- why you ignore Goldman at your own peril;
- the bubbling deals among chemical companies; and
- how recent investment certainties have shifted dramatically.
Goldman Sachs Can't Be Ignored Posted at 3:50 p.m. EST on Friday, Jan. 27. This move in Goldman Sachs ( GS) can't be ignored any longer. The stock has been galloping toward its book value of $119 ever since it reported. It withstood a gigantic downgrade by JP Morgan this week, which said it may have capital issues and is certainly earnings challenged. Yet, there's a story today about how Goldman owns a big chunk of Facebook. The company might be part of the deal. There are two pieces of business that weren't in the cards when we started thinking about the first quarter of 2012. > > Bull or Bear? Vote in Our Poll Plus, we know that Goldman Sachs has made it very clear that it is not going to lose all that much -- if anything -- if Greece goes under. I think Goldman is in the sweet spot. It saved tens of millions of dollars by having partners retire. These retirements are immediately additive. Plus, I think that the compensation for the younger people is quite different from what it was when I was there. You aren't going to make as much money as you thought in those first couple of years. I believe people will be pleasantly surprised when they see the rest of the year unfold. There will be new business lines we don't know about, initiatives that make money that aren't in the numbers, and the hoopla over the changes mandated from Washington will have died down. Don't overlook the possibility of Goldman Sachs taking advantage of the vacuum that the European banks are giving them by pulling back and dumping good divisions. It might be Goldman's time -- just when it is most hated. Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
Chemical Deals Deserve Attention Posted at 1:55 p.m. EST on Friday, Jan. 27. You always have to pay attention to a deal where the acquirer ramps, especially one where there's stock involved. That's exactly what happened this morning when Eastman Chemical ( EMN) bid for Solutia ( SOA). This kind of consolidation is hugely additive and, in this case, a sure sign that Eastman Chemical recognizes that performance chemicals, Solutia's bailiwick, could be making a big comeback. When you hear performance chemicals you should be thinking non-residential construction and aerospace and we know from Eaton yesterday that both markets have been gaining steam. The chemical patch has gotten very hot of late. Westlake's ( WLK) trying to buy Georgia Gulf ( GGC), which is a residential pvc pipe play. Last year Lonza bought Arch Chemical, another deal that seems to be working out well for that Swiss acquirer. All of these companies have a tailwind that's terrific: feedstock. They use natural gas. I think Eastman will continue to run on this one. The group's gotten little respect. Eastman traded 10% higher not that long ago. The combination's a good one. Oh, and hat's off to Wells Fargo's Frank Mitsch as he's been red hot in predicting deals in this undervalued segment of the stock market. Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
Navigating the New Normal (Again) Posted at 6:21 a.m. EST on Thursday, Jan. 26. Have you ever seen so many assumptions that were taken as gospel two months ago mean so little now? How much that was considered to be etched in stone now seems like it was scratched in Play-Doh? Let's just tick down some of the major changes:
- Let me start by saying I am not political, and I have criticized Democratic and Republican presidents pretty equally in the last 16 years of writing. But I detect a rather amazing shift in thinking about politics courtesy the GOP primaries. These hatefests seem to have been scripted by the candidates to give you a maximum view of how inept they are. I wouldn't trust any of them to be stewards of the economy because they don't seem to have any thoughts in their head about how to actually fix the economy in any sort of practical way. (Yes, I am including Ron Paul who most certainly, while the funniest and most intellectually honest, would have embraced policies that I think would have produced a depression.) They only seem to know one tune: You cut taxes and it creates jobs. We have not created jobs with tax cuts in this country in some time. We have a historically low tax regime. I am simply not even going to debate this stupid issue any more. Yet it is all they do when they are not talking about how to run our personal lives.
- The president seems to have spent a lot of time thinking about job creation and has decided to make oil and gas a centerpiece of new hiring, as we will see with his trip to a nat gas depot for trucks powered by Clean Energy Fuels (CLNE). The president is embracing the Boone Pickens plan, which I think is the single-biggest job creator we can have in America. The 600,000 jobs that Obama wants to create with fracking is understated, if you ask me.
- The European debate has gone from a discussion about how we are about to go back to the Stone Age to a discussion about how we are going to have a recession of some magnitude, not so bad as to disrupt the earnings of most American cyclicals. We will hear from Ford (F) Friday, but so far the only companies that have been really hammered by Europe are the auto-related companies.
- From worst to first, tech's been on fire here and we know that was supposed to be hurt by Europe. Again, Europe isn't bad enough to hurt tech. That's a major change.
- The players, and this is the biggest change, seem to have undergone a dramatic change. The people who used to press markets when they are down seem to have vanished. It's the same with those for when the market's higher. It is as if the people who used the double and triple ETFs to bang the market up and down are gone. This fifth point bothers me the most because I can't figure it out. How in heck did so many followers of a particular strategy of selling into selling squalls and buying into absurd lifts just go away? Where are they? What happened to them? Their departure is the single most important feature of 2012. And as long as they stay in the weeds or have vanished, then the constructive tone we have seen all of 2012 will stay constructive, as they were perhaps among the most pernicious forces I have ever seen in my 31 years of trading.