Jim Cramer is Founder and Chairman of TheStreet.com and writes several times each trading day on RealMoney.com.
Considering The Recovery As A Reality
Maybe this time, the recovery is better, healthier and more sustaining. Maybe this time we’ve got it right, not wrong, and the recovery will be responsible and fuelled by a longer-term health in the consumer, not turbocharged bad lending, like we saw from the likes of the Washington Mutuals, which, outrageously, former CEO Kerry Killinger is in total denial of what caused the bank’s downfall.
What makes this one sustainable? As I go through the JPMorgan quarter, I am conscious that the recovery is not being fuelled by excessive consumer debt or consumer spending. It is not being fuelled — for certain — by too-easily-available home equity loans. It is not being fuelled by reckless issuance of credit cards.
Now all of this could be, and it is almost always spun negatively. Numbers that show slower consumer spending because of less-easy credit are invariably being used to infer a double dip in the economy down the road.
But I am saying that the big multiyear bear case against this market, one that has been proven out, was based on too much reckless credit issuance, particularly against housing.
Now, though, we are in a world where housing is cheaper and down payments must be had. That’s OK with me, and it’s quite bullish long-term for certain. The credit card correction is ongoing, and the doling of cards to dogs and cats and children is a thing of the past, thanks to reform and the losses taken.
Now, the bear case will switch to too much government spending, and how the economy is on steroids from stimulus. I think that we are going to be viewing that as a canard, not unlike the “commercial real estate collapse will bring us down” or the “Chinese bust will bring us down” scenarios. This recovery will create more jobs than people think, as the table of employment in this country is way too lean for this level of demand. It will produce bigger tax receipts than expected. It will produce lower deficits than expected. That, and the negativity that I am saying is misplaced, will keep this rally going longer than people want to believe.
Dow 12,000 beckons, because as much as this economy looks like it is on steroids, once it catches fire, a gradual increase in interest rates without a concomitant increase in inflation — particularly if you were to include housing — will only further buttress my contention of a real and long-lasting recovery.
These theories of mine will be fought against tooth and nail, and I get that. They seem fanciful. But remember that I am about trying to understand the rally. This is the best that I can come up with, and I like it.
Random musings: The rotation out of the soft-goods stocks and drug stocks is part and parcel with the thesis I am propounding. Those stocks cannot work at this point in the recovery unless they have some secular growth basis that is eluding most of them.
At the time of publication, Cramer was long JPM. Cramer’s commentary is available here: Jim Cramer and 60+ market commentators on TheStreet RealMoney.
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