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 risk/reward of the current market, and
- Building a diversified yield portfolio.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Liking This Market Sure Takes Work
Posted at 8:00 a.m. EST on Saturday., Sept. 6, 2014
Do you have to work at liking this market as I do?
On Friday, I bumped into a gentleman when I was filling a prescription at my Walgreen's and he said "what are you buying?"
I didn't even know what to say. So I said, "Medicine."
But I told him that it is often a reluctant process because the good ones go quick and the bad ones go bad.
It's just how it is.
Let me give you the perfect example. Behind the scenes at "Mad Money" we worked hard at arriving at our fantasy football picks. We take this stuff very seriously and we do screens and go through the research and make calls and really try to nail it down.
You know I think that speculation is an integral part of a portfolio's diet and I decided that on Friday we were going to do sleeper stocks, just like you live for in fantasy football (sleeper being code for speculative bets that could pay off).
But this market just loves these two stocks and by the end of the week what was compelling was, well, not compelling.
In the meantime value, value like Vale (VALE) or Freeport-McMoRan (FCX) ? You own them at a hedge fund and they are going to take your money away. You try to buy someEnsco (ESV) , with a 6.3% yield, a just-boosted dividend and some great long-term contracts and you will run into a wall of stock flying at you that you can't even keep your head on straight. These stocks are like pro football games. You are literally spotting the other side 15 to 20 cents each day, which is how much they seem to go down on the opening.
So, if you go with value you are hammered and if you go with pizazz you are too late by the time you've done the work.
I think one of the chief reasons this market is hated so much is that stocks that are cheap just get cheaper and stocks that are expensive just get more expensive. Then there's just a whole bunch of nothing. Plus, when you mention a stock like Mobileye positively, you are taking your life in your hands if it ticks down a buck and a half. If you say good things about GoPro you are a gunner.
The risk/reward for someone like me who talks about stocks is perfectly hideous. You talk about value with Freeport at $37 and it goes to $35 you are an idiot. You talk about speculation with Mobileye and it goes down two bucks the next day you are a moron, EVEN IF IT GOES UP EIGHT LATER IN THE WEEK.
That's why I say you have to work at being enthusiastic. You have to roll your sleeves up and buy some stocks you don't like because the discipline is different. The stocks of the era are Netflix (NFLX) ) and Tesla (TSLA) , not Freeport and Ensco. They have created the template this market wants and when it finds them it goes crazy.
Now, last year at this time you could look at Europe turning and you could make some projections for multinationals based on sales leverage and you could do well. You could look at biotech beaten up and do some buying. You could figure out which stocks could break up and create some instant wealth.
There's no free lunch in these. There's just huge risk and huge reward or little risk and very little reward.
And that's truly why this market's not inspiring and why so many are reluctant, like I am, to get behind something when that something can go in one week from exciting and interesting to overvalued and very risky.
It's not an ounce of fun right now. It's just plain work.
But work we must. Or CDs it is.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long VALE, FCX and ESV.
Your Five-Card-Stud Dividend Portfolio
Posted at 2:42 p.m. EST on Thursday, Sept. 4, 2014
We know there's collateral damage to any central bank intervention that's meant to drive growth or slow inflation. Always has been; always will be.
Right now, the radical actions being taken by European Central Bank (ECB) boss Mario Draghi are taking yields around the world down to levels where you can't really make money with your money using the usual fixed income alternatives. His rate cut today -- as well as his pledge to keep rates down to historic lows -- is driving money into our bonds. So, despite the strength I described earlier, the market is not getting the real spike in interest rates that we should have seen by now.
Sure, we can bemoan the Fed's largesse, as some do. Even as I think there's little inflation in the system, it really is time for the Fed to stop trying to keep rates down with its bond buying. If I were Fed Chief Janet Yellen or Treasury Secretary Jack Lew, I would be a seller, not a buyer. These rates are only available because of the deflation precipitated by the almost total lack of demand in Europe along with German insistence on inflation being stopped by any means necessary. This is the polar opposite of what Draghi wants.
I am not here to debate interest rate strategies, though. I am here to help. I know many of you need income, particularly those who are retired. I know that certificate of deposits (CDs) and other fixed income securities are offering returns that are just preposterous for those who need fixed income to support their lifestyles. We can throw up our hands and say, "I give up there's nothing to do," or we can work hard for alternatives, as my writing colleague Matt Horween points out. It's time to roll up our sleeves and work for that yield without taking too much risk.
Where do we go? Let's build a diversified yield portfolio. I would start with Verizon (VZ) . Why? Because it just boosted its dividend today, from $0.53 to $0.55, which gives you a terrific 4.3% yield. That's much better than Treasuries, even before you factor in the favorable tax treatment. We like companies that have enough growth that they can increase their dividends, and Verizon's amazing wireless division will give us that.
Next up? Last night we heard from Royal Dutch Shell's (RDS.A) (RDS.B) CEO, Ben van Beurden. I hope you were as impressed with him as I was. He's giving you a 4.7% yield and a dividend boost is in the cards, as he follows through with his disciplined plan to invest with better returns and knock out profligate spending, which he will detail in tomorrow's analyst meeting. I know oil's been headed down, but not so much that it hurt that dividend growth.
How about Kinder Morgan (KMI) ? I can't harping on this one, but let's understand each other. You get a 5% yield and a commitment to grow that distribution for 10% for the next five years. It's a pipeline company that's more of a toll road than an oil company, so I am not concerned with the diversification issue vs. Royal Dutch.
How about a real estate investment trust (REIT)? We have heard from the incredibly bankable Debra Cafaro that she has committed Ventas (VTR) , the senior housing real estate company, to a path of consistent growth with higher returns. Growth plus a 4.3% yield without a lot of economic sensitivity? I like that.
Finally, a pure utility with growth? That's Dominion Resources (D) . We just heard from CEO Tom Farrell last night about how his gigantic pipeline and natural gas export projects will give you growth for years to come. I'll take it along with the 3.4% yield.
Okay, there is risk; these are stocks, not bonds. But we aren't stretching the risk and we are boosting the reward at levels I find comfortable. Verizon, Royal Dutch, Kinder Morgan, Ventas and Dominion make up your five-card stud dividend portfolio.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long RDS.A and KMI.