The return of old-style investing

The aerospace move and the short covering are reminiscent of bygone days.

By Jim Cramer Jul 12, 2013 9:42AM

thestreet logoStocks circled in newspaper (© Digital Vision/Getty Images)This aerospace theme won't quit.

 

When oil goes up, the sector does well because the airlines will need more fuel-efficient planes. When oil goes down, people think the airlines will do better and therefore place more plane orders. In the absence of a trend in rates -- and we don't know the trend -- it has become the de facto trade, and aerospace is even better than biotech and high-growth retail like Starbucks (SBUX).

 

One of the amazing things about this market is the intense and relentless run-up of the same stocks on the same news. There is no per se news about aerospace. We just keep getting more orders, and it will keep happening because of the fuel-efficiency issue. But when is it built in? When does Boeing (BA) discount it? Right now, the answer would seem to be never.

 

What I think is happening is we are seeing a return to some old-style investing. Boeing used to trade in seven-year cycles. A new '87 entry would give Boeing seven long years of profits with terrific gross margins, ones that get better every year. That's precisely what it seems to be happening right now, doesn't it?

 

That means the discounting mechanism has gone awry.

Plus, the current crop of analysts just aren't used to a market this bullish. They, collectively, don't want to hype Boeing, because they fear top-ticking it. In fact, the only stock that analysts don't seem to be afraid to top-tick is Google (GOOG). Before that it was Qualcomm (QCOM), and before that it was Apple (AAPL), although I think Google is better than those two.

 

It's just that the bullishness is so pronounced that they can't get their arms around it.

 

Plus there are tons of stories out there that people are short, and they seem to be short/cover/short/covering every time.

 

Take Amazon.com (AMZN). Periodically someone says something good about the stock, but we're much more likely to hear the stock is overvalued. How many people are short that?

 

Then there is this pattern, too. You will have a couple of days when winners like PVH (PVH) and Netflix (NFLX) are weak. That brings in the short sellers. Then something positive happens and the shorts spend the next day or two scrambling. Again, constant pattern.

 

That, too, is reminiscent of the 1980s and '90s, when the bears simply couldn't believe the moves and so shorted them out of disbelief.

 

Disbelief is a terrible reason to short something. And that's exactly what's generating a lot of these moves.

 

cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long AAPL.

 

 

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168Comments
Jul 12, 2013 11:17AM
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I buy quality companies like Coca Cola and Exon, a bit heavy on utilities, consumer staples, and health care, but generally keep about 10 % in each sector, but light on technology and the financials and telecoms.  I aim for the dividend and only buy when the sky is falling and the mood is negative. The bigger the panic, the better I like it for buying.  Since I started doing this, I have averaged around 10-15 % a year and 4% average dividend.  I rarely sell.

The most "old fashioned" investor in the world is an 80-something man named Warren Buffett.  I wish I had started being "old fashioned" when I was young.  If I can keep going until I am Mr. Buffett's age I will have a very nice nest egg and legacy, but if I had invested this way when I was 20-soemthing, I wouldn't have to be working now.  
Jul 12, 2013 12:06PM
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Let the lefty spin begin !


This tells the story, why Bush was so bad at the end of his term.

Some people aren't aware of all of this. Don't just skim over this, please read it slowly and let it sink in. If in doubt, check it out.

The day the democrats took over was not January 22nd 2009, it was actually January 3, 2007... the day the Democrats took over the House of Representatives and the Senate, at the very start of the 110th Congress.

The Democrat Party controlled a majority in both chambers for the first time since the end of the 103rd Congress in 1995.

For those who are listening to the liberals propagating the fallacy that everything is "Bush's Fault", think about this:
January 3rd, 2007 was the day the Democrats took over the Senate and the Congress.

 

At the time:

The DOW Jones closed at 12,621.77
The GDP for the previous quarter was 3.5%
The Unemployment rate was 4.6%

George Bush's Economic policies SET A RECORD of 52 STRAIGHT MONTHS of JOB GROWTH
Remember the day...

January 3rd, 2007 was the day that Barney Frank took over the House Financial Services Committee and Chris Dodd took over the Senate Banking Committee. The economic meltdown that happened 15 months later was in what part of the economy?
BANKING AND FINANCIAL SERVICES!

