Mergers in banks and chemical stocks will set the pace today, as they probably will all year if the valuation disparity between tech and everything else continues.
Banks can't earn any respect without merging, because after last summer's
Long Term Capital
debacle, banks' earnings aren't trusted again. They can still earn the Street's respect, however, by getting together and taking out costs.
We haven't seen many mergers in financials lately, in part because of the Y2K problem, and in part because everybody who wanted to merge has merged already. But the European mergers will get things going again here. Look for strength in the group despite Brazil.
The chemicals merger between
Rohm & Haas
is a perfect example of a once-proud company, Morton, realizing that nobody will pay for chemical companies no matter how well they are doing. It's funny, right about now I always short Morton if there hasn't been enough snow and ice, as the company routinely has a shortfall when rock salt doesn't sell well. Didn't get a chance to do it this year, so I saved myself some money.
We first saw this
cyclical give-up pattern last year when
. Union Camp could go along its merry way independently, but it couldn't reward its shareholders with higher prices no matter how hard it tried. Same with Morton; it just couldn't bring out value. And believe me, these guys tried and tried and tried.
The tough thing for someone trying to catch the next takeover is that while you are waiting, the earnings keep eroding. For example, last week I talked about how I stepped into
strictly because they seemed undervalued. Neither of them worked, as the companies reported horrible earnings. If I have to wait for these managements to surrender and sell themselves, I could significantly underperform the averages in the interim.
That's too high a price to pay.
gets delisted this morning from the
. Go back and look at when this one was the toast of the town with tons of really smart people fawning all over it as the next, you guessed it,
. Last week when I wrote about how crummy a business retail is, I neglected to mention the business that is actually worse than retail: restaurants. I know I almost bought into this one, the hype was so great, until I visited a Koo Koo Roo in New Jersey that was so filthy that we had to leave. The hypsters don't tell you how clean restaurants are when they do their thing. Remember a simple rule: never buy a share in a restaurant stock until you visit the restaurant. ...
win in the Super Bowl; look for 20% S&P gains this year, I guess. ... Gee, why were the papers so boring this morning?
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication the fund was long Eastman Chemical, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to firstname.lastname@example.org.