Investors need to rein in the froth

People are nuts over just about anything these days. It's bad news for what has become a bedraggled market.

By Jim Cramer Mar 17, 2014 4:19PM

Image: Stock market (© Digital Vision/SuperStock)You can't stop the froth, even in the midst of a new Cold War between Russia and the West. You can't stop it even as major stocks seem to be rolling over left and right.


You can't stop it even when the established stocks in a group are getting crushed but initial public offerings in the same sector come along and roar.


Take last Friday. Castlight Health (CSLT) came public to tremendous fanfare, soaring 140 percent the first day. Why? Because this is a company that offers a software-as-a-servic​e cloud-based solution for health care benefits. Whoop-de-do.


Have you seen how badly Salesforce.com (CRM), Workday (WDAY), Veeva (VEEV) and Concur Technologies (CNQR) shares have been trading after excellent quarters? These companies are the cream of the crop, and they have been fabulous shorts for two weeks now -- and we like Castlight?


I suspect this week will be more of the same when several other names come public: Paylocity, a cloudbased payroll-and-human-ca​pital company; Q2 Holdings, a cloud-based community­-banking play; Amber Road, a global trade cloud-based company; and Globoforce, a cloud-based social-recognition software business. (Ticker symbols will be "PTCY," "QTWO," "AMBR" and "THNX," respectively).


These are all versions of what could easily be described as existing companies. In fact, Paylocity sounds like Workday-meets-Cornerstone OnDemand (CSOD). As for Q2 Holdings, Salesforce.com has a community-banking initiative -- check its site.


Cloud-based social recognition and global trade businesses? I am sure Globoforce and Amber Road have something proprietary, but I have to ask: "Do you really need to come public now?" What's the darned hurry? The answer, of course, is that the public market is divorced right now from the soon-to-be public IPOs, and that is always a bad sign.


It's the same thing with biotech. Upcoming IPOs for Akebia Therapeutics, an anti-anemia therapy company and for Versartis, a growth-hormone play, presumably will dazzle (under respective tickers "AKBA" and "VSAR") -- even as Celgene (CELG), Gilead (GILDIsis (ISIS), Jazz (JAZZ) and Seattle Genetics (SGEN) are becoming unglued.


Now, I happen to like the incumbents. I am not making a judgment about those. I think the incumbents that I have mentioned here in the cloud and biotech spaces will come back. Many are fine companies.


But the hot deal froth now stands with the fuel-cell debacle, the marijuana froth, the tiny-biotech bubble, the rampant penny-stock craziness, the anything-solar love affair, the Fannie (FNMA)-Freddie (FMCC) silliness, the Tesla (TSLA) anything-goes trading and the 3-D printing nuttiness. It's all just total bad news for what has become a bedraggled market.


Plus, you can see that we have a flood of Chinese IPOs coming and the Chinese stock market is the single biggest bear on earth. Can we really separate China's social and gaming Internet IPOs from the rest of the madness over there?


The bankers will.


We are having way too much of a good thing in certain sectors and way too little of it in others. The hatred is amazing if you call this stuff out, which I know over at @JimCramer on Twitter.


Just makes me dislike the market more and more. This froth has to be reined in. These deals need to start failing and the window needs to close. The big-volume joker names need to come down to earth and stay there, or we aren't going to get through this period without a more serious broad-market correction.


It has always been this way. It will be now if the froth isn't stemmed. If it is, then the market can resume its climb, provided we get stabilization in Ukraine and China. Without it, it'll be tough sledding. Sorry.


Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners. The portfolio is  long CELG.


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32Comments
Mar 17, 2014 12:55PM
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Reading some of the reports this morning about factory output and how it signaled that the"economic recovery was gaining momentum".  We're 5 years removed from when the recession officially ending (allegedly), and we're still talking about being in a recovery?  Pretty damn sad.  
Mar 17, 2014 4:44PM
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I've ridden this crazy train since the early 90's - as a broker for 20 years, and now just as an occasional player. 


The game isn't for the individual anymore - and the spreads are too thin and too tight.  Computers and flash executions make profits possible with tiny price moves.  The "powers that be" have determined that a lofty stock market will keep people from asking too many questions about the real economy....so the cycle continues. 


I am bemused at best by it all.  I'll take my indexed-tied annuity growth each year with no risk of losses and continue on.  Jim's a good guy, but a rising tide floats all boats....the tide does go out...and always, always, always on the little guy. 

Mar 17, 2014 5:15PM
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"You can't stop the froth..."

You should have just stopped 'frothing" right there, Cramer.  We would certainly love to see our barometers rise in concert with valid reforms to the financial machinations behind these markets, as well as to see that rise sustained by something other than mass layoff and accounting sleight-of-hand.  
Organic growth has not escaped being oneof the catalysts in this 'recovery',  but until that recovery reaches everyone capable of participating, it will mostly be characterized as the 'smoke and mirrors' of a very predatory form of capitalism, in which only the wealthiest thrive.
And especially at the expense of others.

