NEW YORK (Real Money) -- 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:
- Sandy Cutler's assessment of the economy, and
- Some perspective on Apple.
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CEO Gives America All A's
Posted at 12:27 p.m. EDT on Friday, May 1, 2015
How bad can things really be if Eaton (ETN), a major U.S. industrial company, gives this country a report card that has all A's? What's that report card look like? Consider that CEO Sandy Cutler told us last night that residential construction, non-residential construction, aerospace, trucks and cars are all very strong.
When you think about it, you are talking about a considerable portion of the economy performing well. Housing may only be 10% of the economy, but it punches well above its weight. Eaton's blessing is big there. Non-residential construction is a gigantic form of hiring and Eaton's confirming what we have heard from many regional banks, namely that business has picked up and construction's driving a lot of jobs. Sandy cited the lower oil prices as a principal driver, and while oil has gone up 25% in the last month, it's still way down from where it was.
Autos are a huge force in the economy. Auto sales at these levels, about 17 million units, remain incredibly robust and that's been terrific for retailers AutoNation (AN) and CarMax (KMX). I can't say it is terrific for the automakers because, as you see from the reaction of GM's (GM) stock to its better-than-expected April, it doesn't matter. The autos are uniquely now about Europe, where GM's Opel is performing terribly, and about Latin America, which has fallen off a cliff.
I can't stress enough how much Latin America is hurting American companies doing business there. Brazil and Argentina are just miserable and Venezuela rivals Russia as one of the worst places to do business on Earth. It's no wonder that Clorox (CLX) is one of the few consumer packaged-goods companies that reported earnings greeted positively by Wall Street. It exited Venezuela last year and that's already paying big dividends. Other companies seem to keep hoping that things are going to get better. They are getting worse.
Cutler's view that we could build more than 300,000 trucks this year can only be seen as an extreme positive for the U.S. economy because they don't build them unless they need them. I think his comments are one of the reasons why Cummins (CMI) has been able to shrug off a downgrade and worries about China sales.
Aerospace remains a gigantic driver to the economy, and nothing's changed there except it seems to be accelerating. Again, great news.
In fact, the only area that's been weak, of course, is oil and gas, and Cutler confirmed that the decline in that segment has been a very big net positive for the rest of the economy.
Now, we are largely a consumer economy and you could argue that Eaton's got nothing to do with how the consumer's doing. I say that's just plain false because the consumer's health has to do with hiring and a belief that jobs are plentiful. We know from the employment numbers that they are. Which brings me to the one area of pronounced weakness in the economy that makes no sense to me given these positives: retail. Sure, oil's up big in April. But I think everything else I just went through trumps a bit of a bump in the price of gasoline.
This group's down horrendously. It is time, given the comments we have been hearing broadly about the U.S. economy and specifically from Eaton's Cutler, to recognize that the gloom is overdone for the consumer just because of a slight rise in the price of the pump. Time to pick at your favorites in retail. I think they are putting in a bottom that can hold after a long drought and there are plenty, including the home improvement companies, department stores and big-box retailers, that can now be purchased.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long ETN.
All About Eve and the Forbidden Apple
Posted at 5:32 p.m. EDT on Thursday, April 30, 2015
We can talk about the Fed's role in this pool of quicksand that we find trying to swim in. We can make parallels to the dollar and the bonds and to soft macro data, whatever you want to explain today's drop. I know I am hearing all of those ethereal concepts bandied about as the enemies of those who own stocks.
But I think that this market's all about Eve, the one who was tricked by the serpent to eat the forbidden Apple (AAPL) from the tree, and the whole investor class has now been paying the price.
The serpent in this case is the Apple quarter, the one that was so tempting that eager investors couldn't resist. Now the investor gods are making every stock pay and the pain won't end until the Apple bottoms.
Look, I was going to go with Newton and what goes up must come down, but this selloff is more biblical than Newtonian because in science only the Apple takes the fall. Here everything that went up seems to be going down.
So, why don't we offer some perspective, rather than start ripping out our ribs, and talk about why this Apple is so seminal.
We start with a simple concept. If you own stocks you own them because you want them to report numbers, both top line and bottom line, that are better than expected. You want the sales to be global and promising, the earnings to be thick with gross margins expansion. Then you want analysts to guide estimates higher, to stay biblical. That's the holy grail of higher prices. You really want to get things rocking? Throw in a big juicy dividend boost and an awesome buyback expansion.
