Today we are going to talk about distractions, things that become part of the discourse almost as if they are meant to scare you out of stocks, and then they go away, buried in the prefrontal cortex somewhere, ready to be dusted off on time to magnify the next terror. Take yesterday’s left hook out of nowhere by President Donald Trump, bragging about doing something that would bust even this pathetic budget. It’s a distraction. It turned a good day into a bad one. But it was just a day. Or how about the debt downgrade by Moody’s last Friday. Another typical distraction. Wolf cries multiplied all over the place. Weekend dread. Sunday night scaries. Market opens down, red ink everywhere, and then, what? Sellers finished. Nothing behind them. We ended up finishing higher. It’s not the first time a downgrade faked us out. I can recall being at Eagles training camp during the first downgrade by S & P in August 2011. It came near the tail end of another woe-is-me moment in that era’s budget talks and everyone on the sideline recognized Armageddon when they saw it. Even a couple of the players took a moment off from a grueling scrimmage to ask me if it was time to get out of their 401(k)s. I took the other side of the trade and told them to focus on football, not that they needed me for the illumination. They seemed distracted as they pounded each other. Can’t blame them. They were frightened. Yep, I went against the doomsday trade back then and, wouldn’t you know it, I was immediately wrong for 6% and then I was right for about a triple. Started right from the ground floor. One of my best. Why did it work? Because the downgrade was again, a distraction, a one-off negative arrow that drew a trickle of blood but nothing more. It was just like the multiple Greek downgrades, the Chinese stock market crash of 2015, the flash crash of May 2010 and so many other distractions that caused people to dump their stocks like clockwork every time. Right now, we have about as many distractions as I have ever seen. We have the distraction of a president who wants factories built here both out of nostalgia for jobs long gone but also for national pride. We have a battle over a tax bill that’s got the bond market in a tizzy. And we have a 10-year Treasury yield that flirts with 4.5% with every tick above 4.5% preceding a vicious sell-off, and every drop below 4.5% stabilizing the situation. The more money Congress gives away, the higher rates go and concomitantly the lower the stock market goes. It’s not over. We’ve got a vicious wall of tariffs ahead of us that might not be as vicious as we think because everyone knows about them. We just don’t know who is going to eat them. We’ve got the greatest story ever told — the data center industrial revolution — which is regarded as a total fraud by the short sellers and their press minions, causing havoc with many of the believers, including us, generating large losses, unrealized of course, until the numbers prove the bears wrong. We have about a four-week period beginning with Liberation Day on April 2 where business seems to have stopped in this country. It will hurt next quarter’s numbers. We have some retailers that are tailspinning, like Target , something that can only be good news for Amazon and Costco , two of our best, as well as Walmart . Can’t own them all. Oh, and for the record, both Home Depot and TJX quarters were terrific and we have to deal with the negativity distraction before they go higher. They are buys for certain. And we have the Federal Reserve, and all the Fed minions chatting, based on nothing, full-speed Hamlet: To cut or not to cut, that is the question. Why are board members even allowed to talk? All they do is create discord. What a waste. I hate it. Their meanderings spawn endless trading back and forth in a pathetic, albeit machismo, fashion. We are not traders. We don’t like to lose money on a daily basis. Seems unhealthy financially. Jeff Marks and I, sitting three feet apart in what’s known, unaffectionately, as the bullpen, listen to the tube and despise those who trade and trade some more, seemingly unaware that they are drowning us in a pool of buy-sell quicksand. What we talk about is a bit counterintuitive. We have a level of conviction to our buys that we welcome the distractions because they give us better prices. We need these distractions to drive stocks down so we can buy them lower, as we did twice now with GE Vernova , which, as I mentioned last night , almost never comes in. The distractions are our only hope if we are going to get enough stock in to make a difference. Again, I reiterate that the latest declines — those of Home Depot on Tuesday and TJX today — are classic buying opportunities for new members to the club. We have two reasons why we wait and do not plunge in right now. Why our sells outnumber our buys for the moment. First caution: the action in the aforementioned action in the 10-year Treasury. Right now, it is putting more pressure on the S & P futures than I have seen in some time, hurting all stocks like they are just one big brick being thrown at you that’s too big to dodge. Second, we can’t act in any concerted effort when we’re not oversold and we are still over 5% (overbought) on the S & P Oscillator , the indicator we care so much about. We are too vulnerable even as we know that if we stay up as long as we have it’s actually a known positive. Just a weird observation about the oscillator that is worth pointing out. It happens so rarely, but it is happening now. Doesn’t warrant buying, but does caution us to stop selling until we get even more overbought. The distractions don’t matter unless they are part of a proximate cause of what we want to buy. That makes sell-offs like the one we are having now palatable. Remember, what really matters are the companies themselves, not their stocks. We have companies with CEOs who may have been thrown off by Liberation Day, or disturbed that the 10-year seems headed to 5%. We have CEOs who are momentarily stunned by the mercurial, often mean if not dictatorial nature of the president, but they will get used to it and formulate game plans that can reassert their companies’ greatness despite the president’s wiles. We select companies with CEOs we trust, and that trust includes dealing with the very distractions I have laid out. So, I ask you, why should we trade out of these amazing stocks just because other people don’t believe in our theories as we do? Why should we join the traders who love it, hate it, love it, as if a transaction is some sort of high school crush gone wild? These are companies, for heaven’s sakes, not dates with no destiny. We don’t dump them after we pick them up and then dump them again. We own our stocks. We need these distractions to get bigger in the ones we like. And we have faith in our stocks because we like the companies that stand behind them and the people who run them. They are not trades. They are investments. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Jim Cramer.
Rob Kim | NBCUniversal
Today we are going to talk about distractions, things that become part of the discourse almost as if they are meant to scare you out of stocks, and then they go away, buried in the prefrontal cortex somewhere, ready to be dusted off on time to magnify the next terror.
Take yesterday’s left hook out of nowhere by President Donald Trump, bragging about doing something that would bust even this pathetic budget. It’s a distraction. It turned a good day into a bad one. But it was just a day.Â
