8 reasons the market isn't worse

CNBC host Jim Cramer says stocks should be crushed by global turmoil. Instead, they're doing fine.

By MSN Money Partner Jul 22, 2014 1:06PM
Credit: © Richard Drew/AP
Caption: Specialist Jay Woods is reflected in one of the screens at his post on the floor of the New York Stock Exchange, Wednesday, June 18, 2014By Lee Brodie, CNBC

Although stocks closed lower on Monday, the declines were modest with the Dow Jones Industrial Average ($INDU) and Standard & Poor's 500 Index ($INX) falling a fraction of a percent.


Many investors, including CNBC host Jim Cramer, found the relative strength somewhat curious, given the widespread geopolitical unrest.


Israeli jets, tanks and artillery pounded Gaza again as the death toll from a two-week conflict topped 500. Also, fighting flared in the Ukrainian city of Donetsk as investigators began to inspect the bodies of the victims of the Malaysia Airlines crash. In addition, the United States and the European Union announced further economic sanctions against Russia.


"You'd think the market would get absolutely crushed," noted Cramer. But it didn't. 


Here are Cramer's reasons why:


1. Russia's not that bad

Although there's tough talk out of the White House, Cramer doesn't think the stock market believes sanctions on Russia will hurt the earnings of U.S. based companies. (It's a belief that Cramer feels may be misguided; scroll down for more.)


2. Bonds 

"The flight to quality trade has sent the interest rate for bonds so low that stocks, once again, look pretty darned good by comparison," Cramer said.


3. Aggressive corporate moves

Cramer said Allergan (AGN) may be the poster child for this category. "It announced huge layoffs and issued a 2016 forecast that makes the stock seem so cheap you have to wonder whether you can do better voting with CEO David Pyott than with the hostile takeover offer from Valeant.".


4. Deal making

The flood of M&A has captured the imaginations of investors with pros buying stocks in anticipation of the next takeover. 


5. Activism

"This morning we learned that Elliott Management has taken a position in EMC (EMC) and asked the company to fully spin off its fast-growing VMWare subsidiary. EMC's stock has flatlined forever, but this news sent it soaring. When such large companies are vulnerable to pressure from activists, you get very nervous if you aren't fully invested." 


6. Good earnings

Strong results from corporate America have cheered the Street. "It's hard to sit out a market when so many companies beat estimates and raise numbers."


7. Fewer IPOs and secondaries

"We're not seeing a lot of new stock for sale, which helps keep supply and demand in balance," Cramer said. 


8. Janet Yellen 

"The new Fed chief is in no hurry to raise rates. She's waiting. She's patient."


Although the preceding reasons explain why the market was relatively buoyant on Monday, Cramer isn't sure all the reasons are warranted.


He's most worried about sanctions against Russia.


Although the sanctions themselves may not cause significant harm to U.S. companies, Cramer can see repercussions from the sanctions taking a very serious toll. 


"I could see the Russians kicking out MasterCard (MA) and Visa (V), which have tens of millions of credit cards there. Russia could put its own system in place, something they buzzed about when Putin first started meddling in Ukraine. We could also see some of the machinery companies get hurt. And Russia could kick out Coca-Cola (KO) and PepsiCo (PEP) as well as some of the other packaged goods companies."


Also Cramer thinks the market is forgetting the ripple that events could have on Europe. "In this case, I would say the market hasn't correctly assessed the downside yet, and there's potentially a lot more downside."


Therefore, Cramer wouldn't put money to work, just yet.


"Now, I'm not saying that this is a perilous situation. I simply want to wait for lower prices before I do any more buying. If that sounds bearish to you, so be it."


More from CNBC

 


164Comments
Jul 22, 2014 2:33PM
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2 reasons the market isn't worse:

#1 - the federal gov propping up the economy by spending borrowed dollars
#2 - the federal reserve propping up Wall Street with QE

In 2008, our GDP was about $14 trillion.  Today, it's $16.8 trillion - an increase of $2.8 trillion over 6 years.  During that same time period, the federal gov has borrowed and then spent $7 trillion and the federal reserve has conjured and spent another $4 trillion in QE.  So we've spent $11 trillion to get $2.8 trillion in growth.  Some plan...

Jul 22, 2014 2:14PM
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i am so envious of cramer............to make millions for doing absolutely nothing is pure genius
Jul 22, 2014 1:47PM
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Stocks are completely uncoupled from all reality, fundamentals, actual earnings or any other genuine, unmolested economic data, so why would world events have any effect?
Jul 22, 2014 1:21PM
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Yes sirree Jim the strength does seem curious.  6 years straight up without a blip.  Makes one wonder who is the author and what is their plan? 
Jul 22, 2014 1:52PM
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If you want any ROI, you are not going to get it in bonds or just collecting interest.  You might as well burry your money in a coffee can in your back yard.  At least stocks, no matter how overvalued they are, have potential to grow.  Unfortunately this false market is going to end badly for all. 
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Holy Bats Batman -- just what about a total bubble in the stock market isn't to worry about.

Look 401k plans now have a constant negative drain of money out of their accounts due to retired people taking their money out to live on.