Until these issues are addressed and prosperity starts to encompass our nation to revive a flagging middle class,  "froth" will be the sole actualizing element of our very-amenable indices.

Oh and Happy St Pats to ya!  May he return to drive all the snakes from Wall Street.

Mar 17, 2014 4:41PM
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I was at a street fair this weekend, in a classy more upscale town as well. 

 

having done such art shows before I look to see if people are carrying packages indicating they bought stuff.  ~ there were virtually NO packages being carried by anyone! 

 

that's not a good recovery sign! 

Mar 17, 2014 4:57PM
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We are 5 years removed from the Great Recession and folks are still Blind to what happened and why. Most of those folks come to these types of boards. If you are dumb enough to think there was no Recovery, then you are dumb enough to believe anything idiots on these board will feed you.

There absolutely was a recovery. Just look at auto sales then and now on a annual basis. Look at Corporate balance sheets now and then. Look at the record number of millionaires and the record sales of Luxury items. There certainly was a recovery, problem is that most of it went to the top 1% and the morons saying how there was no Recovery had zero problems with that.

The Right to Work Harder for Far less has assured there will be no real recovery for the general population, just the the Folks that never needed any recovery to begin with. The very same folks that have bought and paid for our farce elected officials. It's true, you do get what you pay for, everyone else, not so much. And yes, that's pretty darn sad.

Mar 17, 2014 1:03PM
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Some of the current and forward P/E's are crazy.
Mar 17, 2014 12:49PM
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italian bonds..........market went down and came back up
greek bonds..........market went down and came back up
spanish bonds....market went down and came back up
ukraine threat......market went down and came back up
cramer picks......they go down and the market goes up

Mar 17, 2014 6:46PM
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This market reminds me of beanie toys and those Japanese looking game cards how much are they worth now
Mar 17, 2014 1:01PM
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I guess some have recovered. Total millionaire households in the United States jumped to more than 9.6 million according to Spectrem, an increase of more than 600,000 over the previous year. That is the highest level since the research group started measuring in 2004.--- I am still waiting for that trickle to turn into a river at this rate.
Mar 17, 2014 5:57PM
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It sure is comical that the "chief barista" of stocks, Jim Cramer, is complaining about "froth"!!  He has created more in his time than any one other individual.  Its kinda like listening to Feinstein complain about the CIA snooping on Congress-- you reap what you sow, sometimes.
Mar 17, 2014 8:11PM
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To the To Big To Fail and The To Big To Jail !   Only one Life To Lead  The fast life of GREED !  DIE BANK OF AMERICA DIE ! (JFD) !
Mar 18, 2014 8:40AM
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" ActiveRia, dave - most of us do not doubt the recovery - but we question the cost effectiveness of the means used to effect the recovery and also whether or not it will last ..."

I question more so what Corporations and Governments have done with the benefits due to Global Feds collusion as opposed to anything else. Instead of focusing like a Laser on our Future, they are far more concerned with rewarding the very same bad players that created this mess to begin with. Too Big to Fail, Too Big to Jail has only gotten far worse.

I also believe strongly that Corporations and their bought and paid for Government Officials really don't give a darn about the working population at large. This appears to be leading to their true Goal, One World Government and One World Currency. It's just a matter of will it be the West or the East that achieves it first.

Expectations moving forward for Markets and the economy, the same Bad Players seem to blindly ignore many of the issues you and I but have brought up. But why should they care, they got theirs, darn everyone else.

 

"Why didn't we let capitalism and the free-market work through their course and make the repairs??"


Now that's the million DOLLAR question that nobody can truly answer. We don't have a time Machine to go and see all the what ifs. Posters like Togg have suggested things could have gotten much worse without intervention and I can't say I don't agree. Keep in mind the root of the Problem, $500-700TRILLION in scam Debt Derivatives. Farce Capitalism and Free-Markets just don't have the oomph to solve something as large scale as that. How can so-called farce Capitalism and Free -Markets solve anything when it's very foundation is based more lies then fact.

Mar 17, 2014 11:42PM
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Jim,

Keep on telling it like it is. It is appreciated. With Mr. Market, experience and perspective is all.

sm

Mar 17, 2014 11:23PM
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We'll if your bonus doubled if you made over 15% a quarter then you'd be throwing darts too.
Mar 17, 2014 4:49PM
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The market goes up one day and down the next, what the hell does tell you? Play it safe folks and hope you don't lose your ****. It's coming sooner than later and you better hope you're not one of the stupid ones. Goodluck and Godspeed!
Mar 17, 2014 12:49PM
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Froth is that once in a lifetime chance to make a killing in the market. Jim says he wants to shoot the goose that lays the golden eggs.  Something tells me Jim will lose this fight.
Mar 17, 2014 12:55PM
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Yikes and I just about to do an IPO of my string of Chalupa Parlors. And yes it'll be cloud based. Order up one of my fine tasty Chalupas, and it will fall out of the sky and hit you on the head!

Yuk yuk!
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