Friday, June 5, 2009
(Cont'd from above)...

Jim (cont'd):   

Oh, how could you not be confused? I say, welcome to the world of expectations... A world where - as I'm going to show you or, perhaps, edutain you - some really horrid news isn't so horrid... but it sure isn't all that great either.

It's not like we're in bizarro world, where good is bad... bad is good... And, not only will I teach you tonight how this makes sense, I'm going to relate it to something from last night's show, when we spoke to Michael Sutherlin, the CEO of Joy Global (JOYG)... the big steam shovel manufacturer... the company that makes the equipment to dig coal and copper out of the ground. Yep, "Mike and his Steam Shovel"... Good book... better stock!...

If you recall, he said something pretty astounding... despite the universal recognition that this downturn's the worst since the Great Depression... At Joy Global, because of some incredibly quick actions taken by the company, well... its bottom line hasn't been damaged by the downturn nearly as much as he thought it would be, given that it's a heavy machinery company.

So what does this incredibly quick action have to do with the employment numbers?... Everything.

We've had a host of CEOs on Mad Money since the downturn began, and the continual theme is that they took swift action when they saw it coming. That basically means that they fired people so that they didn't get caught... They laid off people by the boat load... by the car load... and by the train load... It's not so much that they saw it coming... they didn't. Almost no one did. It's that, once Lehman Brothers collapsed in September, these companies prepared for the worst... a depression... not as bad as the Great Depression, but you certainly consider it the worst since the 30s... which is why on Mad Money we always call it the "garden variety depression"...

These people fired employees like mad... They fired deep... they made mass firings, huge firings... because they figured it would be years before we bounced back. But, because governments around the world reacted swiftly through stimulus programs, especially China, a second round of firings has turned out not to be necessary.

Plus, the decisions not to close GM and Chrysler, but to keep them and their suppliers alive... well, let's say, it didn't add many to the rolls of the unemployed... And we can also say that it's basically a stealth version of the Works Progress Administration (a jobs program in the 1930s)... from the New Deal. It's a big make-work program that also produces cars. But so what? Isn't that what we really need?

Frankly, when we step back and think about it, this is all rather remarkable...

We went from worry about like 33% unemployment like we got in the Great Depression, to being thrilled that we stayed under 10% for now... despite the horrendous declines in home building and home price and auto manufacturing... despite the huge disappointments in retail... despite the collapse of what was once the financial industry...
The result?... This Labor Department number we got this morning. The firings were swift enough... and big enough... that they're largely over. And that's what they're cheering about. That's why we are thrilled when 343,000 people are laid off... That means fewer people to be foreclosed upon... more people who can still pay taxes... and more people who can shop and go out than we thought could...

Ladies and gentlemen, believe it or not, that's bullish...

But understand... understand the circumstances... The economy is not roaring back, despite what you heard today from so many people who, frankly, so many people who just never ever admitted that things were bad. Those are the ones who are saying the recession is over, and they never even acknowledged the recession to begin with.

What's happened is that we have cut back enough that we don't have to cut back anymore for now. That's not the beginning of expansion. It's simply the end of the mass firings.

It is true that the stock market never waits until we reach the end of a recession to start flying upward, which is what you've seen happen since the bottom in March... and we can go higher.

Of course we're jumping the gun... This is the one business in the world where you're allowed to jump the gun and still get paid.

Plus, we know our stimulus awaits us, as very little money has been spent here so far.

Here's what you need to know though...

Anyone who thinks the recession is over now is misinterpreting the data, or they're being rosy, or they are just infused with a level of optimism that is just cockeyed...

I think we will be in it for a while, which is why I am not so worried about how interest rates have gone up; I don't think they go up that much more. And even if they do, I think we'll be okay because they're so low. I'm not that worried about commodity prices. I think most of those are manipulated short squeezes by hedge funds.

Well, I guess you know what I am? I'm sanguine, and so is the stock market...

So what does it all mean for your portfolio?

It means that those who think the economy is going to roar back are going to continue to buy the troika plus aerospace...

I'm now, tonight, christening this... "BOAT"... as in, "rising tide lifts all boats"...

"B" is banks... "O" is oil... "A" is aerospace... and "T" is tech... "BOAT"...

For banks, it's JPMorgan (JPM*), which my charitable trust owns... ActionAlertsPlus.com. It's now under the equity offering (the price for which they offered their most recent stock offering). That's a bargain, just like it was for Anadarko Petroleum (APC), remember?...

For oil, ConocoPhillips (COP*), another charitable trust name, now that it's down 8%. A caller asked me about it last night. I said that it still has more downside... we got that today.

Aerospace, you know it's Boeing (BA)... which won't come in (e.g., won't likely go down in price), in part because the plane is going to start shipping soon.

And finally, for tech, is there any doubt you want Apple (AAPL), with the possible iPhone price cuts?... And a definite iPhone launch in China coming?...

The people who worry about inflation... what are they going to do?

Well, these are people who think the economy's too strong...

The play there is Agnico-Eagle Mines Ltd. (AEM), or gold bullion, or the SPDR Gold ETF (GLD), which down a lot today...

And those who think the economy isn't yet out of the wilderness, and that we are going to be weak for some time and, therefore, we'll have a weak dollar... They'll buy Johnson & Johnson (JNJ), Colgate-Palmolive Co. (CL) and Hershey Co. (HSY)...

So think about it... Gold, Johnson & Johnson, Hershey's... tech, banks, oil... hmm... aerospace... You know what you could do?... You could build a portfolio out of all these names, plus some cash... because we don't know which way we go, so we need to be ready for when we find out...

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The Bottom Line!:     After today's not-too-strong, not-too-weak employment number, a diversified portfolio should get you in the right spot. Yet it may seem pretty nuts on the surface... But it all makes sense when you know the context that we just explained... the context which you need if you want to stay in the game.

[verbatim recap]

[end of segment]

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