If you've been reading the blog, you heard that "first" many months ago... but I will say Cramer is ahead of 99% of Wall Street herd mentality (he's been quite early on the famine angle I've been touting as well)... but I've been many months ahead of Cramer ;)
Get used to it folks - I do believe we can now enter an era where (relatively speaking) the stock market will go one direction and the economy the other - I've written about this late last year as a matter of fact... the tax code, the trade system, the labor markets - it's all geared for US corporations - they own the money, they pay for politicians, they get what they want. [Apr 4: Congress is Rushing to Help Home Owners!! (NOT)] They do not need Americans... and will need them less so each year. Now the fly in that ointment is slowdowns overseas will "eventually happen", but as I keep saying as our world gets flatter, the home domicile means less by the year. Note Halliburton moving HQ to Middle East last year. It's getting to the point that despite all my bad feelings about the domestic car market I have been considering in past month if Ford and GM might be good investments because of their overseas arms (Chrysler is a no go if it were public because it is mostly an American company) - Cramer says the same thing.
I continue to believe the narcissistic attitude of Americans, even stock strategists and economists are leading people to many poor outcomes. This is why the Federal Reserve who believes the US still lives in the 1960s, thinks when the US slows inflation should go down. Short of a global slowdown (and again, I do believe the globe especially Europe will be slowing substantially - probably due to GLOBAL inflation), commodity prices won't be "falling". The only saving grace for the inflation front is the total lack of bargaining power for US workers. Again, this is a BENEFIT for corporations - inept US workers cannot ask for raises like they could in the 70s - so we cannot have 'wage inflation' like we did in the 1970s. While that's good for "Fed policy" and corporate profits (and hence the stock market) what does it mean for the US worker/consumer? Not good things. The dichotomy shall continue and only get stronger. You got a complaint? Well your job can be placed in Prague or New Dehli or Rio. So quiet down and take your medicine.
Now the problem with this "new era" is most job creation is with small business, not the corporate titans who get all the headlines. So a flailing domestic economy, full of suffering small business is the reality on the ground... businesses who cannot afford the insane health care premiums to offer to their workers, businesses who rely on our "service economy" of shuffling money from person A to person B with no "goods manufactured"... is not a prescription for any sort of job growth. Again, the past half decade our main countrywide job grower was... building houses. We had millions of jobs created from this industry and all the "related services" (especially in finance from NYC packaging the toxic mortgages to the local guy selling ridiculous option ARMs to keep the juggling act going). 1 in 7 Californians has a real estate license - what does that tell you? So without that, we have been exposed. Unfortunately this is our great hope for the future ... we just have to sit around and wait for the next housing boom - because unlike the experts who say housing is only 4.5% of GDP, it appears to be closer to 10-15-20% when you take into account all the supporting industries. So I don't know how a country continues its greatness for decades on, relying on "building homes". But this appears to be our "recovery plan". At least we still have farms and coal mines...
This paradigm shift is very critical to understand. We've been talking about it for a long time, now Cramer "gets it" which means it should reach consensus on Wall Street by end of 2008.... but it's no short term cyclical situation. This remains why my broad market shorts have focused on US small caps (Russell stocks) and away from US large caps and multinationals (Dow stocks) - the golden era for large caps from the 90s is coming back and just imagine one day (say 2011) when the United States of Subprime can eek out 3% growth again. Then these multinationals will be even better off... until then, they feast on the rest of the world.
Here are some highlights (subscribers to Realmoney.com can go directly there)
- Slow domestic ... weakness in the U.S. ... unfortunate decline in North America ... blah blah blah. Does it even matter anymore? As I listen to call after call after call, I hear the same thing -- sluggish U.S. There was a time, even a year ago, when we would have freaked out and sold any company that was associated with U.S. weakness. For example, Procter (PG) had crummy U.S. numbers, worse than expected. But people yawned! Nobody even cared; everyone figured it.
- This is a radical revision in thinking. Earlier in this year, McDonald's (MCD) reported a weak December in the U.S. The stock dropped 15% immediately. They just announced U.S. weakness again, and the stock went up! I am not kidding. U.S. was bad, and this time nobody cared.
- Yum! Brands (YUM) is a great example. David Novak said, point blank, that the U.S. doesn't have it right now. He's trying to turn the U.S. around, but there are only 3,000 KFCs in China and 18,000 stores in the U.S.; if he did nothing but move to China and flip that ratio, it would be a better use of his time.
- Even GM (GM) and Ford (F) get it. The big takeaway for the multi-billion-dollar GM loss isn't that the company is losing money, it's that the company is, radically, weaning itself off the U.S. market. About two-thirds of their business is going overseas. Either they solve their production/union problems in the U.S. or they just give up and leave.
- This is a phenomenal shift, a no-longer-grudging recognition that how we sell in this country doesn't even matter. Our best companies have adjusted and recognized the reality: The U.S. is not a great place to do business. That's the single most important reason that we may not even be in a recession. Our companies have figured it out, and now Wall Street has figured it out.