P/E are nearly 40/1 folks that means these businesses will have to stay in business at the level they are at now for 40 years in order to pay someone holding their stocks back.

Things are way way way beyond normal and going to collapse very soon very fast

And this is not even considering that the BRICS have abandoned the US dollar as a trading currency which is going to send a death blow to the US dollar.

Pretty much the Fed and everyone else on Wall Street are in denial of what is really happening

things are getting worse and worse and people are working for less and less money while the market has priced in earnings growths of 100 percent for the next forty years.

Things are just not going to work for much longer.

Jul 22, 2014 2:52PM
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Through the first 17 comments posted, the opinions expressed are overwhelmingly bearish, fatalistic, pessimistic, what have you.

The points made by the bears are (mostly) valid.   I think the opinions (again mostly) reflect the opinions of the majority.  There's the rub.   The majority is usually wrong when it comes to investment decisions.  I remain today where I've been since 1983.  Fully invested in Stocks.  Very nervous and uncomfortable to be sure, but I can deal with it.

Jul 22, 2014 1:22PM
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Someone has painted THE AMERICAN FLAG ON THE BROOKLYN BRIDGE WHITE

I GUESS OUR SURRENDER IS NOW OFFICIAL 

F Y I
Jul 26, 2014 7:12AM
Jul 22, 2014 3:11PM
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Stock Market - buy/sell/profit taking.

 

Jul 24, 2014 9:23AM
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Please,  don't make me laugh. Nice job Cramer, not bad reasons either - too bad there not the real "reasons the market isn't worse." Borrowed money is still dirt cheap by any standard with interest rates near zero. Cheap money will push stocks higher and higher for as long as it can....regardless of what catastrophic news makes the headlines. Greed has no moral limits...
Jul 22, 2014 4:13PM
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How many more times do you want to read it? This was terrorism. The nation owes more than $1 Quadrillion from those executing it. That's a Hell of a LOT to repay on your future $8/hourly wage as Fry Cooks.
We didn't get a sustainable economy out of it, just ruin and balloons. You WILL pay for it.
Jul 22, 2014 4:10PM
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The crazy part here has to be Yellen. She dislikes complacency in the markets but causes it every time she bails a sell-off. Meanwhile, the added dollars in the markets allows employers to keep all wages in check (at poverty level) and she wonders why. For a woman in charge of the Fed with data galore to reference and review, one would think she would look out the window and validate what's on those spreadsheet. It's really just-- sheet, pardon my French-Canadian accent. 
Jul 22, 2014 2:52PM
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The group rigging the market holds every stock out there, so they make the prices anywhere they want to. Just that
Jul 22, 2014 2:45PM
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as pointed out previously , cramer called a market top on may 7.........since then he keeps calling for the market to go down............eventually he will be right........what a carnival game he plays
Jul 22, 2014 3:39PM
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The only . . . and I mean the only . . . reason the market has gone up is because the FED has been stuffing it with Billions and Billions and Billions of phony printed money. As soon as the money printing stops, this market crashes and we complete the Crash of 2008, except worse.


Wall Street and the financial markets received fair warning that they had gone too far, but they will not listen. If you didn't like greed and avarice and completely de-regulated markets then, just you wait. The last 6-years have been worse. Don't like housing bubbles; nuts to you. Don't like having the nest eggs of old age pensioner stolen. You ain't seen nothing yet. Etc.

Jul 22, 2014 4:01PM
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The stock brokers of today are the used car salesmen of yesterday:


How else can you explain a penny stock with only one employee

who's shares started at 1 cent jumped to $20.00 per share.


We have a system present today that was never equated in

the formula of the DOW of yesteryear .. "The Internet"


With Tweeter and the Web one is able to sell worthless stock

without leaving your office and by using graphs and tweets

one can encourage those who otherwise would have walked away,

 but instead choose not only to stay but to buy more ..


With such a system in place a "Bull Market" that would have died

years ago is fed by investors desire to fuel  the fires and keep a

Stock Market appearing to be robust but  in all reality is dead 

by its own weight..

 

Jul 22, 2014 4:11PM
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We all know where this is going (it's not going up or to a recovery). The key here is to not be in the line of fire as the one age-group managing all the platforms and controlling all the financials- goes extinct. If this is what we get from degrees... leave no college intact.
Jul 22, 2014 6:39PM
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Why would any SANE person come to a freaking posting Board to get investment advice? After following investment Boards for years, one thing is crystal clear, at best it has entertainment value. If folks really want to learned about investing, take the time and use anything BUT advice from posting Boards.

Learn the Basics like understanding what a PE actual is forward or trailing. Take the time to actual READ quarterly Reports.  Learn how to compare companies within the Same Industry and their Comparable Growth Rates.

Understand that Dividends can be raised, lowered, or eliminated. Stocks can go to ZERO or you can get lucky and catch an Apple like Stock Run. Bottom line, postings Board are about the Last place anyone should go concerning about figuring out how to invest in Markets. Folks are too concerned about themselves and care not a Darn if you lose it all. Plenty of ways to learn about investing without the NOISE of Posting Boards.
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