Get ready for the following: "The market's about to take a header because the Fed and Treasury are going to take away the stimulus."
First, I don't even know if it is true. We have a Fed chairman who is incredibly independent and a great student of history who recognizes that if World War II had not started, we would have slipped right back into a depression.
You can always tell a benign market by the comeback the doghouse names manage to give you.
Consider the errant cases of Pepsi (PEP) (Cramer's Take), McDonald's (MCD) (Cramer's Take) and Intel (INTC) (Cramer's Take). All three allegedly "disappointed," with Pepsi failing to please on the alleged guide-down after its bottling purchase, McDonald's stuttering on a bad month and Intel on a so-called failed quarter.
If I were to be a short-seller, paying attention to the news flow, I think I would like to be a short-seller of higher-end residential real estate, because I would presume that people couldn't afford it. If they can't make their payments for their houses, they are going to hold out to fix their mortgage or they are going to abandon ship, but they are not going to go to a luxury apartment complex. They are going to go downscale, and the apartment complexes that cater to those who are well-off should be going begging.
I think I would want to short AvalonBay Communities (AVB) (Cramer's Take), which has 172 communities and 50,000 apartments in decimated areas such as Southern California, Northern California, the Midwest and the Pacific Northwest. It must be getting killed. How can it possibly pay those underlying mortgages and how can it grow, building new apartments? It must be a moribund, declining business.
Have you ever noticed that with every good housing report there are endless caveats:
1. Prices are still down year over year.
2. The home tax credit of $8,000 moved the house, and that will go away.
3. Home mortgages are artificially low because of the Fed.
4. Banks have more foreclosures on their balance sheets than before.
5. Foreclosures continue to occur.
6. Everything will slip back to imbalance when the credit goes away.
Three times this market eluded people. The first was what looks obvious in retrospect but was actually a perilous bottom, back in March. I wouldn't have recommended it here or on my show if Doug Kass hadn't pushed me and all others who read this site. It was a call of a lifetime. And we all know it, the generational call to get in. So many missed it because the moment was breathtakingly dangerous and could have been binary. I got lucky and backed into it, with Doug's help, simply by tallying all of the individual stocks in a worst-case basis, and you couldn't get much below Dow 6000, which at the time was only 300 points below, barely enough to worry about. That was the Nouriel Roubini heyday, and he managed to mark the bottom by slashing his price target for the Dow to 5000. He could have declared victory and been a hero, a la the now celebrated David Tepper. Instead, I think he's a bum who reiterates his sell at every turn. If you go back and look at all of the stocks that were at a buck and change at the moment, you can see exactly what I mean. Citigroup (C) (Cramer's Take), anyone?
What do you with Citigroup (C) (Cramer's Take) if you bought it on the deal now that you are up so huge? I'd keep it.
Remember, there were two variables to this deal -- how much raising the TARP return money would hurt the stock and how much the government's sale would hurt the stock. We saw the underwriting knock off about 60 cents from the stock, and we are getting the distinct view from Washington that there is no consensus between Treasury and the FDIC about what should be done with the government's stake beyond holding it for a while.
We should be in research heaven starting today. We have unwritten rules at the end of the year in this game: no big downgrades. And with almost no earnings reports left for the year, there is little reason to expect any.
Given that the last major earnings reports -- General Mills (GIS) (Cramer's Take), Research In Motion (RIMM) (Cramer's Take) and Nike (NKE) (Cramer's Take) -- were all worth praising it is hard to see why this year should be any different.
I like Brian Moynihan. I have wanted him from the get-go. Not because he is a lawyer -- that hasn't been much of a boost for others in banking (sorry Chuck Prince!). And not because he is an insider, although I think learning this story would be darned hard for an outsider.
I've liked him because he is from Fleet, the part of Bank of America (BAC) (Cramer's Take) from New England; Fleet is the least risky, most conservative portion of the bank. Fleet was a bank I loved. It gave you an amazing return and did it in a simple, conservative way: good banking.
With the usual suspects rallying -- gold and oil -- it's important to remember how the oil rallies have unfolded in the past. You have to be able to recall the oil pecking order of the petroleum complex ramp.
