For more than 10 years, this market has done nothing.
Go hit up chart after chart after chart going back to 1999. It’s absurd.
With the exception of some rails and fertilizers, everything’s been treading water. Until now. We are finally starting to see potential big breakouts from many big-cap companies, including United Technologies (UTX), Freeport-McMoRan Copper & Gold (FCX), Caterpillar (CAT), Stanley Black & Decker (SWK), Cooper Industries (CBE), Eaton (ETN), CSX Corporation (CSX), Union Pacific (UNP) and so many other big rails and industrials.
And what do people want to do? They want to sell ’em. They want to sell either because they are up way too much short term or because they think they are up on a squeeze.
In fact, the perspective here is that if it ain’t Qualcomm (QCOM) or Netflix (NFLX) or Apple (AAPL), don’t bother. It can’t go up from here until it declines and consolidates.
But what if we are at the beginning of something big? What if the moves are sustainable based on worldwide growth and profits (plus cash and dividends)? What if there’s a possibility that things in this country are getting better as measured by simple things such as the Challenger, grey & Christmas numbers this morning showing job cuts dropping 34%, the lowest monthly total since 2000, or the ISM survey for services growing at the fastest pace since 2006. What if almost all of the regional Fed numbers for manufacturing are right as they point up? Maybe we are so worried about Portugal or what the Fed is going to do, despite the fact that the Fed has said over and over again that it won’t stop pushing until it gets employment going, or whatever is the negative story du jour that we simply can’t see the forest through the data trees?
The pincer move by the bears (i.e., stocks up too much and QE2 as a failure) has gripped so many that it has clouded peoples’ judgment. It’s as if somehow we are waiting for Ben Bernanke to tell us when to buy stocks when he has been saying buy stocks for months. We are somehow waiting for unemployment claims going to 100,000 when the direction is the thing, not the absolute number.
Put aside the remarkable moves happening in the industrials. Consider the banks.
For example, stark example, all week we have heard that Bank of America (BAC) is up way too much on some settlement that basically does eliminate the biggest risk. And like it or not, fighting with Fannie Mae (FNM)/Freddie Mac (FRE) is the biggest risk the bank can have. Have you seen where that stock was when it wasn’t as good as it is now?
Same with Citigroup (C). Does someone want to tell me that the $50 Citigroup with the miasma of pain coming at it is as good as the $4.75 Citigroup with the whole world being its oyster — particularly the emerging markets as the bank moves inexorably toward 60% to 65% international (being helmed by the most international of bankers)? Does someone want to quibble with my judgment that JPMorgan Chase (JPM) with multiple dividend boosts ahead is as bad as the JPMorgan Chase with dividend cuts ahead, especially when this JPMorgan Chase has made some terrific acquisitions and has a balance sheet that makes it the strongest bank in the world?
Don’t get me started on a stock such as Alcoa (AA), which gets downgraded today because it has moved from $12 to $16 when it used to be at $40 back when it was a terrible mostly domestic company, not the well-run international company spewing cash flow as it never has before.
Or finally, does anyone really believe that Ford (F) is done moving up when it could become the world’s No. 1 automaker and is doing so selling the highest-margin products? It is stalled, I believe, because of a classic arbitrage between the preferred I like so much and the common stock?
I know this whole view is disparaged as wild-eyed, like I am calling for DJIA 36,000 or something. I read the negative comments, such as in Twitter @ JimCramer, where I was reviled for my bullishness when the Dow was down 30 points and the Nasdaq, excluding Qualcomm, looked terrible. Remember I said we will turn when F5 Networks (FFIV), Apple, Deckers (DECK), Salesforce.com (CRM), Chipotle Mexican Grill (CMG), Amazon (AMZN) and Netflix reverse and go up.
I am aware also of the commodity cost pressures, even as in this country commodity pressures represent about 6% of the cost of doing business.
But I come back to something my colleague and friend, Matt Horween, keeps urging me to remember. Most stocks have done nothing for more than 10 years, so the scepticism will remain high because stocks have been such a disgraced asset class. The individual investor’s been blown out. How could s/he not be. The consumer debt is on the decline, so the rally will not be fuelled by reckless borrowing at the individual level.
Bond funds, while not getting new money in, have hardly seen outflows. Maybe we are being set up for something big, as indicated by my bottoms-up forecast for a 16% gain.
I say let it sell off. I hope it sells off. I hope for a 3% to 5% correction as I will buy quality stocks that decline that much. In the meantime, I can’t sell here. I fear too much that I can’t get back in, a fear that is as thick as the fear of the majority of investors I talk to, which is the fear of not sidestepping the big decline that they think is coming.
Jim Cramer is Founder and Chairman of TheStreet.com and writes several times each trading day on TheStreet RealMoney.
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