Why is this market so hated and feared?

It's unnerving that almost every strong stock has a poorly performing company underneath it.

By Jim Cramer Apr 14, 2014 11:25AM

Trader Anthony Rinaldi is reflected on a screen as he works on the floor of the New York Stock Exchange on Monday in New York © Carlo Allegri/ReutersAlmost everyone I know has two emotions about this market: They hate it and they fear it.


They hate it because they can't figure it out. They fear it because if they can't figure it out, then something must be very wrong that they either can't see or can't get their arms around.


TheStreet.com logoSome of this fear comes from the fact that no one I know -- and I've canvassed the best desks -- has a clue why interest rates went down last week on some very strong U.S. data. The only plausible flight-to-quality provokers I heard were as follows:


1. Russia attacking Ukraine under the premise that "Ukrainian bandits" provoked them.


2. Japan's new taxes could cause a Great Recession.


3. Something in China is so awry after those pathetic export and import numbers that the country is near a "collapse" to a 5 percent GDP growth level, down from 7 percent.


Yep, something is happening in each or all three countries that is so scary and frightening that it has some very in-the-know people buying U.S. bonds. Is it flight-to-quality? Or is it that there is no quality anywhere else -- particularly in Europe, which has extremely low rates and less stability -- so the money, in search of a decent yield, comes here?


Among those who are buying bonds, whatever these folks fear, they presumably fear it for a legitimate reason. The money's too big to be a couple of yahoos buying. The usual underlying reason -- the economy is rolling over -- just isn't the case in the U.S. Employment is too strong; sales are too great. We also know Europe is better, not worse. But China, Japan and Russia-Ukraine are all bad and worrisome, and each one could lead to some sort of worldwide slowdown if they get out of hand.


But if that's the case, why is the truly global commodity of oil going up and not down?


It just doesn't make sense that oil is relentless in its advance, especially when many other commodities are being hammered. Oil cuts toward some sort of doomsday scenario involving Russia and a genuine clash with the West. Otherwise there's oil coming out of our ears globally, and the U.S. is importing less and less of it. Again, it just makes no sense, but those oil prices are going to start hurting this country at the retail level if this keeps up.


To stoke the hatred people have for this market, let's break down the micro. The best-performing stocks since the slide began? Hands down, the utilities. OK, I get that: search for yield. But the best-performing utilities? Nope, not the highest dividend yielders, but the ones with the greatest growth, led by Exelon (EXC), Edison International (EIX) and NRG (NRG), all of which have among the lowest yields in the group. That's totally counterintuitive to people who say this move is all about the yield. Again, it's too confusing for most who are trying to figure this moment out.


Two telcos have held up well and are now advancing -- CenturyLink (CTL) and AT&T (T) -- and I believe it's because they yield 6% and 5% respectively. Again, I am willing to call that a thirst for yield.


That thirst is hard to slake. For example, lots of real estate investment trusts, particularly the office-building and retail REITs, have been bid up for their yield. But, as with the utilities, the ones that are still rallying have puny yields -- yet they keep going higher. It's almost as if people say, "I want yield; buy some utilities," and they aren't even realizing they aren't getting good yield anymore.


But some yield is just not considered to be any good. They aren't created equal. Consider the master limited partnerships. These stocks have all been awful except Enterprise Products Partners (EPD), which is the most fully valued and has one of the lowest dividend yields. The higher-yielding ones seem shell-shocked, a result of too many equity offerings -- think Markwest Energy (MWE) -- or too much worry about distribution cuts, as with Linn (LINE) and Kinder Morgan (KMP). While I don't think that will happen, I didn't think that Boardwalk Pipeline (BWP) would slash its distribution, and that has cast a pall over all but EPD and a couple of other pure toll roads with no commodity exposure and plenty of room to grow.


Next bizarre area of strength after the utilities? It's in the polar opposite of the utilities: machinery. I told you this is an exercise in counterintuitive and befuddling logic. Yep, Deere (DE), Terex (TEX), Joy (JOY) and Caterpillar (CAT) are all roaring higher. Again, these are total mixed messages. Sure, some crops are doing well, so Deere can be reconciled in the U.S. But business outside the U.S. is iffy at best. Joy? Coal is horrendous. Sorry, it is simply horrendous. There is no future for coal in this country, even though a short-term and short-lived natural gas spike has caused some switching. The sector is in permanent secular decline and, therefore, so is Joy. Is it selling itself? Perhaps, but after the disastrous Bucyrus buy by Caterpillar, who would be that foolish?


The only explanation? Perhaps Europe needs to stockpile coal because of a Ukrainian war and Russia potentially cutting off oil and gas? Could that be why people are buying Joy?

It wouldn't surprise me, because the best-performing energy stocks, despite the oil spike above $103 per barrel, are the natural gas stocks. This is despite the fact that natural gas prices seem to have peaked. The moves in these -- Southwestern (SWN), Encana (ECA), Ultra (UPL) -- are insane. The only one that's being crushed is the one that had been the favorite for years, Cabot Oil & Gas (COG). I think we are getting this move because people actually believe those companies, with the exception of Cabot, are going to supply the world with natural gas. Cabot can't because its natural gas is spoken for by New England agreements.


