The boogeymen continue to be fictional, despite endless attempts to drum up fear and hasten the departure of millions of scared investors. I’m calling the endless negative prattle the “Bear Bilge,” the stuff thrown at us that seems so cerebral and intellectual, but just turns out to miss the mark. I’m being plenty genteel in that summary. I won’t stay that way. You know my thesis by now. There are dozens of commentators who come on-air and posit the “hard landing” scenario for the economy, making it clear that we are indeed on the eve of destruction. These Cassandras are from two camps. The first is made up of negative analysts who dug in their heels and overstayed their welcome. The second group is wealthy hedge fund managers and individuals who see no harm in generating chills simply because they don’t think they are doing so. They regard their fear-mongering as first class advice that can’t possibly have consequences. I get that. If the market crashes they will be lauded for a lifetime. if it percolates, big deal — they didn’t tell you to sell, they just told you not to buy. This “heads I win, tails you lose” mentality is rarely questioned because the media often shares the same bias. The impossibility of any company doing anything right, or as right as the market seems to judge, serves as the only homily worth offering. The sole exception is Warren Buffett who, aside from owning Apple (AAPL), provides no agenda beyond being a happy warrior and a buyer of a second-rate oil company. Sure, he deserves to get away with it, but a lot of his armor stems from history not from current events. It’s not like he’s endorsing Federal Reserve Chair Jerome Powell’s every move, or any move, and he’s the most optimistic of the opining lot. You can see why this is. The Fed has not distinguished itself over the years, with only former Chair Alan Greenspan getting an undeserved free pass. We remember Ben Bernanke, who led the central bank from 2006 to 2014, as the man who saved us from the housing crash, but not the one who caused the crash with endless rate hikes. We slam Powell as the man who kept rates too low for too long without ever considering that every other nation did the same. But we are the only one with great growth and falling inflation in the entire universe. Those who deride Powell never dare to discuss the disaster of the People’s Republic of China, with its once-inconceivable inability to generate any sort of growth even via inflation. An economy that’s one-quarter based on property can’t afford to have no gain in property values as has been the case for most of the year. An economy that’s trying to pivot and become like that of the U.S. — which is 60% service and not 30% as China sports currently — has failed miserably to do so even as it’s been the stated goal for a multitude of years. Sometimes deflation can be as hard to uproot as inflation. Right now what you own in China is going down in value, not unlike a car after it leaves the lot in our country. So why spend at all? It didn’t take long to dispel so many of the boogeymen. Earnings season kicked off with spectacular numbers from Wells Fargo (WFC), JPMorgan (JPM) and PepsiCo (PEP). Wells was expected to take in 10% in net interest income, now it expects to gain 14%. You couldn’t have a bigger delta for its most important line item. JPMorgan showed it is a true growth stock, with beats on the top and bottom lines, and has a ridiculous price-to-earnings multiple of 10. It used to be a big deal for PepsiCo to grow at 4%. Now if it doesn’t grow by 8% we are disappointed. Thank heavens it’s growing at 10%. The gains are no longer just in Frito-Lay. They are in carbonated beverages, too. The emphasis isn’t on good tasting versus good for you. The emphasis is on growth itself. Oh, and weren’t we supposed to fear higher utilization rates for UnitedHealth (UNH)? But what if it’s ready for those rates? Does that count? I’d say it does. So does the market. But let us deal with the bigger issues of the day, the things that were supposed to make equities more dangerous and the 2-year Treasury a more lovey blanket. The first? We had the dichotomy of “hard landing” versus “soft landing.” The cognoscenti swore to us that Powell would haplessly cause the plane to crash. We were just trying to figure out how well they foamed the runaway. The soft landing camp never told us what that really entailed. Shifting in the overhead compartments? But what if there was no landing. What if we just kept on flying because Powell was and is simply better than we thought. So what if he has the charisma of non-participating character. What do we want? Vin Diesel? Powell has set us on a course that plays for time and acknowledges that he’ll be bailed out of any real collapse in employment by the hundreds of thousands of admittedly blue-collared jobs that the multiple rounds of federal largesse will soon bring us. I have been harping of late on how hard it’s been to get all of these dollars to those who need them. The state regulations confounded many who thought that we would have already done the bulk of hiring and would probably be on the side of the firing. Instead, I put all of the spending to date on infrastructure, semiconductors and climate change at about 10%, with 90% about to hit the economy just when the Bear Bilge swore to us that we had to crash. You don’t foam the runway with trillions in federal spending. You simply don’t land at all. The genius of Powell is that he has played for time so well. We are finally getting the intractable items in the consumer price index — cars and rent — to come down. No, we don’t have deflation, just disinflation. The consumer has shifted her pattern of buying to going out and going away — two paths we’ve never seen before so we have no way to gauge their impact. The bears therefore presume the worst. I just say that the retailers have had a hard go because we never thought that anything could change our conspicuous consumption. Who knew that the xenophobes would even travel abroad? But that’s not all we learned. We had come to believe that the biggest of the boogeymen, commercial real estate, had become the ticking time bomb, or some other crank cliché. (Can we retire canary in a coal mine now that we almost never deep mine?) But then we listened to what we expected would be two of the three biggest offenders — JPMorgan and Wells, with only Bank of America awaiting — and we found the loan losses ridiculously low and the reserves dubiously high, making us think that we are going to have to blast some of these negativists with a couple of left hook roundhouses to the temple. But no one will actually do that because the