Jim Cramer on Mad Money: “The S&P’s new highs are a tale told by an idiot, full of sound and fury, signifying nothing about the hardship of millions of people on food stamps, or the millions about to be fired from service jobs, or the homeless, or the people who are just huddled at home waiting for the vaccine, which currently feels a lot like waiting for Godot.”
CNBC’s Jim Cramer explains why trump’s bragging about the “Great Economy” (code for a bullish stock market) is not a reflection of the US economy.
I was inspired to look into this after all the press about “record highs” on Wall Street and election polling showing voters giving trump higher grades on the economy than Biden.
Such cheerfulness about the trump economy puzzled me because no one I know is doing “great.” Most of us are just hanging on.
Some people I know have had to ask their mortgage companies for 180-day forbearance plans in March that are about run out. So I did some research to figure out how “great” the economy actually is.
Let’s start with more insights from Jim Cramer (boldface, mine):
“We’ve had a magnificent V-shaped recovery in the stock market,but the stock market’s not a great reflection of the broader economy anymore,”Cramer said. The S&P 500 just banged out another record high, as did the Nasdaq Composite. The Dow Jones Industrial Average still has a ways togo.
“You don’t need to be a rocket scientist to figure this out,” Cramer said. “Just look at the stocks that have brought us to these levels — they’re not the recovery plays. In fact, they are the opposite. They are stocks that tend to do well, because of what we call secular considerations.” He’s talking about digitization, short hand for “cut out the fat,” as Cramer sees it. It’s not “classic recovery stocks” —industrials or retail or banks — pushing indexes to new highs. Rather, it’s the likes of Apple, Amazon and Microsoft.
“The winners in this market are the companies that are most divorced from the underlying economy,” Cramer said on his “Mad Money” show on Tuesday. “The actual economy is in precarious shape, especially now that the government’s stimulus package has run out and Congress went home for the summer rather than trying to come up with a replacement.”
www.marketwatch.com/...
Why are Tech stocks doing so well?
Though the trump administration refused to reveal which corporations received COVID bailouts (and how much they received), I found a little tidbit revealing that, in addition to whatever Apple received in the bailout, they borrowed another $8.5 billion in a four-part bond deal with the federal government:
“Apple’s offering illustrates how companies with the best credit ratings are boosting shareholder returns by tapping cheap debt made available through the Fed’s backstopping of the credit markets,” according to Reuters. In the first quarter, Apple spent $38.5 billion on stock repurchases.
If one tech company used this strategy to repurchase their stock to drive up it’s value, it’s likely the rest of them have taken the same route.
When you add this to the point Cramer made – that the tech companies are divorced from the underlying economy – it seems clear to me the bullish stock market is held up by butterfly wings and headed for a correction, soon.
According to some stock market experts, I may be right.
“The stock market seems unfazed or oblivious to these dangers. It recovered all of its losses from the COVID sell-off, no matter that 28 million remain unemployed. But the stock market isn’t the economy.
It’s not too late for the federal government to deploy another stimulus, along with investment in advanced, job-creating areas such as high-speed rail and green industries. Most of all, we need leadership that stops the pandemic ….
Otherwise, prepare for Depression 2.0.” www.seattletimes.com/...
And…
According to Warren Buffett, investors should "attempt to be fearful when others are greedy and to be greedy only when others are fearful." With major indexes reaching new all-time highs, the market sure looks greedy -- and the next correction may be just around the corner.
There are many reasons why the S&P 500's winning streak could suddenly end. A second wave of the COVID-19 pandemic, a lethal mutation in the coronavirus, or COVID-19 vaccine candidates failing major clinical trials are just a few of the potential risks ahead. www.fool.com/...
And …
The U.S. stock market’s five-month rally is coming to an end. Of course I don’t know when. That’s important to acknowledge, since this spring I presented arguments for why the market’s March lows could be retested in mid-June or mid-August. ….
The lesson I draw from the data is that we should keep our enthusiasm in check. The stock market was surprisingly strong over the last five months, but — as the famed British economist John Maynard Keynes liked to remind investors — trees don’t grow to the sky. www.marketwatch.com/...
For Average Americans & Small Businesses, The Economy Is In Dire Straits
Pre-COVID, small businesses in the US employed about 50% of the nation’s total workforce.
As of May, 100,000 small businesses had closed for good. In NYC alone, 3,000 small businesses closed forever and it’s predicted that NYC will permanently lose one-third of its small businesses by the end of the COVID crisis.
According to a survey from Main Street America, an estimated 7.5 million small businesses nationwide may close permanently due to Covid-19.
This loss of jobs has led to increased unemployment across the country with some states higher than the national average of 10.2%:
“Massachusetts remained the state with the highest unemployment rate — 16.1% — and three states set new record highs in July, the Bureau of Labor Statistics said Friday. New York's 15.9% jobless rate was the second highest in the country… New Mexico, which shed 6,000 jobs, had the biggest increase to its jobless rate, to 12.7%.” www.cnn.com/…
Nevada’s unemployment rate is 14%.
California’s unemployment rate is hovering at 13.3% after hitting an historic high.
Pennsylvania's unemployment rate hit 13.7% in July.
New Jersey’s unemployment rate is currently 13.8%.
Florida’s unemployment rate rose to 11.3% in July as COVID infection rates rise.
Not to mention what’s happening to small farmers which is another story in itself.
Yet, in spite of these hard realities, some economic experts have speculated that one of the reasons why Mitch McConnell may be blocking a second stimulus for Average Americans is because he thinks COVID will go away and the bull market will continue.
In gambling circles, this is called Betting on the Come: -- betting on cards that may come in the future.
Good luck with that, Mitch, because a second COVID wave is hitting Europe, right now, and we’re likely next.
As usual, trump’s claim to a great economy is another lie.
