The Self-Defeating Business Policy
By Jim Cramer
RealMoney Columnist
12/8/2009 12:17 PM EST
Why does the U.S. market underperform? Simple reasons, like the front page of The New York Times, which, basically, says that the drilling for natural gas in the largest repository of natural gas, the Marcellus Shale, is compromising drinking water, something that is sure to kill this bold attempt at energy independence. Because the CO2 rules are paralyzing whole blocks of industry, because no one knows for sure what kinds of plants they should build or the cost of their operations.
These kinds of arbitrary decisions and negative press make it so I feel that we are so self-destructive in our business practices that it is difficult to invest in industrial companies that have a majority of their businesses here.
When you couple that with the fact that it is hard to get a loan -- well documented in the endless articles about how banks are not loaning -- and we don't know the health care costs of employees, you begin to wonder why anyone would or could expand in this country.
You particularly worry about the engine of growth, small business, and how it can handle this thicket of regulations and rules and a regime that seems to give only lip service to business.
How ironic is it that the only business I know that has hired more than 1,000 people this year in this country, Chesapeake Energy (CHK) , is going to be a victim of the reckless campaign against drilling because of worries about water that have so far proven totally unfounded and of climate-control rules that are so in flux that everyone is frozen. And the coal-powered utilities can get away with the idea that they have to do nothing, even as the new businesses trying to figure this all out are unable to wend their way through the thicket of Washington.
The pattern is everywhere. Yesterday, Macy's (M) Terry Lundgren fretted about the new rules the administration wants, where you have to show a paystub to get a Macy's card. Given that no one has pay stubs with them, that source of Macy's sales and credit will go away. Bad for Macy's, worse for the consumer. But that's because, of course, the administration seeks to protect the least well-off from themselves instead of worrying about how they can get credit to buy things with the idea that one day they can pay it back.
The whole regimen of this nation has become threatening to business, and the moment you point it out, you can bet you will become public enemy No. 1 of this crowd.
Better to shut up and take the pain that it keeps dishing.
I wish I had that instinct of self-preservation. Comes in handy under a Pelosi-Obama presidency. How bad were Bush and his team that these radicals were allowed to hijack this government and no one's willing to stand up to them?
Video Worth Watching
Tuesday, December 8, 2009
The Balancing Act
By Jim Cramer
RealMoney Columnist
12/8/2009 1:52 PM EST
Where does the balance of power fall today? On the side of Apple (AAPL) , Amazon (AMZN) and Google (GOOG) , the leaders who lately have taken it on the chin and are trying in fits and starts to rally? Or on the side of McDonald's (MCD) , Wells Fargo (WFC) and Citigroup (C) , which are just plain awful, and worst of all Goldman Sachs (GS) , which has become a total house of pain?
I think the leadership, which pretty much encompasses Apple, Amazon and Google, led us down, so -- forgive me for being simple -- I think they can take us back.
But we need more clues. How is demand here? Kimco (KIM) priced a big piece of merchandise, 25 million shares, that is hanging right at the offering price of $12.50, not bad for a neighborhood and community shopping mall play -- sort of a junior Simon Property Group (SPG) or Federal Realty (FRT) .
But the New York Community Bancorp (NYB) deal is not hanging in at all. This offering of 60 million shares at $13, with proceeds to purchase Amtrust, seems like a broken deal. It says something when commercial real estate like Kimco keeps delivering -- the iShares Real Estate (IYR) has been so good -- and the natural FDIC-aided bank deals are not working.
All of these are works in progress. They are what I am following as of this moment, and things are definitely in the balance. But I would go with the bullish side, not the bearish, if the leadership can stay up an hour from now.
McDonald's Nov '09 comp's
By: Brian Gilmartin
thestreet.com
12/8/2009 9:43 AM EST-->
Update MCD
-->-->McDonald's reported a November '09 comp that was +0.7%, or pretty much inline with expectations. The US comp was a -0.6%, as the US has been soft in late '09, although MCD's continues to take share from its competitors. The US continues to be weak, although MCD's is taking share in a shrinking market, by declining at a lower rate.
The fascinating aspect of MCD's is the free-cash-flow, currently sporting a 16% free-cash-flow yield, (that is a whopping percentage), according to a note out of Wedbush as of the October eranings release, MCD's returns 7% of market cap annually to shareholders in the form of share repo's and dividends.
One of our best performers off of the '03 bottom, we'd buy MCD's again in size near the mid $50's (200 dma) or with a breakout over $66 on volume.
MCD's is the proverbial cash cow right now, with a high single-digit, low-double-digit earnings growth rate. That being said, i wonder what the next catalyst is for the stock, given the well-know fundamental story. Maybe a special dividend ?
Kroger blew the quarter big time and the stock is getting slammed, down about 10%.