media mogul fear complex can’t resist. You must resist. I know that next week Goldman Sachs (GS) will report and that once-rigorous-now-hapless entity will have to do some serious real estate reserve writing, if not outright write-offs, but the containment to that once-hallowed firm might be shocking but true. The bears just aren’t delivering on the goods on any key negative issue. Of course, the biggest worry to this market is its two-tiered nature: The mega-cap techs versus all the rest. The sense is that the mega-caps have to come back to Earth at some point. I can’t tell you how tempted I am to say that it’s the UnitedHealths and JPMorgans that will play catch-up. But even I, with card carrying bullish credentials, can’t argue for that cause. Nor do I like the leapfrogging of one artificial intelligence play over another, even as we own most of the lot. What has Alphabet (GOOGL) done to deserve its rally? You buy it simply because its CEO now gets that there is actual wood to chop when it comes to its bloated table of employment — not because it’s been chopped. The whole turnaround from a gentle to a precipitous decline in growth and then a pivot to upward revisions based on ChatGPT seems fanciful but enjoyable, certainly not as investible as thought. I like it because it seems to have regained its e-commerce crown. Microsoft (MSFT) owns so much of everything, including video games after its purchase of Activision Blizzard (ATVI), that I can’t come up with a reason to slag it. Although its CFO Amy Hood will most definitively. She won’t have the strong dollar to kick around anymore, though, as that earnings slayer has at last cooled off. Apple makes too much sense not to stay higher. Its ubiquitous nature seems to know no bounds and the fact that the iPhone 14 remains in play is a good sign, not a bad one. There is that much demand still for what we would call an old model. Of course, only those of us who have worn the Vision Pro know what awaits . And those who have not will play the needed role of antagonists. They will get away with their pessimism typically because they are telegenic, an interesting credential, to use a less-than-loaded term. Tesla (TSLA)? It’s Cybertruck will find adherents among the non-truck buyers, so no need to fret about that stock’s multiple. I am beginning to fret about Meta Platforms (META), if only because the Vision Pro is Tim Cook’s pro tennis entry to Mark Zuckerberg’s pickleball contestant. And then there is Nvidia (NVDA). It’s tough to ask for an encore to the $4 billion guide-up for this current quarter. The fact is though, you must think about the nature of computing as going from the multitudinous central processing unit (CPU) to the unique graphics processing unit (GPU), with Intel (INTC) and Advanced Micro Devices (AMD) ceding their actual existential need to that of Nvidia. You just don’t need a lot of CPUs in the new regime. What I suspect will happen soon will be a series of articles about how artificial intelligence is simply an overused term for recommendations (“If you like Colgate, you might like its tooth brush, or if you like Clive Cussler, welcome to Stephen King.”) Sure there will be lots of talk about how it displaces many people, but it hasn’t displaced anyone yet. If it were so powerful wouldn’t it be doing so? The articles won’t buy the “it’s a matter of time” logic and the reversal in Nvidia’s stock on Friday was breathtaking enough to allow the bears out of the den. All of that said, the bullish genie has unleashed the enterprise software hoards, the highest multiple group that has been dormant for ages. Now they are flying — Datadog (DDOG), Cloudflare (NET), Atlassian (TEAM) and the like. That means we are about to see a huge wave of issuance from that venture capitalist-loved sector. Meanwhile Federal Trade Commission Chair Lina Khan’s stunning defeat in the Microsoft-Activision case will lead to a ton of mergers. You can’t block everything. With that defeat, it’s time for the zealot with rigor, Jonathan Kanter from the Justice Department, to assert himself and tell corporate America how to do a deal that can pass muster. He can’t stop Khan, who has no rigor whatsoever, but he can blunt her errant ways with unassailable doctrine. So, put it all together and a more robust M & A market and a better IPO market — you heard it hear first —will take up the slack of the banks and put down the monotony of endless price target boosts from sycophantic analysts. At last they will be busy with new issuance. Now, the good news for the bears is that the next phase of the earnings season could be rocky. Look how the banks opened up and then just collapsed on the altar of State Street’s hideous numbers. Go figure how that piddling institution could erase the gains of Wells and Morgan, but it’s a reminder of how good news is still shunned as an outlier. To me, let’s get the overbought worked off. Let’s go toe-to-toe with the bears and our own mistakes as I did so in an incredibly naked fashion this last Monthly Meeting . Let’s bet that we will tread water until it’s clear that the we don’t have much to fear from the Fed or a recession — and earnings will be good enough to inspire some buying where stocks haven’t run, and some selling where a beat-and-raise is already in the stock price. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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Visitors around the ‘Charging Bull’ statue near the New York Stock Exchange (NYSE) in New York, US, on Thursday, June 29, 2023.
Victor J. Blue | Bloomberg | Getty Images
The boogeymen continue to be fictional, despite endless attempts to drum up fear and hasten the departure of millions of scared investors. I’m calling the endless negative prattle the “Bear Bilge,” the stuff thrown at us that seems so cerebral and intellectual, but just turns out to miss the mark.
I’m being plenty genteel in that summary. I won’t stay that way.
You know my thesis by now. There are dozens of commentators who come on-air and posit the “hard landing” scenario for the economy, making it clear that we are indeed on the eve of destruction. These Cassandras are from two camps. The first is made up of negative analysts who dug in their heels and overstayed their welcome. The second group is wealthy hedge fund managers and individuals who see no harm in generating chills simply because they don’t think they are doing so. They regard their fear-mongering as first class advice that can’t possibly have consequences. I get that. If the market crashes they will be lauded for a lifetime. if it percolates, big deal — they didn’t tell you to sell, they just told you not to buy.
AdminJuly 17, 2023
