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Block Out the Politics
Posted at 12:02 p.m. EDT on Friday, April 12
Wealth springs eternal, and it comes in all shapes and sizes. This morning we are seeing a decline in oil, and when I see that I think "wealth." A decline at the gas pump can make up for this payroll tax hike that I keep hearing people talk about.
The appreciation of real estate can make up for the payroll tax.
The refinancing of mortgages can make up for the payroll tax.
The advancements in the stock market can make up for the payroll tax.
I point all of these out because, when Friday saw a 0.4% March decrease in the retail sales number -- the worst decline since last June -- I heard immediately that the culprit was the end of the payroll tax holiday. I think that's nonsense. I actually think the cold weather played a bigger role.
Go back to what Manny Chirico, CEO of PVH , said on "Mad Money" about the company's March numbers. He said the weather played total havoc with them. Remember how retail works: In March you are showing swimwear, clothes that are lighter in fabric -- nothing warm at all. But when it is 20 degrees colder in much of the heavy-consumption portions of the country, that can really hurt -- and I think it did.
That's the reason the retail stocks keep hitting new highs despite the weak aggregate numbers. Plus, the companies that did "Squawk Box" on CNBC Thursday made it very clear that things improved as the month went on, and that the early part of April's looking very good. In fact, the only retailer I heard bemoan the payroll tax increase was Family Dollar , which was also the only retailer that truly disappointed in its numbers.
There's way too much emphasis and too much worry expressed about today's Commerce Department figures on retail. But never forget that weak numbers form on high. They allow people to blame Washington for weakness that then confuse the average investor. It's terrific if you have an agenda, a drum to beat, but it means nothing if you are simply trying to make money in the stock market.
We are hearing much too much about why retail is bad and not nearly enough talk about the rallies in Wal-Mart , Target , Macy's , Costco , TJX , Nordstrom and Ross Stores . There's way too much pin-the-tail-on-the-government and not enough focus on the strength of the consumer, as expressed by the retail sales of the actual stores we must follow. If you listened to the political junkies and the top-down economists, you would be short every stock you needed to be long.
Of course, not all is well, and some of it is the government's fault. As JPMorgan Chase told us Friday, there still isn't a lot of small-business lending, and that's a key source of employment to keep things going. The sequester will impact some spending, although not as much as first feared, I believe. The government seems to have done its level best to destroy the very confidence that businesspeople need in order to expand or start their own business.
Still, I am not stopping on the notion that positives as varied as lower gasoline prices, and the wealth effect through home and stock appreciation, trump what you keep hearing. I'm not set on the idea that big-think people have led you astray the whole time as they've tried to score points for or against President Obama.
I am not saying, "Who cares?" I am saying our goal is to make money, not to take the House or the Senate. That's why following individual companies, and not the aggregate numbers, is what matters.
Stay focused on the players' trade, and not the politics that polarize -- unless, that is, you don't care about money. Then I have to ask, what you are reading this for?
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long TJX and JWN.
Some Industrials Come Up the Hard Way
Posted at 6:52 p.m. EDT on Friday, April 11
It's not like people are talking about a new paradigm. It's not like we are hearing, "It's OK now to pay three times growth rates because rates are so low." You don't hear people say, "Look, China's going to come roaring back, which allows me to pay $110 for United Technologies ."
I think these stocks are tiptoeing higher, not bursting forth to breakout levels.
I spent some time on Honeywell and 3M today. Sure, some of it had to do with what I am thinking about their growth rates. But most of it was the way a parent looks at a child who is going off to college: "How did that stock grow up so fast? How did it get so big?"
When I traced over Honeywell and 3M, what I found was a peculiar reluctance to go higher, literally the whole way. The path to these prices was littered with downgrades when it comes to 3M. There was always an analyst who said that the valuations were unreasonable, every step of the way.
Honeywell? I think there were more people worried about a missed quarter than worried about missing more upside. Every analyst meeting was filled with trepidation, and most earnings notes were about how Honeywell better not miss or it is Katy-bar-the-door. I found no notes of bravado that you would see, typically, at market tops. Instead, throughout the $40s, the $50s and the $60s, analysts were commenting about how rich the stock was compared with the expectations, not about how cheap it was. In truth, it was never cheap, except in hindsight.
Yep, it's been an odd run-up here, one that hasn't been embraced. One that analysts have looked askance at. One that they feel bewildered by, particularly if they got off the ship as so many did with 3M at much lower levels or simply lived in fear of a shortfall, as most of the recommending analysts on Honeywell surely did.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long UTX.
- What really drove the retail sales decline; and
- the run-up in industrials.