Unemployment... to this CRISIS by (among MANY other things) dumping 5-6 TRILLION Dollars of toxic loans on the economy from YOUR Fannie Mae and Freddie Mac FIASCOES!

 

Bush asked Congress 17 TIMES to stop Fannie & Freddie - starting in 2001 because it was financially risky for the US economy.

 

And who took the THIRD highest pay-off from Fannie Mae AND Freddie Mac? OBAMA


And who fought against reform of Fannie and Freddie?

 

OBAMA and the Democrat Congress.

 

So when someone tries to blame Bush..REMEMBER JANUARY 3rd, 2007.... THE DAY THE DEMOCRATS TOOK OVER!

"
Budgets do not come from the White House. They come from Congress, and the party that controlled Congress since January 2007 is the Democrat Party.

Furthermore, the Democrats controlled the budget process for 2008 & 2009 as well as 2010 & 2011.


In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.

For 2009 though, Nancy Pelosi & Harry Reid by

passed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the 2009 budgets.

And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete 2009.

If the Democrats inherited any deficit, it was the 2007 deficit, the last of the Republican budgets. That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets.

If Obama inherited anything, he inherited it from himself. In a nutshell, what Obama is saying is "I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th."

Jul 12, 2013 10:35AM
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Cramer has run out of topics to yak about, so he has come up with this crap post. 

In fact, all of the MSN columnist have posted nothing but crap mostly wrong out looks on the market based upon flakey analysis. Consider them one-by-one starting with Bill da Flake. If you had invested in Gold following his advice, you'd be dining at the Salvation Article for sure. Next in this pantheon of losers is Anthony with his total reliance on TA and little else. However, in his favor and under my magnificent guidance, he has seen the light and is now bullish. And we come to Jubak, and I have to ask the question has this character ever made any money for any one with his convoluted horrendously complicated analysis? 

The last but certainly not the least is Cramer who certainly deserves a special place in the world of investments. This guy is totally nuts. He is the only one who gives me a headache with his advice. I have watched his show on TV, and it is more like a circus act than anything resembling serious investing information. Bells, whistles, buzzers, and a difficult to follow fast paced rap on the merits of various stocks leaves me with a sinking feeling that our society is regressing back to the days of cavemen! Oh the horror!

I remember the very best and famous investors like Dr Martin Zweig who coined the phrase, "Don't fight the Fed!" or how about the famous mutual fund manager who felt 5 minutes was enough time to throughly explore the merits of any stock? Or what about the greatest trader of all time - Jesse Livermore who provided many memorable nuggets of wisdom?

And the greatest Federal Reserve Chairman all all time and probably the future too who saved our economy from rapid deflation and put it on track to sound growth. He'll be credited with saving the American and perhaps global economy from utter ruin. Yes Dr Bernanke should receive the Noble Prize in Economics and Peace too for his great service to man kind. 

Now all the forum morons should stand at attention while I sing Wooly Bully! 
Jul 12, 2013 11:16AM
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Cramer ---"Buy Gold at $1900..."   ....says it all !!
Jul 12, 2013 10:36AM
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DOD is already war mongering again complaining about the Chinese missle program.  The Chinese will not have to fire a shot to beat US.  All they need to do is ignore the silly US legal system of patents and trademarks and build their own ecosystem while dumping US debt to raise are interest rates to unbearable levels. They'll beat US just like we beat the Russians - economically.
Jul 12, 2013 10:36AM
Jul 12, 2013 11:15AM
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What absolute meanlingless garbage ......

Cramer why don't you write about your paltry returns at action alerts plus over the last 12 years.

Also why don't you write about which "charitable organisations" have benefited from donations that you claim to have made?
Jul 12, 2013 2:07PM
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New style investing?  Old style investing?  I only know one style of investing.  Invest the same amount of money bi-weekly or monthly.  Invest in low cost mutual funds, compare the fees.  Diversify between stocks, bonds, and cash.  Take advantage of dollar cost averaging.  Invest for the long term, and don't invest in the flavor of the week.  Buy a house, live well below your means, and don't forget to start a family.  This is how you create wealth, it takes a lifetime.
Jul 12, 2013 10:20AM
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Maybe some of that "old tyme" investing never left...

 

Not everyone has a HFT Platform running on their Home PCs...

 

Only guys/gals like Regal Man(?) and Mr.Fat Cat (?) can afford those luxuries.

