- eternal optimism;
- the mesmerizing fall of BP; and
- what Asia's return brings to the table.
The Eternal Pessimists Still Have the Floor
Posted Monday, June 7, 11:44 a.m. EDT First, nothing would please me more than to agree with my friend Doug Kass about the potential positives of this market. He's got a great point: "the pessimists are getting hyperbolic." At 5:40 a.m. I heard "breaking news" on Bloomberg TV: Nouriel Roubini spoke negatively about the euro. I said to myself that until that's not breaking news, we are still in a world where we are not inured to the downside. We still have people in the media -- and therefore in the public, as the public is swayed by the media -- who regard this as news. I can write Roubini's speech in my head, and it goes like this: "The world is falling apart. The U.S. is falling apart. China is a bubble that is falling apart. The euro is falling apart. We are going back into a recession. The European banks are bigger and worse off and can take us back down huge. We are in a terrible situation of which there is no way out." Of course, no one says, "That's the same rap he had at Dow 6500. He wants it back there." But the uncritical way with which this fellow is treated reminds me of the others, the Prechters, the Garzellis, the Granvilles, who went negative and stayed negative, and every time they spoke, they were reported on -- until they were made irrelevant by the market. We are not there. Not there at all. Second, I totally disagree with Doug about earnings. I think they are way too high. I watch these pharma stocks go down every day and know their estimates are monster too high. I see companies like Oceaneering ( OII - Get Report) preannouncing, and I know it isn't down much, but I would short it with impunity. Why not? What is it going to get? A takeover bid? Exporters will be hurt by either a slowing China or a slowing Europe that is more competitive on an export basis because of the euro. I like Boeing ( BA - Get Report), but I think it is at a quintessential earnings-risk moment. Third, until we see the cleanup of BP ( BP - Get Report), of Santander ( STD) and of Banco Bilbao ( BBVA), we can't rally for real. The credibility on what anyone says about BP is so shot that we will believe it only when we see the video that shows no oil coming out.
Mesmerized by the Fall of BP
Posted Wednesday, June 9, 6:56 p.m. EDTYou can't have one of the largest companies in the world disappear overnight and believe it won't affect other companies or the market's psyche. As Doug Kass said late tonight, this was BP's ( BP - Get Report) last hour, with ETF shenanigans thrown in. At one point today, between $32 and $29, I remarked to a friend that I had never seen a stock unravel in front of my eyes like this one did, with huge value disappearing. Just amazing. Just disappearing. It was frightening. Also, it is clear that if you make the company's liability unlimited, it might never want to drill again. Who can risk this? Who can risk having a company taken away from its shareholders, as if it were expropriated even when you believe it deserves it? Lots of people are debating right now whether any company in the Gulf of Mexico can finish a project, or even stay in the Gulf. They believe this is Three Mile Island for offshore drilling. My colleague Matt Horween reminds me that the risk-reward has now gotten astronomical for those who drill or already have wells in the Gulf. Watching BP fall and watching Anadarko Petroleum ( APC) collapse after actually being up at one point -- talk about misdirection -- was horrifying to everyone. It was like watching the collapse of every single nuclear-power utility in the 1980s in time-lapsed photography. I know there had been many smart value buyers of BP all the way down. They came on TV. They talked their game. But in the end, they could own, well, nothing. Or what, maybe they make $5? BP is now, to quote the late Richard Nixon, a pitiful helpless giant. And that has everyone and everything spooked. I ask you this: If you follow the market, were you able to take your eyes off BP? I sure couldn't. At the time of publication, Cramer had no positions in any of the stocks mentioned.
Here's What Asia Brings to the Table
Posted Thursday, June 10, 9:29 a.m. EDT You can't overstate what good news out of Asia does to this stock market. I don't think it's understood. I don't think people get the all-encompassing nature of what it means to have great export growth and terrific imports. It's almost as if we are blinded by darkness of Europe rather than bathing in the light of China and its derivatives. First, we have major companies making major inroads in China. We all know the consumer plays, tech's doing well, so is Yum! Brands ( YUM - Get Report) and we know the Nike ( NKE - Get Report) / Coach ( COH) business, and Wynn ( WYNN - Get Report) just reported some good Macau numbers, although in typical conservative style they are tempering enthusiasm for the future. We also know that China is a classic "bad actor," dumping materials worldwide. But the consumption of product is so important in so many ways. There's the linkage of oil and copper and the Baltic Freight numbers to the stock market. This is worth spending some time on because it is so powerful. If you go back to the beginning of the huge selloff in 2008, you got a peak in commodities because of high prices and a potential slowdown in China. The hot-money hedge funds had been betting almost entirely on the "China trade," owning a ton of the oil, mining and fertilizer stocks all because of growth in china. When China peaked, these hedgies -- huge and leveraged owners of the Freeport ( FCX - Get Report) / U.S. Steel ( X - Get Report) / Chevron ( CVX - Get Report) / Exxon ( XOM - Get Report) / Nation Oilwell Varco ( NOV - Get Report) / BHP Billiton ( BHP) / Potash ( POT) / Union Pacific ( UNP - Get Report) / Peabody Energy ( BTU - Get Report) complex, the most emblematic of the group -- fell apart. They all relied on China growing forever and ever. We got hedge funds gone wild, an absolute run on these owners when these stocks went down and the hedge funds could not meet margin calls. Sure, there were huge problems in the economy, but the selloff in these China names crushed so many stocks and brought the part of the market that was not financial to its knees. The ripple effects were felt in aerospace, in industrials, in companies as widely varied as 3M ( MMM - Get Report), United Tech ( UTX - Get Report), Hewlett-Packard ( HPQ - Get Report), Boeing ( BA - Get Report) and Cisco ( CSCO - Get Report). There was nowhere to hide from these sellers. So a collapse in copper and oil and coal and fertilizer prices and the Baltic Freight, all off of China, led to the worst-possible-timed selloff we can recall, right at the moment of the AIG ( AIG - Get Report) / Lehman / Fannie ( FNM) / Freddie ( FRE) / Citi ( C - Get Report) / GM / et al. collapse. In 2009, this whole trade started reversing as China's stimulus, all about the consumer having more capital, took hold. The reverse led to the rise in all of the commodity futures, which then translated to the sector ETFs and ultimately the S&P. The combination of the end of the hedge-funds-gone-wild margin pressure and the beginning of the stimulus is what really took us out of the morass we were in, aided by Fed chief Ben Bernanke's accommodative policies and a line in the sand against bank nationalization. Treasury Secretary Tim Geithner's stress tests, Bernanke's assurances and the China commodities turn gave us the troika that we needed to go from Dow 6500 to Dow 11,000, with banks, oil and tech leading the way.