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:
- What happens when everything goes right, and
- Separating emotions and facts.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
A Bright and Sunny Day
Posted at 1:05 p.m. EDT on Friday, May 8, 2015
Today shows you what happens when everything goes right. As I said in last week's game plan on Mad Money, if you get a monthly employment report that delivers just enough job growth without inflation, you could have a spectacular thread-the-needle rally, and that's just what we got.
It didn't hurt that we got the now fabled bullish combination of strong earnings from some key technology companies, notably cyber-security ace Cyberark Software (CYBR) and data-mining king Tableau Software (DATA), the latter with a spectacular number that's got the stock breaking out and taking the whole sector with it. Plus, calm oil, a boring dollar and lower interest rates are pure tinder for this monster move.
You've got some huge takeaways from what happened today.
First, this market zooms when you least expect it, when pessimism reigns from stern to bow. I can't tell you how many funds I know came into today's session short or underinvested because either the charts supported a total breakdown or they feared that the dollar would rally once again and that this market could not handle a stronger dollar anymore and still go higher.
Second, interest rates, which had been going up and up and up, may have seen their peak for 2015. Why not? There's no real inflation. Our rates are much higher than Europe's, and that makes no sense if Europe is beginning to grow and we are slowing as all reports seem to indicate.
Third, if Europe is as strong as I think it is, you are going to see some American companies do much better in their European operations. Right on schedule McDonald's (MCD) this morning announced its first positive surprise in Europe. Remember, people spend more money when they go to a restaurant when they feel wealthier. We have heard that time and again. McDonald's new CEO, Steve Easterbrook, may be the luckiest guy on the planet, and it is better to be lucky than good.
Finally, as I tell you endlessly, you need to buy stocks of companies you like at discounts the market gives you, especially ones created by those who truly did believe this market was on its last legs. Earlier this week, when traders were flipping out over the dollar, bonds, oil, the euro, and comments from Fed Chief Janet Yellen that stocks are dangerously overstretched, you needed to do some buying. It is why we stress buying at your price, not the inflated price. When everything went right today, it was, sadly, too late. You don't get a chance to buy after we get good news. You have to buy when others are freaking out.
Oh, and can I just say that Janet Yellen is now 0-for-2 on stocks? Perhaps it's just better to recognize that she is in the American League and she can pitch, but we will get a designated hitter -- maybe Hall of Famer Warren Buffett -- to do the batting.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.
Here Is Why Investing Is Hard
Posted at 6:48 a.m. EDT on Thursday, May 7, 2015
We can look at the stock and bond rout around the world right now and we can run for cover.
Or we can take a look at what's causing the rout and think whether there aren't winners and losers being made and broken right here, right now.
It's difficult to separate the emotions of the losses from the cold, hard precipitating facts. But it's what you must do to make big money.
What's causing the selling? Some say it's the rise in oil. Others, a decline in the dollar. Or a vicious back up in European interest rates. Or the possibility of the Fed raising rates shortly because of inflation or job growth.
There are a ton of variables.
But what's really changed that's caused all of this turmoil? I think that the answer is pretty darned simple: Europe's getting better. Not just Germany. Not just the Northern rim. I'm talking about Spain, Portugal, Italy, France and all of the other countries -- obscured by the craziness of Greece.
That's happening in part because the European central bankers created a situation where, like here before our own central bank uber-activism, you didn't want to own bonds because they paid you too little for buying them. Instead, you wanted to own anything save bonds, as almost all other assets represented greater value. They still do, even after yields have moved up radically, because they have only moved up radically on a percentage basis versus where they were.
The moves by the European Central Bank may have been unorthodox, desperate even, but they are working. The economy is humming. When an economy is strong, many things occur. The currency gets stronger, and that's happening right now to the euro vs. the dollar. More people get put to work. Sales increase. Profits grow. Lending resumes. Bad debts go down. Tons of things that are good for business.
Which brings me back to the original question about picking winners - or more accurately, about buying stocks that should go higher because of this huge sea change.
So, let's take the stock of PPG (PPG), run by CEO Chuck Bunch, which is the biggest most lucrative coatings company in the world, with the highest-quality products for materials, for packaging, for boats, planes, homes, construction and cars, including all sorts of paints like Glidden and Pittsburgh.
PPG just reported what looked to be a pretty miserable quarter, with a 1% sales increase year over year. That's the principal reason why the stock, a tremendous performer, has been stuck, down 4% year over year.
Because it does about a third of its business in Europe, that's why. And Europe hasn't been that strong. Worse, PPG's in a dogfight against European paint companies and its prices are too high relative to theirs, because of the strong dollar. When it cashes in the euros on what it does sell, mainly paint to BMW and Mercedes and the like, there's less than you thought left over.
Now, consider that in the last two months the following things have occurred: the euro's gotten incredibly strong versus the dollar, the order books have gotten much fatter, car sales are way up, and PPG's products are now more competitive versus their European counterparts.
You haven't seen any of this in the company's reporting yet. Its last quarter had almost all of the negatives and none of the positives. In six weeks, a monumental swing has occurred. PPG could show a dramatic year-over-year growth in earnings because of what's causing the turmoil.
Dramatic and positive.
So what gets sold? What's become a loser? The stock of PPG. Why? Because it is in a basket of stocks called the S&P 500. I accept that judgment; it's called indexing. Nevertheless, there will come a time when this stock will be too hammered because of these good things, and you will have to buy it.
As it goes lower. Because it is going lower for the wrong reasons. Which is exactly the kind of misjudgment you must salivate over, and take advantage of, not be repulsed by.
PPG's why investing is hard. It's also why it's worth it, because when this currency-induced smoke clears, PPG will be a much more profitable company and its stock will draw money away from others that don't benefit from the great 2015 sea change that soon will be evident for all to see.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long AAPL.