Monday, May 11, 2009
(Cont'd from above)...

Jim (cont'd):   

The first is employment… for the market to keep powering higher we absolutely must stay on a roll when it comes to unemployment… and we are… we must continue to see the rate of change, slow, in other words see the claims go down month after month… we are not going to see unemployment claims, they are not going to drop from 500,000 to 300,000, we just need to see progress… and yes, that is every week progress… if we see a spike in weekly unemployment claims, say back over 600,000, or 700,000... I am going to rethink my bullishness entirely… I want you to keep an eye on this one.

The second is very important… and the second is President Obama… he has been pretty good about taking on Wall Street without demonizing it lately… and for a moment he freaked us out, by signaling that there were some bad acting hedge funds in that Chrysler… it turns out that there were some bad actors… darn chiselers… that is not negative rhetoric, it was just the truth… how important is it to have Obama on our side… remember, this market bottomed at the same time that Obama recognized the importance of our stock market… I think that this quick study by the President, realized that we are all in with our 401K’s and our 529’s… that we stopped investing in anything else other than stocks… so it was more important for him to worry about the market than even about tax rates… it simply doesn’t matter if you cut a persons taxes by $2000, if that person has just lost $20,000 in their 401K… Obama seems to get that now… and to understand that he has the power to take the stock market down… but if he ever forgets and he starts abusing that power… we could be in trouble.

The third potential concern is inflation… everyone knows that inflation has only got to come back when you are printing as much money as we have been printing… that said, I was heartened by a fabulous piece of research and writing by Ron Insana, which I read this morning at TheStreet.com where I am chairman, it was titled, great title “The Flationistas Are Flat Out Wrong”… which made me feel that inflation was not even an issue… cheaper housing prices, plummeting auto sales, collapsing financial system, still rising unemployment… these are signs as Ron points out of deflation, not inflation.

Alright, here is one… this is one where I picked up The New York Times this weekend, I wanted to read a positive banking article, every single piece about banks is negative… I say, the banks, the journalists have spoken, the stress tests are a joke… and the banks are more insolvent than ever… here is the problem, the problem with getting too worked up over their verdict… the journalists do not control any dollars… they do not have any divisions, to quote Stalin… but the mutual funds do, and believe me dollars speak much louder than words… they are all buying all of these big stock deals… personally, lets just go down the list… I think the BBT deal looks like a sweet one, Capital One and US Bancorp if priced in the hole could be great, but only if they are priced right… and then they could work out like this spectacular Wells Fargo deal of last week, $22 got you to $28, quick $6... you need to recognize just how smart this forbearance action is, as in look the other way and let the banks heal themselves… that is a strategy we push for endlessly on Mad Money, that has now been adopted by my new buddy, pal, friend, Tim Geithner… whom I tried to talk to this weekend at the White House Correspondence dinner, but Owen Wilson, that noted bond seer kept getting in the way… Geithner’s plan totally gapped the shorts, got the equity markets juiced so that banks could raise capital… including all of these deals just filed, which are positive… and the new capital should get out of the financial morass that we have been stuck in over time… in Geithner/Cramer we trust.

Finally , the fifth fly in the bullish ointment is one that actually does keep me up at night… this one is gasoline prices… you see the recovery in restaurants and then retail, the two most visible rallies since this bull market began, occurred because gasoline prices got cut in half, late last year… that propelled consumers to get out and go to Red Lobster, at least for the seafood lovers… along with Chili’s and Olive Garden where I love the unlimited salad bar… not to mention the rolls that you must stuff in your pocket on the way out, if you are going to get your moneys worth… when I saw oil rocket up to high end limit of where I thought that it could go, right near $60, I shuddered… I recoiled… because that could be a bull killer… nothing worse for this market than if the consumer is strangled and left for dead by high gasoline prices… that you must watch.

So, we have got four reasons to worry that are totally under control as far as I am concerned… and the fifth, well, you can follow it is well as I can… we can both see if the pump is $3 a gallon… and then I think the leaders of this rally, the ones that depend on consumer spending, they will begin to fail… remember, gasoline was up .20 cents last week, and we will have to bull in our horns and rethink our game plan… that is what I used to do at my old hedge fund.

But for now, the bottom line is this…

▼   ▼   ▼   ▼   ▼

The Bottom Line!:     I do not think that the 5 fears yet merit selling… The bull is still alive, and well I think on these pullbacks, you should still be a buyer... Alright, watch out for my 5 bull market threats… unemployment spike, Obama’s market view, signs of inflation, dip in bank stocks, and higher gas prices… and only the latter really scares me.

[verbatim recap]

[verbatim recap]

[end of segment]

Read Jim's next Segment here  

Read Jim's next Segment here