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Cramer: This Bull Market Is Still Charging (Hard)

Posted at 2:53 p.m. EDT on Wednesday, Jan. 4, 2017

Sometimes the market rallies because bad things don't happen. Other times it rallies because fears prove false. When the markets collide with negative news they tend to go down, but with this market collision avoidance is king, and when we collide we bounce back with alacrity.

Let me give you some concrete examples of what could have happened that didn't, the accidents that never occurred.

First, let's parse some of the biggest fears being peddled by pessimistic prognosticators perhaps designed to sow panic, panic that didn't happen.

How often, for example, did we hear that if the Dow didn't crack 20,000 we were doomed for a huge selloff. I can't believe how loud this chatter was. It was almost as if the issue was binary: We crack through the 20,000 ceiling or we get thrown back into some sort of oblivion.

Well, here we are: We didn't take it out; we got thrown back from the Dow 20,000 ramparts and the result? The Dow stocks get right off the canvas and make another challenge. This prognostication was just plain wrong.

Second, we heard that there would be big rebalances at yearend that would require institutions to sell a great deal of stock, and we also thought that there would be a gigantic wave of tax-related selling when the year began by people who wanted to hold out for lower rates that could come from a Trump administration.

Sure, we got a little selloff last week, but it wasn't monumental at all. The rebalancing was a canard. Tax-related selling? It hasn't happened. It looks like individuals either aren't much of a factor in the stock market - entirely possible - or that the average investor wants to play this one out ... wants to see how high we can go. Who can blame them? Each selloff has been met with buyers. Why not let things run?

Then we had as astonishing amount of talk about how we are seeing peak cycles in everything from homes to planes to cars.

So far, despite the dramatic spike in rates, we have not heard from any homebuilders about a slowdown. If anything it's the opposite. There's a housing shortage. I keep reading these scare articles about the collapse of high-end apartment values. Oh, come on, housing is a multiple-trillion-dollar market and yet the media just babbles on about $5 million apartments in New York. We are seeing a resurgence in homebuilding. It's finally back to where it was before the Great Recession. So much for peak housing in a world of higher rates.

Peak planes? This has been one of the biggest canards out there. Yes, it is true that this incredibly important business is being stung from a surfeit of large-body airplanes. But the small-body planes? You just can't get them. There are queues stretching for years. And there's a good reason: As the world becomes more middle-class, travel grows. It's a secular not a cyclical trend.

Today we learned that the biggest scare story of all, peak autos, was just plain wrong. We saw flabbergasting numbers out of General Motors (GM - Get Report) Wednesday, plus 10 when analysts were looking at plus four. Every single auto company reported better-than-expected numbers and in some cases, like Ford (F - Get Report) , the incredibly lucrative F-series trucks led the way.

The impact here is huge. Not only do car sales impact these companies' stocks, but they are fabulous for CarMax (KMX - Get Report) , AutoNation (AN - Get Report) and for car-part companies like Lear (LEA - Get Report) and BorgWarner (BWA - Get Report) that have been endlessly downgraded by non-believers. I think that auto sales are strong because you need a car to go to your job and jobs are plentiful. The conclusion of the tense, mud-slinging election busted open the floodgates of buyers, and December was just plain off-the-charts fantastic. Tesla's (TSLA - Get Report) stock even rallied despite missing (barely) its forecast, helped no doubt by the larger back-drop and an analyst meeting where Eli Musk worked his usual magic.

A little more than a month ago we were aghast that the president-elect was tweeting attacks on individual companies about moving jobs to Mexico. The first foray? An attack on United Technologies  (UTX - Get Report) that caused the company to blink and lay off 1,000 workers instead of 2,000 that would have been let go in order for Carrier to manufacture heating equipment in Mexico, something that would cost the company a couple of pennies per share.

The stock was at $108 at the time that UTX caved. It's at $110 and change. Buying opportunity.

Next? Boeing  (BA - Get Report) , attacked by a tweet over outrageous Air Force One overruns. The stock was at $154. Now it is at $158. Buying opportunity.

Then Lockheed Martin (LMT - Get Report) got hit over the head with a two-by-four for F-35 overruns. Don't look now, but the stock is now than when that tweet appeared. Buying opportunity.

Oh, and what a chance you got to buy GM Tuesday off of a tweet about it making cars in Mexico and shipping them here. I saw the stock hit $34 and change in the pre-market. Sure we got good superseding news, but let's face it, when was the last time you made almost three bucks on GM in 24 hours. Buying opportunity.