Caterpillar? What can I say? It's absurd. But it appears there is not a seller to be found, no matter where this stock trades. It's the same with Terex, which is a poor man's Caterpillar.


Beyond these, there is a scattering of strength in the most boring and old-line of the drug companies, namely in Eli Lilly (LLY) and Merck (MRK), which look like upside-down charts of Gilead (GILD) and Biogen Idec (BIIB).


Kellogg (K) and General Mills (GIS) -- the two food companies with, I think, the least impressive earnings streams right now, save ConAgra (CAG) -- are the market leaders in that segment. I would presume this is yield thirst. Plus, in the case of Merck, you have a potential breakup of the company and a potential hepatitis C pill to rival Gilead.


Shares of Hewlett-Packard (HPQ), Intel (INTC) and EMC (EMC) are all acting terrifically. This seems to indicate a return of servers as a powerful concept in tech even though, frankly, it shouldn't be. A step further: It's absurd and wrong. But it's happening.


What's so unnerving is that almost every single stock that is strong has a company underneath it that isn't really doing well at all.


And the stocks that are doing poorly? They tend to be just nominally attached to the best-performing companies.


Worst-performing stocks and best-performing companies. Best-performing stocks and worst-performing companies.


I see no other way to say it. And explaining it is no different from explaining the strength in the bonds in light of strong economic data. It can't be done with the current information at hand.


Maybe there is a giant worst-to-first sea change that's about to occur. Maybe the market has decided to reward poor performers and trash good ones.

Either way, it's very worrisome, because a healthy market rewards the good companies with higher stocks and punishes the bad companies with lower stocks.


But the opposite is happening. For anyone who has been in stocks for a long time, as I have been, we know an uncomfortable situation when we see one, and this one is mighty uncomfortable.


Jim Cramer headshot


Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio to see the stocks Cramer thinks could be winners.





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57Comments
Apr 14, 2014 1:50PM
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"But China, Japan and Russia-Ukraine are all bad and worrisome, and each one could lead to some sort of worldwide slowdown if they get out of hand. But if that's the case, why is the truly global commodity of oil going up and not down?"


Jimmy, Crude Oil has been one of the most manipulated commodities in History. Our Consumption has Slumped over time while our Production has Soared. Yet gasoline prices continues to rise since Oil Companies know that folks are too Dumbed Down to do anything about their gouging.


Before the Great Recession, the Markets were fueled by $500-700Trillion in Scam Banking Derivatives along with regular folks using their Home as a ATM. When that Rocket Fuel for Stocks froze up, the Global Feds starting printing to Infinity to reopen the Funny Money Gravy Train, once again. The only problem is, that's only working basically for just the top 1%. Everyone else is seeing a steady Decline in Income while inflation takes away the rest.


The Global Worker has been suckered by the Global Elite. Since they don't have the Stones nor Sense to do anything about it, when it all goes to Hades, they will still suffer the Most when all this Funny Business implodes bringing us right back to where we were during the Great Recession or Worse.

Apr 14, 2014 2:53PM
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The stock market is nothing more than a scam that allows the elites to skim (while doing nothing productive themselves) their living off the real work that is done by the common man. Now add in the intentional pumping up of stock prices by the government (welfare for the rich), 80% plus of which goes to those elites, and it's easy to see why the stock markets make so many people sick. 

Apr 14, 2014 3:08PM
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All of the wealth that has been "created" by stock prices going up since 2008 is phony paper wealth. Real wealth is only created by work: by building, making, or producing something. No work has been done to produce this phony stock wealth. The government simply announcing that stocks shall now be double in price (as they essentially have), adds absolutely zero value to the economy. That is where the economy is right now.
Apr 14, 2014 3:43PM
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there is a disconnect between fundamentals and the stock market.   
Apr 14, 2014 11:51AM
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Who hates the market?  It is that most of the gains of the last few years have been fueled by FED money printing.  That cannot continue, and thus many feel the market will have to price this FED balloon pumping out of the market.  The market probably is overvalued by a (26 months  x 85 billion) a couple trillion or about 3,500-4,000 Dow points.


Do you feel earnings will grow rapidly given the current 1.8% GDP growth?  Hence what will propel the market higher? Certainly increased corporate taxes won't.


There is far greater risk on the downside as Obamacare crushes GDP growth.

Apr 14, 2014 1:18PM
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I just saw some of the neighbor's pigs fly over the house, 5 of them.

They were flying in formation, like geese.

