want the growth of
? Go buy
. It's got accelerated revenue growth and fantastic bookings. You want the pizazz of LinkedIn? Go buy
, as it is much cheaper per sub and has more upside from the international market ahead of it.
This is one of those admonitions that I can't stress enough. LinkedIn could go higher until the lock-up ends. Then it will fall flat. Or it can fall flat when it reports. But mark my words,
it will fall flat
-- and when it does, it will not fall small.
One of the things that we saw in 1998-1999 -- not 2000 -- is that the stocks don't quit early. They tend to go higher because of endless short-sellers who come in and don't realize there is no float; you are not even supposed to be able to short it yet, as it is not marginable.
Plus we don't know how many mutual funds have finished their buying. There's so little stock around that a "full" position for all but the smallest of mutual funds will move the stock up gigantically, especially if the stock was placed with non-flippers.
I don't want to spoil the party. I don't think this is a late-1999/2000 deal, where you get a one-day pop and then a sickening decline. I say that because the stock kept roaring throughout the day.
I am saying that you are simply playing a big game of chicken. Be my guest. I did it. I made a lot of money playing chicken in 1999 and 2000. But I had a big advantage -- I followed all of the dot-coms that came public because of my founding status at this company.
Do you have an edge?
At the time of publication, Cramer had no positions in the stocks mentioned.
A Marginal Solution
Posted at 3:37 p.m. EDT on Friday, May 20.
It is amazing to me how easily buffaloed people are by those who say that non-users of commodities aren't moving up prices ahead of so many who actually consume them.
Notice, I did not say "speculators" because that is a highly charged word. No one would ever call himself a speculator. It's an ugly, parasitic term that conjures thoughts of evil forces that are trying to profit from your misery.
No, I prefer to think of the scenario as non-users who are able to put up very little capital to, basically, play a game of "keep away" with the actual users. Again, I see nothing wrong with non-users being involved. They can play a vital role in many markets, although when it comes to commodities it is difficult to calculate their value, or their usefulness. It is much easier to figure out that they have a right to make a profit -- I support that -- I just don't want the market distorted by them to the point where real consumers are crowded out.
No non-using buyers will ever publicly buy the notion that they, along with others, together or independently, can impact markets with their buying. This is more disingenuous garbage. We never knew who took oil up to $147 in 2008, but we know it wasn't gas stations desperate for crude and it wasn't airline companies trying to get their fair share. They were swept along because the market itself isn't very deep, but we know that non-consumers were behind it. No one has contested that.
I had never thought that non-users should be reined in. But after 2008, I thought we recognized how foolhardy it is to have non-users control pricing. They can do it because one, the margin requirements are so long and two, the pools of capital the non-users control are much, much larger than they used to be. It is fanciful to think that non-users can't impact pricing dramatically.
The only way to restore the balance of power between non-users and users is to change how much money the non-users have to put up. And, while I initially felt that the change in margin should be moved up for just oil, I now believe we need to raise margin for the grains, too, after the terrible numbers we saw in April.
We are hamstringing our own recovery by allowing non-users to have so much power over the users. Sure, it could turn out that I am vastly overstating the power of non-users. But after the dramatic decline in the silver market when non-users had to put up more capital, one can only believe that we could have a similar decline in oil and food stuffs.
I know the exchanges are reluctant to change the margins. The exchanges are profitable enterprises. They can make so much more money by keeping margins low and encouraging more traders that it has to be presumed they will be very reluctant to create an atmosphere that is restrictive to non-users.
But at this point the most important component to the recovery is to keep commodity costs as low as possible while stimulating the economy, so it makes a great deal of sense to raise those rates and take them to the same margin level of equities, and then see what happens.
If it turns out to be irrelevant, amazingly, they can always be taken down again.