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Care About What's Working
Posted at 7:51 a.m. EDT on Friday, June 14
All rallies are phony. All selloffs are real. Every plus-1% day is manipulated. Every down-1% percent day shows the market's true colors.
That's the conventional wisdom, especially these days where the path is set in cement: Stocks must go down and rates go up because all that mattered the whole way up were the actions of the biggest manipulator of all, the Federal Reserve.
Take yesterday, for instance. I hate up openings -- those big up openings on nothing but good foreign news. But down openings where everyone sees the gloom and the gloom only, those are made for reversals and that's just what we got.
Once the market reversed, Ben Bernanke picked that moment to have a conversation with his go-to guy, John Hilsenrath, in what was a master stroke moment where the bears were busy betting against the big, phony rally because the truth about rates, and therefore stocks, is now out of the bag.
So, Bernanke manipulated the market, right?
When I suggested yesterday that Bernanke picked a terrific time to spread the gospel that you can't presume the tapering is soon upon us, initially people were suspect. Did I believe the Fed did anything substantive? Was I that naive?
Darn it all, I am nothing, if not naive. What I was saying was Bernanke has learned to play the game. He knew his words were going to have an impact because he wasn't trying to stem a decline. He was saying basically, "look, intelligentsia, I know your game, you think I am done, think again."
Those who believe that he is too unsophisticated or doesn't know the impact of his words; he knows all too well the impact and he needed to undo his testimony of a few weeks ago.
So, the rally gained steam and people realized that rates can go both ways and Bernanke's not happy with the velocity of the move.
Now, on to the charge of manipulation. My take's pretty clear. The truth is an abstraction. When it comes to the market it really doesn't matter if something is true, what matters is that people believe it is true. Does Bernanke really have the power to contain rates? Maybe, maybe not. But with rates down yesterday and Bernanke squawking, how can you believe that he is impotent. More important, how do you know that the trader next to you doesn't believe he's for real and says we gotta cover and we gotta cover now?
Which all comes back to the first point about whether one market is true and the other market is phony. I have lived with this ridiculous dogma for 14,000 phony Dow points. I have lived with this fanciful judgment during the fabulous runs for so many stocks. All I can say is that nothing's phony if a bid can be drilled for a stock that moved up big on the phoniness. Nothing. If you are able to sell a big piece of merchandise at a good price, what's phony about it?
Of course, my view is viewed as having no rigor vs. the views of those who know it is all a big, rigged market. But the joke's on them. You see, I don't care who rigs it. I don't care what's real. What's wrong? What's different? What's fresh? What's stale? What's known? What's not known?
All I care about is what's working. That's because I am not a bull or a bear. I am a practical person who accepts manipulation on both sides, who understands that people lie and cheat and do whatever's necessary to make money. I have said that before and gotten in big trouble for it by speaking about how I have seen it done, not how I do it or did. I just want it to be known that it happens and I want people to be able to see it and game it for what it is worth, a wave to ride to profits, and nothing more.
But also, nothing less.
Individual Stocks Do Matter
Posted at 3:11 p.m. EDT on Thursday, June 13
You mean rates can go lower, too? On a day when retail sales are stronger than expected? On a day when unemployment claims are lower than expected?
What's that all about? A few things, I think.
First, we got oversold. The declines in some of these interest alternatives -- the faux fixed-income plays like the REITs, utilities and MLPs -- got overplayed, at least for the moment. The average REIT was down 13% going into today. They are still not cheap on a yield basis. In fact, I could argue that after today's run, you should trim them. But they were reflecting a non-stop run to 4% on the 10-year note and 2% on the five-year note and I think that's going to happen, at least not in a straight line.
Second, who is to say that the central banks can't be a little cagey? We all act as if they are road-kill, run over by the U.S. bond market. Maybe they have something up their sleeves because today is a day that bond prices should have been hammered, causing yields to jump. Yes, that's how strong the data is.
Third, bonds, like stocks, do get oversold. Bonds have become the definition of oversold, with their relentless fall. It could be a correction of a correction.
Either way, don't forget that individual stocks do matter. We've had terrific earnings news of late and that's been ignored. We got that incredibly bold forecast from Boeing about multiyear earnings revisions. We got terrific numbers from uber-growth stock fave, Ulta Salon . Yes, ULTA does matter because it is heavily shorted. We got a positive read on tech from Juniper , Ciena and Hewlett-Packard . We got very bullish comments from a host of banks at the Morgan Stanley conference. And just last night we got a breathtaking number from PVH , the huge apparel maker. PVH's is extrapolate-able. It's in every great department store. And PVH CEO Manny Chirico told me last night that May was strong and the last few weeks were terrific. No wonder Bed Bath & Beyond , Ross Stores and TJX Cos. have run.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long TJX.
- caring about what works; and
- why individual stocks matter.