Monday, April 20, 2009
(Cont'd from above)...

Jim (cont'd):   

Actually, I think that they could not be more wrong… in the end what we saw today was par for the course… the vegetarian bears will be back later in the week… probably down another 2% or 3% from here… and our friends the bulls will be revitalized… I am saying that it is simply time for a steak break… pass the A-1 sauce, I am enjoying this cut… you can’t let short term fluctuations in the market scare you out of a good thesis… you cannot worry about today’s pollaxing… and I think that things are actually much better than they were the last time that we were at these levels… yes, improvement… the long term is better… even if today’s action was like getting run over by an 18 wheeler… and then conked on the head with a 2 x 4.

So, here is what you need to know about where we are right now… yes today was truly ugly… truly heinous… but do not be so quick to forget that we just had an incredible 6 week run… the averages have all had huge rallies… but the best way to measure this rally, I have found, over and over again… is to look at the Obama accountability index… our own proprietary report card for the administration… a test that we created, a stress test, to see how the worst parts of the economy would do under the new President… it started at 100 back in January 21st… then it tumbled all the way to 49.9... back to a whole on March 6th… I thought I was on ESPN… when we at Mad Money went on the offensive right here… we tried to blunt what we saw as the President’s great wealth destruction plan… the index pulled out of the tail spin when it became clear that the administration was at least beginning to recognize that even if they took billions Robin Hood style from the rich and gave $5000 to the middle class tax payers, it could still not make up for the great wealth destruction in their 401K… and now the Obama accountability index has rallied substantially from the low… do you know that it was even in the green last week… of course it took a real header today.

I think that the recognition by the President that we are all in… that stocks are no longer just for rich people… but for about a hundred million other people… who were banking on them for retirement, for life insurance, for college saving… that is what started the magnificent rally… that and the tempering of Obama’s most severe anti-stock market proposals… including changes in the tax code, cap-n-trade we are still hitting on that one, and charity deductions… and I don’t think that the mortgage deduction change nor the card check, that pro union organizing plan, will pass either… so the pall mall rush by the administration to Dow 6300 has been reversed… and I do not think that is going to be undone… that is a big change… that is bye bye Marx, I did not mean Groucho.

That said, I did not much care for his comments this weekend about allowing the governments converted stakes in the banks to equity… we want the government out of the banking game… those arrant statements knocked the Obama index for a 10% loop… shocking us… big reason why we swooned today… and if Obama does go back to bashing business… as some thought that he did this weekend… we will hold him accountable… despite the barrage of criticism that I got the last time I did so… although, it seemed in the end fairly effective, even as I did indeed wanted to go home and cry to my mommy… I say be careful Mr. President… do not be to hard on the stocks… because I have to tell you when kids act out these days, they are sentenced to watching their father’s scream at me… or at least the kids on the Simpson’s…

clip of the Simpson’s show

Alright, what else has changed for the better since the bottom… why do I think that you should resist the urge to get too negative… like all my friends, buddies and pals that I talk to… why do I feel that you should stop worrying and learn to like this market… at least a little… six weeks ago the professor journalism complex, that combination of the proliferate and the punditocracy was demanding that the government nationalize all of our banks because they were insolvent… now, if they are insolvent riddle me this… how come they are generating some pretty darn profitable quarters… as Bank of America showed today, against endless attempts by the bears to portray the earnings negatively… what has happened… what is happening.

Just what happened in 1990, and I am actually old enough to have traded during that period, when we solved the last banking crisis… here is what is happening… we are getting winner banks… and we are getting loser banks… the winners, and you see them, they are like JPMorgan… they are going to get the spoils… they will be given the failed banks… and the government will keep the bad loans and sell them thru Tim Geithner’s, Treasury Secretary, public private plan… now I do not want you to believe a word of what you see in the papers, about how the public private aspect of Geithner’s plan is being still born, a failure… that is bogus… let me tell you, if I was not bound by this contract to do this show and serve as chairman and chief writer of TheStreet.com, I would be joining all of my other friends in town, with means, who are putting together partnerships to buy these troubled assets… believe me every rapacious capitalist and his brother are desperate to get in on this… most people simply refuse to believe this.. they just don’t.

In fact, I talk to far more bears than bulls everywhere I go… I know very few people who believe in this market… and nobody who actually wants to buy anything right now… no one… let me ask you… can all of those bears be right… I do not think so… right now it is pretty easy to be smarter than the average bear… one more point about where we are now… and it starts with an anecdote… when I was a little boy, my dad who you met on my 1000th show a couple of weeks ago, used to take me to what we called the place… it was his warehouse, still is, where he sells wrapping paper, and boxes, and bags… $5.99 jewelry boxes… 2 x 12 shirt boxes… I always loved the cadences when he would say them to his customers… anyway, he would work impossibly hard right thru Christmas season and sometimes when we would go to the place… the day after Christmas, the day after he has spent 7 straight weeks driving his station wagon to retailers to meet their holiday demands… and we would see, we would see the enemy… the nemesis of all business… we would see excess inventory… we would see reams of Christmas paper that had not been sold… I would say Dad so what, you will sell it next year… and he would sit there and patiently explain to me what he described what is the most important thing I will ever need to know about business… and it is the most important thing that you will ever need to know about business… that inventory is the enemy… inventory has to be financed… that you have to pay banks… that you have to have credit to have inventory… that no business has enough cash on hand to pay for excess inventory… and now Pop would have to sell his Christmas paper for much less than he bought it for… because he could not afford to finance it… until he did, he could not bring in any Valentine’s Day paper, wedding paper, Easter, Mother’s Day paper… ladies and gentleman all over the country… my Dad’s gift wrap dilemma has been playing out.. as company after company works off its inventory… and I am here to tell you that the equivalent of the great Christmas paper inventory glut is almost all behind us.

In the following industry, homes, with the new home build is so small that inventories can’t be built up anymore… computers, where Intel said last week that inventories were low enough to begin rebuilding… televisions, which Best Buy and Corning told you… cell phones, which Nokia told you last week.. even autos, where the bills were so small that there isn’t enough left to sell… and retail itself, where it looks like the Christmas inventory is gone… although, those stocks have gone up way too much… once you get rid the inventory gone, once you get rid of the Christmas paper, you can start ordering again… and that is just what is happening in everyone of those industries… given that the banking systems can once again extend the credit to people like my father… to take down more stuff… even that was a problem last month… the cycle begins again… and that is where we are today.

Here is the bottom line…

▼   ▼   ▼   ▼   ▼

The Bottom Line!:     A new cycle is struggling to begin… and it could very well turn out to be a good one… which is why we rallied for 6 weeks… and why we can continue to rally… not in a straight line… we will still have down days, awful ones like today… because we are still in a recession… but the market has since confirmed that the depression ended on March 6th… when Wells Fargo, that week when Wells Fargo pre-announced better than expected earnings… and when Obama dropped the anti-business rhetoric… and went from being like, well let’s say my great-great-uncle Vlad Lenin, who asked what is to be done to destroy capitalism… to the much more harmonic soothing lyric, all we are is saying give business a chance, by John Lennon… stick with Cramer if you want to know how to play it... A new cycle may be upon us, but that doesn’t mean the market will continue to rally in a straight line...   The Dow may be down 290 points… but I still think that a new cycle is struggling to begin… and I do not want you shaking out… how are we going to play the next leg…

[verbatim recap]

[verbatim recap]

[end of segment]

Read Jim's next Segment here  

Read Jim's next Segment here