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Gulf Widens Between Haves and Have Nots

Posted at 6:06 p.m. EDT on Friday, May 29, 2015

The dichotomy between what is working and what isn't has grown gigantically near the end of what turned out to be a pretty darned good month.

If it is being acquired or doing the acquiring, it goes higher. If it takes out capacity in its industry, then all the companies in the sector also go higher.

If it is selling goods internationally or if it depends on a stronger consumer, it is going lower -- unless it is heavily shorted, think Shake Shack  (SHAK - Get Report) and GameStop  (GME - Get Report).

It's hard not to be giddy if you own a consolidator or the consolidated. You think we are in a rip-roaring bull market if you own Avago  (AVGO - Get Report) or NXP Semiconductors  (NXPI - Get Report) or Altera  (ALTR - Get Report) or Intel  (INTC - Get Report). You can't believe how strong this market is if you are in a health care cost container, especially if it is Humana  (HUM - Get Report).

On the other hand, if you are just sitting on a plain old industrial, you are thinking, "When did this good market just morph into a bad one?"

You know I have been a big fan of the consolidation theme and have repeatedly urged you to own one of the four horsemen of the semis: Qorvo  (QRVO - Get Report), Avago, NXPI or Skyworks  (SWKS - Get Report). They are all insanely strong. I pushed you to own the HMOs for two weeks, betting that five goes down to three, with Humana the most likely to be acquired from among Anthem  (ANTM - Get Report), Cigna  (CI - Get Report), Aetna  (AET), United Health  (UNH - Get Report) and HUM.

How about the rest of the market, though? That's become hostage to either international events or purchasing power, with the former a source of endless disappointment and the latter turning distinctly negative in May.

I don't like this gulf between the haves and the have nots. We need good news out of Greece, something positive from China and the Fed's people to stop talking entirely and signal that there is no inevitability to a rate increase given the newfound weaker data.

Sure, deals are great ... if you own the stocks involved. If you don't, you are thinking, particularly if you own an old-line industrial or a transport, "If this is what I am staying in for, let me out of here!"

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.

This Is Not a Good Time to Raise Rates

Posted at 11:25 a.m. EDT on Friday, May 29, 2015

When the Fed meets next, how much will it cut rates?

There. I wrote it.

That's the truth.

We have subpar growth. The month of May was a bad month unless you cut hair or sold video games -- obscure references to Ulta  (ULTA - Get Report), which is going down despite an amazing number, and GameStop  (GME - Get Report), which is going higher because it reported a good enough number to freak out the short sellers.

Yet all we hear about is when will the Fed raise.

This is nuts.

You have weak purchasing-manager numbers on top of a terrible first-quarter GDP. You have sick airline numbers, weaker rail car loadings and trucking estimates coming down. You have companies that sell goods overseas being whacked by a strong dollar.

And you want to raise rates, which would cause business to cool in one of the only areas left of strength -- housing -- while it would cause the dollar to go still higher and trim our exports even further?

The inevitability of the rate hike and the nonstop jabbering by Fed heads and commentators alike about not if but when seem totally out of sync with the data of this data-dependent Fed.

Is there froth? Yes, in the takeover business. It's getting thick out there with the multiple to cash flow that Charter's  (CHTR - Get Report) paying for Time Warner TWC, which works out to be an astounding $9,000 per customer. I don't know if Avago's  (AVGO - Get Report) cash-and-stock bid for Broadcom  (BRCM) would be such a hit if rates were higher.

But these deals are no reason to raise rates. When you raise rates into a downturn like we are having, then you are risking a repeat of the Jean Claude Trichet handbook; as head of the European Central Bank, he raised rates twice going into a slowdown in Europe and those moves pushed the continent over the edge.

It's wrong.

It's foolish.

And it looks like it's happening sooner than we are ready for.

Bad for business.

All business.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.