- good news from Europe;
- Cisco the comeback kid; and
- the accelerating transport stocks.
As Goes Europe ... Posted at 8:22 a.m. EDT on Friday, Aug. 17 Are you sitting down? If you invested your euros in the Italian stock market index, the year that Italy is supposed to file bankruptcy, you are now up on your investment. That's right. You are profitable. Spain? Look out. That market rallied another 1.85% today on top of Thursday's 4% gain. These are some of the biggest moves I have ever seen. They are emblematic of small-cap stock short squeezes, not bourses of major nations, including one with the third-largest bond market on Earth, Italy. > > Bull or Bear? Vote in Our Poll When we look back at this remarkable rally in our nation, we will see a few things that will shake us, including those of us who talk and write about the stock market for a living. First, we had been told endlessly that we couldn't really rally with QE3. Or we hear that this rally is based on QE3. Or we hear that the market only goes up on the Fed. Go check the minutes. That's just not true. The people who opine on these matters won't acknowledge this, I believe, but the Fed wasn't part of this and no tip to the media, no speech, or no wink and nod had anything to do with it. Two, the fiscal cliff chatter? It did a terrific job of making everyone sell. I don't know whether it will be resolved or not, but I do know that if you came in now, you missed a fabulous rally. Again, just a fact. Three, there was no real change in claims or any other data that signaled this rally. Nothing. Not one piece was really all that good except some homes data, and most people still don't believe that prices for homes have stopped going down. Either way, we are still building very few homes, so the turn is off a small base.
Taking Share and Taking Names Posted at 12:14 p.m. EDT on Thursday, Aug. 16 No one's been a bigger critic of John Chambers and Cisco ( CSCO) of late. The networking giant seemed to have been bloated, without direction, blowing with the breeze of macro events. The company had promised a juicy dividend and then gave you a paltry one. We had to hear endlessly why the company wasn't living up to expectations created by the company itself on the previous call. The company seemed to have lost its way entirely, to the point when you read the release and if it was positive, you had to bang out of the stock immediately because you knew that Chambers would somehow talk you out of buying the stock by saying he had a muted outlook, or that customers weren't buying or that the prospects weren't as strong as he thought because of global woes. Meanwhile, the company would have bought a ton of stock back at very high prices and you would think, what the heck's going on here? And that's why yesterday's quarterly report and conference call were so refreshing. First, the outlook wasn't muted, it was terrific. Second, even though Europe is a big part of Cisco's business, almost 20%, it didn't hurt them nearly as much as it has hurt other international tech companies. No complaints, no alibis. Third, Asia was fabulous. While other companies cite the post-Japan earthquake as still hurting orders or note that China's killing them with the sudden slowdown, Cisco performed fabulously in both markets. Meanwhile, telecom spending in this country, which everyone says is way down, doesn't seem down for Cisco. Neither does cable, where Cisco earned the bragging rights to crow about its seamless Web integration of the Olympics, with staggering numbers of viewers. Hmm ... telcos and cables just now turning in the juice. That could be good for ages of orders. That's why I think Cisco made the astounding decision to boost its dividend by 75% immediately taking the stock to a 3% yield. That's remarkable, it's incredible and its fantastic news for long-suffering shareholders plus new ones who are now drawn to the stock. A dividend boost of this magnitude says that Cisco's confident of the future because a dividend, unlike a buyback, can't be easily suspended or cut back.
Transports Get It Going Posted at 3:20 p.m. EDT on Wednesday, Aug. 15 Transports break out! It's happening, and is it ever necessary. I have been questioning the transports' ability to confirm the rally of late because so many are tied to coal, which is in secular decline because of the secular rise of natural gas (not the price, but the use), coupled with an EPA that has decided to get rid of coal as a fuel. But I haven't stopped thinking about the need to get either UPS ( UPS) or FedEx ( FDX) moving because there is nothing more important to the index than these two companies. Sure, I think Union Pacific ( UNP), the best-acting rail, is a terrific barometer because it has less coal and more China traffic. That said, it does have a lot of repricing that has given it better margins. The airlines? They have so many intrinsic issues of execution and demand and fuel that they have become an awful tell. Trucking? I think UPS and FDX are the truckers that have the ability to ship worldwide. But they have been stalled, big time, ever since their quarters. They had been confirming the pathetic Baltic Freight numbers and the hideous Suezmax oil tank day rates. Until today. Today, on the strength of a slim research call that FDX will benefit from a fleet changeover, the stock is roaring. It's igniting a long-needed rally. I think that we get a couple of up days for the transports and we are going to be talking about a phony rally that might not be as phony as the graybeards -- all of whom swear by the transports -- swear it is. Watch FDX. Watch UPS. They could be the key to the next leg of the transport rally, which could then be the backbone of the next leg of the entire rally as the canvas unfolds. Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.