What do you get? How about a stock that's now plummeted almost ten points in a straight line.
That stands the whole rationale for buying stocks on its head. If you get all of those components and more, new products that aren't even counted in revised estimates, new relationships, like those with IBM (IBM) that can bring out earnings later in the cycle and a stock can't go higher, then what does that say for every other stock out there?
Now let's make the Apple even more juicy. Let's say that it sells at a dramatic discount to the average piece of fruit out there as represented by the S&P 500?
I think it says you should have faith in nothing. Not in stocks that benefit from a strong dollar. Not in stocks that win in a weak dollar environment. Not in stocks that go up when interest rates go higher and not in stocks that benefit when rates plummet.
The whole race of stocks seems cursed.
Not from this fundamentalist. Oh, and why don't we throw in some technicals? We know that the people who follow charts can play a role. They can be serpents too. We've got a real cobra going here, striking at all of those who thought the stock could hold what turned out to be levels that the fangs penetrated pretty easily, injecting poison into those who thought it was safe out there.
Now, I am not overlooking the power of actual raw facts to affect stocks, like the strong employment report we got this morning. But I would point out that all data these days are subject to immense interpretation and right now, again, because of the Mac Daddy Apple, that interpretation's being skewed to the negative. After all, didn't the Fed just reiterate that it could raise rates when it wants to now? Not that such a plan hasn't always been in the cards. Maybe this weekly number somehow becomes dispositive. So that bit of good news is bad.
We have some strength in the dollar because Europe's getting stronger. Any country or region than is stronger than the U.S. is going to draw in capital and that's what's happening. When something happens no one expects you get that sea change I keep harping on, the one that says, "If you were thinking domestic because you were betting that the dollar was going to keep going higher, pricing out our goods and hurting our earnings, think again and sell accordingly."
But I see things. I see companies that are reporting tremendous earnings like Apple did, names like AmerisourceBergen (ABC), still one more company that saves health care costs, rally six on good news and then give up the ghost. I see stocks like Cardinal Health (CAH), another member of that once-prized domestic heath care cohort, report a pretty good number and get mowed down like a British soldier on the first day of the Somme. Retailers were trying to hold on to meager gains but we now recognize that oil going higher is bad for these companies because the consumer won't spend more without some spare change.
Meanwhile, Harman (HAR), an infotainment company that makes the innards of your car sound like Carnegie Hall, reported an ever-so-slight miss and while the company is on Mad Money tonight to talk about its business, people would rather shoot first and then listen to the CEO later.
Oh and heaven help a company that actually disappoints. Celgene's (CELG) got some drugs out there that I thought were going to help the company's earnings, and they didn't. It takes down all of biotech. And Yelp (YELP), a company that belongs under another roof, a company that needs a social vertical to go with, say, search or content, tries to go it alone and sounds confident on a call that was met with universal one stars. That's right, the difference being that Yelp can't take an ad out with the analysts who cover it to influence them. While Yelp's still the Yellow pages online, it seems as if the ads are overpriced and the listings are being given away for free.
Even steady Eddie Colgate-Palmolive (CL) couldn't make the numbers and we know that's not because people stopped brushing their teeth. The dollar played havoc again and even if you think the greenback's topped out we still have to deal with the previous consequences.
Now what forgives this market? What can make it all work out? I can see several things that make sense. One is that oil doesn't go up every day, as it has, and takes a breather so we stop disdaining those stocks that are consumer-driven or those companies that use a lot of oil like the transports. Another is that we get some seller fatigue, that people say, "Enough already things aren't that bad." Third is we find some new leadership, perhaps among the banks, or perhaps the real estate investment trusts and utilities or even the darned phone companies and their technological buddies. But let's cut to the biblical chase. We need an Apple to rise up from the ground, a tall order because this one's fallen from the tree and been eaten.
Oddly enough, though, I think that's the most likely scenario. I think the stock should be bought here. I said it would go down for three days after it reported and then would try to find some footing. I know that we aren't supposed to get any rest until day seven, but the investor bible gives you a quicker respite. However, if Apple bottoms, we bottom, the nasty serpent gets smoted and all is right in the Garden of Eden once again.