Jim Cramer fills his blog on RealMoney 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 Obama drag;
- discounting the negatives; and
- browsing at the CANDIES shop.
The Obama Drag
Posted at 9:43 a.m. EDT, Monday, June 28 Are stocks too cheap? In the last 72 hours I have read a huge number of articles posing that question -- including the lead article in USA Today. The idea and thrust behind all of them is the same: Stocks have fallen too far vs. the fundamentals, and the S&P 500 at 12.7 times earnings is just too low vs. the five-year average of 14.2. I discount these articles. I question their worth. Because I have rarely made any money based on valuations, short or long. There's a very firm and obvious reason the multiples are going down, and it is not earnings revisions. It is not that earnings are falling apart, the "E" part of the equation. It is the "M" -- what we pay for those earnings. We don't want to pay up. We want to pay down. Why? Because there's no employment growth and, more important, there is a fear -- a palpable and justifiable fear -- that earnings will be crimped by Washington. I think this shrinking "M" is all about a grudging recognition that you can't afford to pay up for earnings when earnings may be under attack or wiped out by the Obama agenda, and that your share of the profits in terms of capital gains and dividends will be taxed to the point where you should pay less. > > Bull or Bear? Vote in Our Poll Think about it. It is almost impossible to find a company that does not have earnings threatened by the agenda. Banks just got earnings cut pretty severely off finreg. Health care had the same cuts a few months ago, although obviously the true price-cutters, AmerisourceBergen ( ABC), McKesson ( MCK) and Express Scripts ( ESRX) are winners. Even the generics have been losing lately, but that might be because they ran so much because of health care reform but then got hurt by currency. Cap-and-trade and Card Check will hurt the industrials and the retailers ... and the banks again. All industries that pollute -- pretty much everyone -- as well as all utilities will get hurt by cap-and-trade, which Rahm Emmanuel has made very clear will pass this year. Given that Obama's on a roll, that has to be viewed as likely. At every point Obama has stressed the need for workers to do better, so we have to believe the easiest way to make that happen is to have Wal-Mart ( WMT) and the banks unionized. You need to see Bank of America ( BAC), JPMorgan ( JPM) and Wells Fargo ( WFC) tellers unionized, and the easiest way to do that is to ease the rules on the ability to have elections that go the unions' way. That's Card Check. The ban on drilling will crush the oil service companies and the oil companies that needed the new oil to keep their reserves up. Natural gas will be hurt by the EPA investigations. That's why the multiples on Exxon ( XOM) and Chevron ( CVX) and Chesapeake ( CHK) and Schlumberger ( SLB) are shrinking. The stimulus has largely benefitted the state and local governments, which don't move the needle. Some companies can transcend it. I have emphasized them endlessly, notably the