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 importance of oil;
- stocks as a hated asset class; and
- our over-reaction to every little data point.
Oil Prices Override All Other Factors
Posted at 11:03 a.m. EDT, Monday, Aug. 23 Oil has to stay up if the market is to go higher. The moment it turned down, the market gave up the ghost, as we all figured it would anyway without earnings and without takeovers. We are totally binary and we need the oils and we need signs that we will not go into re-recession, and every tick down in oil means that people presume we are going to have a double-dip. It doesn't matter what else goes higher -- Baltic freight, container rates, rail-car loadings. It is all about oil. What's incredible is that oil is basically going nowhere anyway during this whole period. It has traded in a tight range for a year now, and any oscillation in the commodity has been distinctly microscopic. The idea that each tick can be so powerful is just one more reason that people dislike this market. We have this commodity we judge everything by, and because it is stable, that means that we don't have to think about it interrupting any positive life signs for retail. Because it is stable, we don't have to think about its impact on the industrial world. Because it is stable, we should not be worried about Chinese demand, especially when you include Baltic freight and container rates. Yet a 25-cent tick up or down determines whether we have an up day or not for > > Bull or Bear? Vote in Our Poll Pepsi ( PEP) or Intel ( INTC) or Time Warner ( TWX) or TJX ( TJX). It's pretty nuts, and whatever is "nuts" drives away players, and that has become the curse of this market. The only other stats that have this levels of sway are housing, and that's because the estimates are so ridiculously high vs. the reality. We sated, for the moment, the housing demand with the tax credit. It is the summer. Not a lot of players. Why is anyone predicting any existing-home sales at all? Why are these housing companies building any new homes to sell? Isn't it all pretty ridiculous? I think so. Of course, banks look for any reason to sell, even anticipation of bad housing numbers, and we are certainly going to get those. Banks are levered to bad housing numbers and bad employment claims, two sure-fire reasons to go down. Without takeovers, the group remains dead. I thought that the NewAlliance ( NAL)- First Niagara Financial ( FNFG) tie-up would mean something to the smaller guys. Nada. I am hoping that Banco Santander ( STD) could take a run at M&T ( MTB) and that could ignite something in the group, but that's probably wishful. Oil and housing. Hostage. I guess the bright side is that oil goes up now and then, particularly in the low $70s, even as everyone says we are swimming in oil. The dark side: that oil and housing matter so much when there is so much else at stake when you are buying a stock. Or at least there used to be. At the time of publication, Cramer was long INTC.
Just a Hated Asset Class
Posted at 3:03 p.m. EDT, Wednesday, Aug. 25 I hear it on the show all the time: What's the matter with this stock or that stock? I read it on Twitter, "Jim, what's the deal with ..." and then a name of a stock. The tone of the queries is, "Why did I buy this? What's the problem?" Of course, the answer should be obvious, but that's only because I follow so many stocks: Everything is going down, which is why you need the conviction to sit through the pain and buy more, or use oversold rallies like today to lighten up if you can't take the pain. Let's take the case of Cirrus Logic ( CRUS), one I am asked about all of the time. Why is it going down? Well, heck, the Nasdaq is going down. Why can't it buck the tide? Nothing can buck the tide unless it has a nice yield with a dividend that can be boosted. "Why do I own it, then?" You don't have to own anything. People are selling like mad. The bull case for CRUS is that it is involved with Apple ( AAPL) and it has smart grid exposure. Both trends could last for years, and the company is not a large-cap company yet. The bear case? It is a stock. Stocks are going down. Now, periodically some stock without a dividend can fight its way through the gloom, as Salesforce.com ( CRM) did recently. But think about all of the following things that happened to make that work:
- The company had accelerated revenue growth (and I don't know any other tech company that had that).
- The company is the dominant cloud play, where every tech company wants to be. They all want to be CRM. They can't be.
- The new product rollouts are aggressive, and new products drive second legs of tech stocks. Always have; always will.
Not Every Data Point Is a Game-Changer
Posted at 1:17 p.m. EDT, Thursday, Aug. 26 No sooner do we get the all-important key jobless claims than we are peppered with questions about what the all-important GDP number will bring. This is right after the all-important durable goods numbers and the impossible-to-top-in-importance new-home and existing-home sales. Such is the moment of total earnings vacuum -- unless you want to count Guess? ( GES) and Heico ( HEI) -- and things to trade off of. Given that it seems the only players still left are those who trade ETFs, we see big macro players lining up on every single data point. And, as I have been saying lately, they are not even lining up on the right side of the ledger -- higher oil prices are now reasons to buy health care, drugs, restaurants, foods and techs. You know what? I don't care about GDP. It will be awful. We will be reading and hearing a lot of canned chatter on double-dips tomorrow, and I will have to laugh. Here's why: The inputs are all mixed. Some regions are good, others are bad. Some stores are doing well, like Urban Outfitters ( URBN), others are doing not so well, like Guess?. Some sectors are terrific, like aerospace, where we got a great upgrade for Rockwell Collins ( COL) today and a terrific quarter from Heico, both heavy with aviation. But others, like medical equipment, are plunging because of a weak quarter from Medtronic ( MDT). We don't have enough evidence to refute the anti-medical equipment companies because only Medtronic is reporting now. Not enough data. So sell. Put simply, we do not have enough information to warrant big swings or big moves. We don't know enough. We are trading on every little macro or micro data points and unimportant quarters and pieces of information, or ticks of futures, oil and copper, are being seized upon as life-threateningly important. Plus there are so many "on the one hand ... on the other" stories out there it is hard to not be completely confused. Are takeovers a good sign for the market because of undervaluation, or are they bad for the market -- postulated by my friend Jim Stewart in a good piece in the Journal the other day -- because when they have heated up in the past it usually is more indicative of a market top, not a bottom? Is money coming out of the market a good sign in that the retail investor has historically pulled out money at the bottom? Or is that ridiculous because the retail investor has simply been pulling out money the whole time and being contrary to it has made you no money? Are price-to-earnings multiples so low that it is tempting? Or do the housing, durable goods and GDP numbers tell us that the estimates we are basing our P/E models on may be way too high? I come back to it's all mixed. If we make a big judgment here, we'll probably be wrong. But big judgments are being made, even if they shouldn't be. Not every piece of information matters. Not every tick should be of concern. But don't tell that to the people who are piling in and out of sectors on no new information. They may be too busy taking action to notice! At the time of publication, Cramer had no positions in the stocks mentioned.