From Briefing.com: Kroger said several factors influenced its performance during the quarter, including persistent deflation, increased competitive activity and the cautious spending behavior of customers. The co expects these factors to continue to affect its business for the remainder of the year. As a result, Kroger now expects full-year identical supermarket sales growth of 2.0% to 2.5%, without fuel, for fiscal 2009... "While these revised forecasts are well below what we had expected to deliver for the year, we believe they appropriately reflect the challenges of the current operating environment. Kroger's continued growth in tonnage and loyal households and our competitive advantages position Kroger and our shareholders to benefit once operating conditions begin to normalize," Mr. Dillon said. Looking ahead to fiscal 2010, Kroger anticipates current operating conditions will extend at least through the first half of the year. Deflation is expected to moderate throughout the year, and Kroger will be cycling many of the price investments put in place during the first half of 2009. The Company believes that the combination of these factors will produce identical sales growth, excluding fuel, and earnings per share growth, both above forecasted 2009 full-year results, excluding the southern California impairment charges.
Frothy Sentiment + No Leadership = Dangerous Waters
By Rev Shark
RealMoney.com Contributor
12/8/2009 9:02 AM EST
Avoiding danger is no safer in the long run than outright exposure. The fearful are caught as often as the bold. -- Helen Keller
On Friday the indices failed to gain traction on what appeared to be very good jobs numbers. Yesterday we chopped around and went nowhere. This morning we are set to open lower as German industrial production falls and Greek debt is downgraded. We also have Meredith Whitney on CNBC sounding quite bearish once again. She made a timely negative call on Goldman Sachs (GS) a month ago and also did a great job of predicting the rally in July, so market players are understandably paying attention to her.
The market has been chopping around for a couple weeks now, which can be healthy consolidation and setup for some more upside down the road, but the problem now is that recent good news isn't helping the market and we are losing the tailwind of a lower dollar.
For months now, every time it has looked like we were going to crack and roll over, we've come roaring back. The negatives all of a sudden evaporate as the dip-buyers suddenly rush in and the bears scramble to cover shorts.
The question we keep having to ask is, "Will it be different this time?" One of these days the pattern of quick recoveries will be broken, but the million-dollar question is when.
Many of the bulls think that year-end pressures will help to hold the market up at least through December. They believe that many money managers have underperformed and will be trying to catch up by aggressively pursue some big winners.
The big problem is that too many people seem to be looking for that sort of action, and sentiment is extremely positive. In the contrarian world of the market, it's a bad sign when too many people are positive because it means they have most likely already acted on their beliefs. The positive setup in the indices can easily backfire on those who are overly optimistic about the year-end action. If we start to roll over, a lot of folks will be anxious to preserve the gains they already have and they'll move to the sidelines. Maybe they will still lag the indices, but at least they will still have profits to show for it.
The biggest problem I see in the market right now is that we don't have any leadership. Small-caps have acted a little better the last few days, but they topped out back in October and are still in precarious shape. The big-cap technology names, particularly Apple (AAPL) , have been weak, and financials can't seem to get anything going on the repayment of TARP, which was supposedly a positive.
The major indices are still in trading ranges, but the underlying action looks tired. Volume is low, and other than a few China, solar energy and fertilizer names, the pockets of strength are quite limited.
The bulls may surprise us yet again and spark a sudden rally, but they have gone to the well so many times and so many people are a bit complacent that they will do it again with the benefit of positive seasonality. It is a dangerous setup and we have to keep our guard up, especially if the dollar continues to rally.
I'm not averse to putting on some long trades, but I'm not seeing many that I like. I'll continue to be cautious while this market churns and tries to figure out its next move.
Futures
Dow futures are -40; crude is around $75.
FexEx raised guidance this morning...let's see if that gives some legs
to the transports today.
Monday, December 7, 2009
Goldman Sachs is out this morning with a report that says it will take us about 5 years to get back to a 5% level of unemployment.
Sphere: Related Content
Crude oil drops to its lowest levels of the morning at $74.04; now off $1.23 to $74.24
Briefing.com
Poor Start to a Bad Economic Recovery
By: Doug Kass
thestreet.com
12/7/2009 7:18 AM EST
In a fitful and uncertain investment world with a wider range of economic outcomes than normal and with continuing cyclical, secular and nontraditional challenges, I continue to believe that investors should err on the side of conservatism.
Prices on Wall Street remain ahead of the conditions of Main Street. My judgment is that we are witnessing nothing more than a poor start to a bad economic recovery.
Signs of a self-sustaining economic recovery remain tentative and ambiguous. Despite some stabilization in unemployment, November housing, manufacturing, production, retail sales, confidence and service industry conditions all seem to be struggling.
For the near term, it is unlikely that a substantial restocking of inventory will aid growth in light of the already adequate positioning of inventory relative to sales. The few positive economic signs are almost exclusively a function of aggressive stimulus, and some of that stimulus is scheduled to be withdrawn in the first half of next year.
I remain net short, and if the animal spirits continue to elevate share prices, I will likely raise the size of my short book.