Jul 12, 2013 1:03PM
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Old style investing moves are NOT back!  Look at UPS, they are a pretty good economic barometer and their recent forecast for the US economy is pretty dismal.  In the old days, this would be a fairly strong warning signal for things to come.  But just like a poor consumer confidence showing, a poor improvement on the jobs front, a poor small business optimism, etc..;  now the old-style approaches and indicators and fundamentals don't matter, because QE trumps everything else.
Jul 12, 2013 12:32PM
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"Yes they are. JPM reported a 31% jump in profit."

 

Think this one through, America. This bank has a direct conduit to borrowed funds and a pretty stupid blanket credit buy-back program. They are an immediate recipient of Ben's $85 billion monthly QE. Yet... they can't lend right, they screw up in billions, invented- then were victims of their own derivatives and debt contracts! Through the 20th Century, it had the US Government bail it out FIVE times and accepted TARP monies in the 21st Century. JP Morgan is directly responsible for the Federal Reserve Act, which passed with only 4 (GOP) members of Congress in session, after hours. The 31% is based on a massive loss in difference... so... in spite of every odd in it's favor, JPMorgan Chase did really poorly and begs the obvious question... if you truly are doing well JPM... then you should be bribing Congress to end QE, right? Your aren't a bank, JPM, you're a blank check for corruption and the sooner we get to eat your executives and directors and shareholders, the sooner others will get it about financial tyranny in America.

Jul 12, 2013 1:01PM
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Little Beav makes an indoor pool every time he sees his shadow.
Jul 12, 2013 11:28AM
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I remember when Cramer top ticked Apple around $700. In fairness, he wasn't the highest call at the time. But, there were a lot more analysts who got it wrong than right. And, even fewer who got it right made any money by putting their money where their mouth was.
Jul 12, 2013 12:53PM
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If you really want to radiate wealth buy yourself a Buick Regal.

 

At least its not a chick car Beav.

Jul 12, 2013 1:24PM
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I have trouble reading, re-reading contributions, that continually repeat or are repititious of the same agenda on a weekly or some bi-weekly basis...

We have a few posters, that suscribe to the that mantra...

And going into Political forays or rants, seldom holds my attention for long in any conversation anywhere....

I would rather sit and drink my whiskey quietly, and chat about the weather, crop yields or the price of hog bellies...Maybe even argue about Israel or the Middle East..

The name calling or inuendos in jest are tolerable, but then again some can just be clicked or rolled on by...

 

Life is too short, to punish yourself and others with droning on about what is,was or could be..

As you get older that realization comes into play, and sometimes it's not worth the trouble to listen or complain.....But just start whistling or singing under your breath or in your mind.

Que Sera, Sera.

Jul 12, 2013 2:25PM
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Well I won't be posting much for the next few weeks, I work in insurance restoration and between Calgary floods and now the Toronto flood (which is not getting much press but is going to end up being much more expensive then Calgary) I will be out of town for a while.  Hope the market is higher when I have time to pay attention to it again.  Enjoy the summer all.  
Jul 12, 2013 4:46PM
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What kind of man knows Halle Berry is getting married this weekend?
Jul 12, 2013 12:22PM
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Girlie man(?) = Girlie Car

 

har,har,har, me swabby.

Jul 12, 2013 3:12PM
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Fatty Cakes, did you call me a name, did you call me a name....Think it was Racist, Buckwheat really Buckwheat?....What ever gave you the opinion I was Black..??

 

I don't call you bery leetle yallow man, that's the another guy.

And I didn't vote for Obama the first time he ran...

Then you wish me and other's to die...

 

That not bery nice, leetle yallow man.

Jul 12, 2013 12:09PM
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Troubled Times...Kinda surprised if you are an investor leaning towards buy and hold along with searching out good dividends....; That you don't have some good selected Telcoms in your Portfolio.

VZ and T come to mind..I'm sure there are others, maybe even better...We hold FTR, but the depreciation has taken some toll.

Other staid and solid payers are in the Tobacco Sector...

But it also looks as if you prescribe some to Buffet....Think KO is his number one holding.

But I always relate he and Munger did this over about 50 plus some years and did it fairly well..

 

The problem with us or people like us, is we had to work for a living and support other endevours,

And had other obligations...Whereas they had been doing their Berkshire thing over a lifetime.

Good luck and good investing, you should do fine.

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