Lots of skeptics have asked me over and over again, What does de-regulation really mean? How can the president really roll back regulations? By appointments, that's how. You think that a Greg Pruitt, an Oklahoma attorney general, can't roll back years of regulation by the EPA if he's approved for the job? Hate it or love it, he'll have a field day and it will be incredibly good for the earnings of utilities and fossil fuel companies and refiners and pipeline companies. You think that Andy Puzder, CEO of fast-food company CKE Restaurants, and someone who has worked hard to make his chain profitable will represent labor's interests? Only theoretically in that he believes that if you raise minimum wages then jobs get lost. You think that this new SEC appointee, Jay Clayton, a corporate finance lawyer from Sullivan & Cromwell, will be creating a bunch of new regulations? Think again. This is a job that's gone to prosecutors or regulators of late, including the current chief, Mary Jo White, who had been a fierce prosecutor before she got this job. Clayton's a deal marker. He's going to look for ways to help business, not hurt it. You think Rex Tillerson, late of Exxon Mobil (XOM - Get Report) won't promote the interests of business and make it easier for them to do so, especially the oil companies? Anything's possible, but that's unlikely.

Then there's the recovery of stocks that had been blasted for not being cyclical enough to participate in the rally. We are seeing large buyers of Salesforce.com (CRM - Get Report) , of Facebook (FB - Get Report) , even Red Hat (RHT) , which just missed its quarter. At the same time some stocks that had been left for dead, the rails, the ag companies--have you seen those breakouts in Deere (DE - Get Report) and Disney (DIS - Get Report) , both of which had been challenged by recent numbers?

Finally, there are the European collapses that haven't collapsed. Remember when we were worried about Brexit and its impact on British banks? How about when we thought Deutsche Bank (DB - Get Report) could be put out of business by the Justice Department? How about how hobbled Credit Suisse (CS - Get Report) is? Guess what, they have all rallied huge. The debacle didn't happen.

Collision avoidance. Rapid Recovery. The hallmarks of this rally just don't stop. They are behind the hidden strength of this amazing bull market.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long FB.

 

Cramer: You May Not Have Noticed, but Oil and Energy Stocks Decoupled

Posted at 6:31 a.m. EDT on Wednesday, Jan. 4, 2017
 
I don't know if you caught it, but something very bizarre happened Tuesday, something we didn't see in 2016: crude went down but the oil and gas stocks went up.

That's right; we came in to work with oil up a buck and change, threatening to bust through the $55 level, one that has contained oil during the entire updraft from last year's bottom.

The rally in oil was central to the strong opening in the overall market, something, with all of the hoopla around Trump's election, we didn't seem to remember until it reversed and took the S&P 500 down with it pretty much in lockstep.

But, curiously, when you surveyed the stock universe, the oils gave up very little of their gains, less than every other group I follow save the drug stocks, which were giving you a January effect lift--they had been sold down by tax loss seekers in the month of December and that selling finally abated.

Why is that? Why did the oils hold in or, in some cases, rally harder?

A few reasons. First, our oil companies with assets in the Permian and the STACK and SCOOP formations in Oklahoma are making a lot of rumblings about how they continue to cut costs of drilling so that anything in the mid-fifties means that production growth will exceed expectations. Why not? They make too much money at these prices not to drill.

Second, there have been no signs of cheating yet on the recent OPEC agreement. Best estimates indicate that the cartel's actually controlling production far better than the skeptics thought.

Third, while Marathon Petroleum (MPC - Get Report) is a refiner, not an oil company, its decision to accelerate its unlocking of value, spurred by Elliott Management, caused the stock to jump--a reminder that there are still a lot of hidden assets out there within companies, assets that might be worth more now that Trump is going to be president. Remember, he favors drilling and pipeline building, and that's music to the ears of both the refiners and the exploration and production companies.

Finally, there is tons of talk of takeovers and mergers going on behind the scenes. In a little-noticed story yesterday, an activist outfit called Chapter IV investors suggested in a letter that EQT (EQT - Get Report) , an integrated oil and gas company, consider merging with either Range Resources (RRC - Get Report) or Antero Resources (AR - Get Report) . Chapter IV owns 1.35 million Range shares and 765,000 Antero shares, as of the most recent November SEC filings.

The firm suggested that there are obvious synergies and overlaps among the companies that could make for a more powerful combination.

I have always liked Range and feel even more strongly about it this year, because I think 2017 will be the year that natural gas companies outperform their oil brethren, and Range is a company with very inexpensive natural gas holdings in the Marcellus and Utica basins located primarily in Pennsylvania and Ohio respectively.

I don't think anything will necessarily come of it; Chapter IV's not big enough to force anyone's hand in this equation. However, with oil stabilizing in the $50s, scale makes more sense and either of these deals would give EQT a lot more of it.

But let's not overthink this. The main takeaway here is that any decoupling of the price of crude with the stocks, one that sends the stocks of oil and gas companies higher even during a brutal reverse in the price of crude, is especially good news for a group that looked like it was going down for the count a year ago and has now become integral to the amazing Trump rally in everything fossil fuel.