First to move in the drilling complex is Transocean (RIG) (Cramer's Take), the wildest trader in the group. Then it is National Oilwell Varco (NOV) (Cramer's Take). Forget that both of these are the least affected by the day-to-day price of oil. The market's real stupid on these oil moves, and that's what happens. On the oil side it is Occidental (OXY) (Cramer's Take), which at least is closely correlated and can have a big move throughout the day.
Why do Goldman Sachs (GS) (Cramer's Take) and JPMorgan (JPM) (Cramer's Take), the good ones, go down all of the time or act terribly? I think because the equity offerings of the bad ones are just too compelling and the universe of buyers of this merchandise is severely limited.
These stocks are limited because they are not worth the headline risk trouble. If they weren't being bashed by the president or taken to the woodshed by Congress or dumped on by Meredith Whitney, the most powerful bank analyst on earth, then maybe they would be worth owning. But the more successful you are, the worse it looks. Is Goldman Sachs supposed to get into the home mortgage business? Is it supposed to write a check for $10 billion to the government as a thank you for AIG (AIG) (Cramer's Take)? Is JPMorgan supposed to start raising its dividend when it would be branded as a fat cat?
Do you think Exxon (XOM) (Cramer's Take) is going to buy XTO (XTO) (Cramer's Take) -- the best of the best -- if it doesn't see the writing on the wall that it needs to have natural gas as part of its filling station repertoire? Do you think Exxon just wants to be in the home heating business? Do you think the most conservative company in the industry is all about just picking up some good domestic reserves when it has ignored doing so for years?
This is the biggest game-changing transaction in the nat gas patch that I can recall, because Exxon just endorsed both its reliability and its cleanliness. Remember, you do not see Exxon bidding on the Iraq fields. While it is doing some exploration across the globe, you bring in XTO because you want to dominate in natural gas at home.
How big a stock can Ford (F) (Cramer's Take) be? Here's an odd one: It can be as big as the stock will let it be.
So much of this company's future is tied up in its stock appreciation because that will give its fantastic CEO, Alan Mulally, the flexibility to pay off the unions, pay down debt and get its credit rating to where its Ford Motor Credit business will make fortunes for the company.
Ford's performing fabulously, profitable in every market it sells in after having streamlined down to just a few big brands that can be supported both through advertising and through production at far lower costs than just about any other auto manufacturer, if not every auto manufacturer.
Buy Citigroup (C) (Cramer's Take). No, not in the open market, but on the deal or deals, depending upon how heavy-handed the government's going to be.
I initially recommended this stock in the low $3s and saw it go to $5, where I begged the government nightly on my show to sell its 7 billion shares. But no, the government played the market and gave up a very big gain. But now here we are back again at $3 and change, and the government is going to price its stock, and the company might do an additional 6 billion shares or more to pay back TARP.
So you are looking at about 14 billion shares hitting the market.
Disney's (DIS) (Cramer's Take) an odd animal. Until these last few months, it always seemed to be measured by what its worst division at the time was doing. If ESPN was going great but theme park attendance was going down, people would sell it. If theme parks were holding up but broadcast advertising had weakened, investors would jump ship. If the owned and operated stations did well and the company delivered a bunch of hit shows, but the movie lineup bombed, people would dump the stock down to 12 or 13 multiple status, instead of the premium multiple is used to trade to.
Why in heck is Macy's (M) (Cramer's Take) only a $6 billion company? Here's a department store chain that's getting growth back, that's aspirational as all get out, that has a management that understands that it needs to be regional in product but not in duplicative management, and it gets no respect whatsoever.
Yet we love the strip mall guys like Kohl's (KSS) (Cramer's Take) and Target (TGT) (Cramer's Take) because they are still throwing stores up all over the place and have perceived growth characteristics. We are willing to pay twice Nordstrom's (JWN) (Cramer's Take) growth rate for a company that's not that much better than Macy's, if at all. Twenty-three times Nordstrom's 12% growth vs. 15 times Macy's 10% growth makes no sense to me when I expect Macy's' growth to accelerate because of the My Macy's localizing initiative.