NEW YORK (TheStreet) -- 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 outlook for defensive stocks, and
- a Twitter explanation
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
The Turning Point for Defensives?
Posted at 12:41 p.m. EDT on Friday, Dec. 27
Is 3.25% on the 10-year the magic number? Is that the number that makes it clear that all of the defensives which yield roughly 3% and change -- Clorox (CLX - Get Report), Kimberley-Clark (KMB - Get Report), Procter (PG - Get Report), Bristol-Myers (BMY - Get Report) and Merck (MRK - Get Report) -- lose their luster? Is that were Glaxo (GSK - Get Report) and Lilly (LLY - Get Report) get threatened?
So far the untold story about these stocks is how they have held up through repeated analyst downgrades and the relentless decline in bonds. I think the fact that it is a creeping decline has helped these stocks. Plus, they have helped themselves because if you look at the share count you will see that they have taken a lot of money that might have otherwise gone to R&D and bought back stock instead. There is a shortage of quality defensives. Many have been taken over and others have consolidated their sectors to the point where even an underweighted portfolio manager can make a difference in terms of sopping up stock from some of these.
Nevertheless, when you see stocks of companies that have repeatedly disappointed --Cliffs Natural (CLF - Get Report), Joy (JOY), Alcoa (AA - Get Report), Peabody (BTU - Get Report) and Vale (VALE - Get Report) -- rally, that means the money has to come from somewhere.
[Read: Your Financial Musts for 2014]
Now, let me just say that these stocks are by no means dangerous. They always seem to pull rabbits out of hats with restructurings and dividend boosts and increased buybacks.
But I think they will be a source of funds for the minerals and the miners and the deepest of cyclicals.
That's the trade I think will occur right into earnings season, as hope always springs eternal for the heavy metals and their like into the beginning of almost every year.
Random Musings: Just like every other acquirer, Textron (TXT - Get Report) goes nuts on another consolidation. It is the quickest way to make money, as I write in "Get Rich Carefully," which is finally out on the last day of December.
At the time of original publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long PG and VALE.
Don't Blame Me if You're Not in Twitter
Posted at 11:31 a.m. EDT on Tuesday, Dec. 24
First of all, when Twitter stock went past the price at which it opened, I identified it as a cult stock -- much like Solar City (SCTY), Tesla (TSLA - Get Report) and Amazon (AMZN - Get Report). I said that I no longer had any traditional method of analyzing it, no benchmark to put it in context and nothing comparable to explain the pricing. Therefore it is a cult, and a cult can go higher than anyone thinks it will. I have never said to avoid a cult stock, and I like Amazon very much. Always have. I am simply saying you should know what you are playing with. You should understand that, when someone pushes a cult hard and it suddenly goes down, no one remembers you pushed it hard for very long -- they only remember you pushed it hard at the top.
I learned the hard way. In 1999 I identified a group of stocks called the Red Hots. I said these stocks would just keep flying because, while they had no valuation basis, they had tremendous momentum. I said this momentum could continue for much longer than people think it will, but that there would come a time when the stocks would have to be sold and even shorted -- and that, when that time came, I would make it clear here that they are to go.
I did that. I pushed the stocks hard everywhere, and we had amazing success with them. But when these companies started doing massive secondary offerings in order alleviating the tightness, I decided to blow out all of them, and I said it here many times. Still, those who do not read this journal never got the sell call, and I was reviled for years, even as I made fortunes for those who followed me closely.
So even though I said those stocks were red hot, and even though their prices doubled and in many cases doubled again, all that mattered was that the people who got in last hated me to death. No one ever said, "Good job," for those who got in and got out.
Ever since then I have been loath to recommend any stock for which I can't get create a metric or valuation that justifies the move. So instead I'll say the stock is a cult -- and that it is fine to play as long as you know that, when the cult ends, the bloodshed will begin immediately. That way, if Twitter were to crash and burn, it wouldn't be on me.
Now, because of my peculiar visibility, a number of people remember that I said Twitter could be valued to justify the pricing at the under-$30 level, and that this meant I was saying Twitter should not have been bought at the time. Those people now despise the very ground I walk on.
The difference between this time and last time? I have contempt for them. I know the game they are playing, and they don't. I know that they are in bed with a cult -- which, again, I said is fine for me in Amazon. But I am not going to sit here and take their heat, not after the heat I took for catching doubles ahead of a sell call that people failed to read. I don't ever want anyone to lose money. But if you blame me for keeping you out of Twitter, you don't belong in stocks. You belong in a checking account -- although somehow I suspect you'll lose money even in that.
At the time of original publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned.