NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
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You're Investing, Not Running the Company
Posted at 12:55 p.m. EDT on Friday, Oct. 25
Where does it say that we have to hold each stock to the same set of rules?
Where does it say that it's wrong that a stock goes higher based on revenue growth not on earnings? Is there some sort of handbook that says certain stock gains are legitimate and others aren't because they were powered by enterprise worth and not the multiple we put on its earnings stream?
To listen to people talk about the gains in Amazon.com today after it showed a remarkable 24% gain to $17 billion in revenues, is to believe that somehow, the whole move shouldn't be allowed. I hear people speak of how horrendous this all ends and how there has to be a moment where it switches to profitability or else it will hit a wall and be crushed.
And you know what? This is all nonsense. It's all theoretical hogwash. The simple truth is that the goal of investing in the stock market is to make money. There are many ways to make money, some more risky than others. But the goal is the same: get rich owning stocks. The moment you think differently is the moment that you are not investing. You are just theorizing.
So, if you subscribe to the idea that somehow it is wrong that this $164 billion company shouldn't be trading where it is, I want to know who made you the judge? The market has made a judgment of the worth of Amazon and the market's judgment allows you to sell easily, one million shares on the bid side, at $358. This is no small-cap short-squeeze joke. It's the real deal and if you take a gain in Amazon today because you deigned to own it before this magnificent quarter -- and it was magnificent -- congratulations. I know of no bank that will shun those proceeds.
But what about the idea that this company makes no profit and shows no sign of caring about profitability? Doesn't that make it poisonous? I think that, again, you are splitting hairs. What we need to do is not question whether we think that profitability should be its goal, we need to question what the buyers of the stock want, what would make them pay up and we know that the answer to that is revenue growth.
Amazon's stock is a huge chit in the game of money management and revenue growth sustains the increase in the chit. I think it is a better exercise to try to figure out what the Wall Street fashion show wants and anticipate that than to decide what you think it should be doing. Given that you could have become a millionaire many times over with a small investment if you understood that logic, even if you find it illogical, then what's the argument? It's a higher calling to anticipate what the buyers will do if you hit a benchmark than it is to say "nope, not making money, don't want those points."
Now I know that people will say, "Jim that's just the greater fool theory, that you own it hoping that someone will take you out at a higher price." Well, here's a shocker, that's why you own any stock. At least here it is transparent what people want: tremendous growth because of excellent execution. That's exactly what CEO Jeff Bezos gives you.
So I say, simply, congratulations if you gamed Amazon correctly or if you traded it well, or if you invested in it for the long run. And stop complaining if you missed it, or worse, if you shorted it, 'cause you are just plain wrong. You can come back and say "you just wait and see." I say, "people have said that for $160 billion dollars' worth of market cap and have left huge gains for others, so let's stipulate that you've been dead wrong and move on."
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
The Pattern That Plagues the Market
Posted at 2:5 p.m. EDT on Monday, Oct. 21
Yep, tomorrow we get Friday's postponed employment number at 8:30 a.m. and we need to recognize that we will be right back on Washington's red-hot griddle because that's just the way it works these days. You have to figure that no matter what the number, you are being given a reason to sell. If it is too strong, we will hear that the Fed is nervous about the strength of the economy. We will hear Fed governors interviewed who will fret about how it is time to scale back bond-buying. If it is too weak, we are going to hear that the tussle over the shutdown and the debt ceiling killed the U.S. economy and it can't be revived by the Fed's failed efforts.
The confusion will be viewed as a fabulous opportunity to take profits in stocks. You know what? I say bring on the sale. So many stocks have gone up endlessly that we need a sell-off to cool things and give us better opportunities to buy.
Which brings me to the pattern that has plagued the market for years and must be recognized if we are going to be able to dodge bullets and make money: First people decide that there is something in Washington that is more important than anything else that any company could possible say.
This Washington preeminence is part of both the aftermath of the great recession and an activist administration that really doesn't care about the stock market, even as it's been pretty darned good despite this administration. In the wave of Washington's hegemony, companies become bit players in the bigger scheme of things and we don't really listen to what they have to say, even during earnings season.
Instead we parse minutes or count heads or gasp at the indecision, the rancor and the partisanship. Some of us are like children waiting for Santa Claus, with Santa being played by the Grand Bargain. I am surprised we don't leave milk and cookies for the Grand Bargain in front of our chimneys so when politicians come sliding down to give us the gift of bipartisanship they get their just rewards.
What people don't realize is that politicians are all Grinches, on both sides of the aisle, and they aren't going to give us anything good because neither party cares about business. Think about how everything from Washington has played out for years. Take this last fracas. If you recall, we had the last Fed meeting and it produced a spectacular rally as the Fed said it wasn't going to taper.
Then, literally, two days after that great rally, we began to hear about how the possibility of a government shutdown and a debt-ceiling wrangle. At first, we ignored it because we figured that the president and Congress wouldn't let any shutdown go on too long and we would never default on our debt. But then it dawned on us that the hatred was so thick between some of the GOP and the president that perhaps, just maybe, the shutdown won't be solved quickly and the debt-ceiling tussle could be far more serious than we thought.
Then we actually get the government shutdown, which hammers the market. And then we got the second punch: the debt-ceiling fight brinksmanship, where it was clear, at least to me, that we had to go down to the last hour before a deal could be reached on either. It was so patently obvious to all but the Santa believers that the issue wouldn't be resolved until right before Armageddon. But the market didn't look at it that way and it kept trading down, bottoming at a 6% decline from the top.
And then we got the deal.
Nothing's new to that rhythm. In fact, if you look at the charts it's obvious what we keep getting: a big run in the stock market courtesy of better-than-expected earnings and then a big sell-off when Washington in any form -- president, Fed, Congress, taxes, whatever -- gets back on the agenda. Then that's resolved and we get another run when Washington recedes again.
Now we've had our break. With the employment number tomorrow morning the chatter and the pain should begin anew and you can do one of two things: sell some stock because the taper talk will run thick, or the recession chatter will take over. Or just strap yourself to the mast and ignore the sirens.
Frankly, I would split the difference. Sell some tomorrow and get ready to buy it back when the taper talk recedes again.
- another round of tapering talks and
- good investing tips.