Apr 14, 2014 3:29PM
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That's easy, it's hated because it's controlled and manipulated by a few rich ****s, hell bent on screwing the little guy out of his or her lifes savings.
Apr 14, 2014 1:54PM
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"Some of this fear comes from the fact that no one I know -- and I've canvassed the best desks -- has a clue why interest rates went down last week on some very strong U.S. data. The only plausible flight-to-quality provokers I heard were as follows:"

Jimmy everyone is buying their own Bonds so there are Zero Free Markets at this time to actually determine what  or where Real Interest Rate Levels should be. Robbing Peter to Pay Paul will eventually fail and Rates will explode to the upside. Nothing mysterious about it. Gravity is a B.
Apr 14, 2014 12:51PM
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What we really need is Wall St to brought back down to "Street Level"!!
Apr 14, 2014 12:01PM
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this hack called for doom on friday at dow 16000 and i noted it by saying the market will be up this week and he will be chirping about dividend protection..........i can't predict the market any better than the next guy but i can predict this clown's every move. so according to cramer if i have a" high yielder" say yielding 5%per year and my stock gets whacked 5% per day then i am protected? and what happens if they cut the dividend? now that the market is up today he will be ranting about growth growth growth..........BEWARE THE SHYSTER

Apr 14, 2014 2:44PM
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I never know what the hell Cramer is talking about.
Apr 14, 2014 2:49PM
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The main reason we got a up swing today is from the positive retail reports. WHY??
Well, I'll go out on a limb here and say maybe people got a tax return...UMMMM !!!

Now what you should have done with that is pay down your debt; not go out and buy that 60" TV. 

All of this though is just more volatility in the markets because 1/6 of the economy should now be going towards healthcare, but no one has those hard numbers yet. If 20-25% of those buying insurance n the exchanges do not pay that first premium, that will lower those revenues that the insurance companies invest in the markets to raise funds to help with the payouts. We're all trying to discern what stock will rise (or fall) given the fundamentals. But when that data is inaccurate, you get these wild swings that occurred  last week & today. 

And it's not over yet !! Many more swings in the indices are going to happen before the end of the 2nd quarter. Strap yourself in now !!
Apr 14, 2014 3:49PM
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"Why is this market so hated and feared?"


Because, it goes against fundamentals. It's propped up by the Fed's non-stop printing. It's smoke and mirrors. This is NOT the way to operate an economy.

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There are many reasons for being afraid in this market.

1) The Federal Reserve has abandoned any hope of being able to keep the market up considering the downward pressure on the market caused by 10,000,000 new baby boomer retires each year taking $40,000 a year out of the market instead of putting money in and average US salaries approaching $16,000 a year

2) Russia and EU starting W.W. III this is almost 100 percent risk over the next ten years.

3) Japan economy totally collapsing - probably already has done this no one has called it yet

4) World wide Ebola outbreak -- no indication of any sort of containment of Ebola so far in Africa I expect in a month or two to hear about outbreaks in other countries. Sure that Al-Qaeda has been sending people to spread it. "When the first Ebola virus victims were identified in Guinea in February, no one knew it would be the start of an unprecedented outbreak"

5) If new mandate from UN for industry to get off carbon burning by 2050 is adopted by all nations we will be thrown back into the stone age. No cars, no electrical power for normal people, no internet, no phones, no computers, no clean running water, no heavy contruction machines so no new skyscrapers just grass huts, no lawn mowers except the hand pushed ones have you ever tried to use one???. Pretty much everything you know will be gone.

And these are just the more obvious problems.

Apr 14, 2014 1:39PM
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I listened to a market description by a woman from California running for a Congressional position who had a very astute description for this market.  It went something like this.  Everything in America investing has a two week or less time frame.  From the politicans in Washington to the FED to the Banks.  Two weeks and everything to increase share price.  With all the members in the house and Senate all vested nobody wants to be the one to bare the bad news.  Everywhere you look is two weeks.  It is a Junior High Juvenile mentality.   Anybody talking about paving a road or building a bridge?  Nope two weeks, just like a juvenile.  So the reason so many adults hate this market is the participants are acting like money Junkies with a two week time frame.
Apr 14, 2014 3:28PM
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Its crooked, the winners come in like horses fixed on drugs to slow them down to loose. Politicians &  professionals win with inside information. Losers make winners. Guard against inflation and savings disappearing overnight. Not hated, just not trusted, like banks. The bear, the bull and the political impetration is too scary today. An over bearing government showing favoritism to some.
Apr 14, 2014 12:03PM
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why is cramer hated? because he makes big money by conning the gullible
Apr 14, 2014 3:38PM
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Wall street is the seed that will that grows the end of the US as we know it. They have so much money that they feel no need to produce anything and therefore do not hire anyone.

Corporations have trillions of dollars sitting on the sideline, why? because they don't have to. They have moved from a need to produce something to make money to a place wher ethey can now sit back and simply sit on their lazy buts and get richer and richer.

We need to take back our country from these greedy people before they destroy it.

BUY AMERICAN, BUY AMERICAN, BUY AMERICAN

Apr 14, 2014 3:06PM
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  Crammer is the Soupy Sales of Wall Street he needs a pie in the face.
Apr 14, 2014 4:47PM
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This so called chat room is a pain in the azz, every time you try and post something that pertains to the article...It blows up and doesn't, screw it..
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