Pessimism is far too easy

The 2 big trends that brought us here -- autos and housing -- are not going away so readily.

By Jim Cramer Feb 21, 2013 10:07AM

thestreet logoBrown bear (Ursus arctos) roaring, side view (© Ryan McVay/Digital Vision/Getty Images)Housing and autos, the twin pillars of the recovery. How much trouble are they really in?


This is the theme of the hour, and when we're faced with smoking hot numbers that might be cooling -- and I acknowledge that fact -- I like to go back to why they might be good in the first place.


Right now there are plenty of projections that the U.S. might be building as many as 1 million homes a year. Weyerhaeuser (WY) said that the other day on Scott Wapner's "Fast Money Halftime Report." This number is considered to be a big deal. But we could probably use another 50% more homes, given the dearth of inventory in California, Florida and Arizona -- and that's especially if immigration reforms are made and the birthrate keeps coming back.


Simply put, 1 million new homes isn't a stretch goal. Despite the National Association of Home Builders' newfound cautious outlook, and because of the Toll (TOL) conference call -- which was actually positive -- I don't think the country will have a problem topping that number. That's good news for this economy that keeps getting factored out.


We're also betting that the U.S. could produce as many as 15 million cars this year. Again, this is regarded as a goodly amount. It's the "over," so to speak. But similar to housing -- for which a few years ago we built a fraction of what used to be built -- we're still trying to catch up with demand. We built only about 9 million cars a few years ago. Now the fleet is aging. There are more people. Gasoline costs more, too. So you need to buy a new car that guzzles less.


In other words, yes, we may see a temporary impact from the end of the payroll tax holiday and higher taxes for the wealthy. But these two trends, autos and housing, aren't running out of long-term steam, even if some think the market is taking a breather.


During days like Wednesday and Thursday, it's very easy to pronounce that every good trend is in jeopardy. I couldn't believe how many execs said that the looming sequestration is going to hurt them. It was almost as if they broke out the fiscal cliff memo. Would they have said this if the market had been flat? I don't know. A lot of self-fulfilling political thinking has been part and parcel to this market ever since President Obama was first elected.


But I come back to saying there's innate pent-up demand, and it's not going to be put on hold because of the changes in taxes or because of sequestration.

It's always right to worry about trends when the stocks are toppy. You get gun-shy. You might have wanted to buy Toll at $28 going to $38, but you never seem to want to buy Toll at $33 after it's already been to $38, right? Plus, given that so many people are chartists, our reaction to any stock that has gone up and then come down is that a head-and-shoulders pattern is upon us. They hit up the chart, it's hideous and they back down.


So, the stock loses its always-skittish defenders in no time. I didn't like some genuine pieces of the Toll quarter, like average price of homes sold. The company has been a numbers-beater ever since things started to get better, so it's logical to question whether that string is over.


But as I wrote the other day, we have seen so much forgiveness in this market. So, why should we think that, in a few days, it won't be forgiven again, especially as Toll approaches -- say -- $30 to $31?


Or do you mean to tell me that the only opportunity in this stock market comes from companies that report perfect quarters and are on an endless northern trajectory, and that everything else is inedible? Would you say the market is a perpetual-motion machine and that now the motion can only be down? If a stock is down, it must stay down?


That certainly hasn't been the case until Wednesday.


I just don't think you can presume that two down days means the end of the rally -- and I'm presuming a bad day today, or even one or two more down sessions. I certainly don't think the big theses that have brought the market here -- autos and housing -- are now dead because Owens Corning (OC) and Toll Brothers missed Wednesday, or because Ford (F) missed not that long ago.


It just seems way too pat to me. I'm from the school that said we ran too much, that the declines are always sharper than the advances and that the market is shaking people out. We're now going to hear sequestration horror stories into the end of the month. Then the market could be ready for another advance, because the trends that brought us here aren't going away that easily, even though some of the points the market just put on sure are.






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 WY.  


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Feb 21, 2013 10:37AM



Perhaps I deal more at the local level. I don't deal with Toll Brothers, but I do deal with Realtors and Home Builders and what I see is a barely survival level and potential bankruptcy. Home sales are not soaring and home prices are still dropping. There is no robust recovery. And that's here in NJ which wasn't one of the worst hit states.  


I sold my Weyerhauser a bit ago, and I expect to buy it back much,much cheaper. In fact I'm selling a few things becasue I smell a sale on Precious Metals.

Feb 21, 2013 11:01AM
Why folks don't get the arbitrage going on in our economy is unfathomable.  The more cheap labor stuff Americans buy the more pressure to devalue their own worth.  It is simply water level economics.  Picture a barrel with a bunch of holes in it from the bottom to the top.  The water level will never rise above the lowest hole.  The same with the standard of living.  As Americans buy more and more cheap labor products the economic arbitrage is too lower the inherent value of that production whereby Americans must work or accept the same value as the person in China, Korea, or Mexico that that worker was paid to produce or assemble it.  So allowing cheap labor products to enter our market is about the same as allowing a drunkard to buy cheap booze to kill himself.  Our elected officials and the International Corporations are making money while they watch Americans destroy their own economic futures. It is simply a matter of time before Americans will have the same buying power of one of the 800 million Chinese workers.  It is called a given!  So how does this affect stock values? Well as we continue to lose water through the lowest hole in the proverbial barrel these American Internationals will be able to make less and less profit until there will be no difference between selling here or China.  Profits will most definitely be less and consequently we see these organizations refusing to invest in new plant and equipment, hire more employees, or commit to any long range product development.  And as many recognize they are presently  hoarding their money.  Many of these CEOS have actually  stated that increasing future profits from American consumers will become much more difficult.  So to suggest  improvements in the housing and auto markets with long term fundamentals clearly suggesting otherwise is unwarranted.  JMHO
Feb 21, 2013 11:20AM
Jim, It might be time to get out in front of this one and call it for what it is...a stock market bubble induced by the Fed. It is interesting that investors have become numb to the constant flow of sub-normal economic numbers. We celebrate mediocrity. Things are far from normal and I sense we have reached a critical mass of headwinds. You should be telling people to grab their profits and head for the exit. 
Feb 21, 2013 10:49AM
Feb 21, 2013 10:35AM

JC, you are so superficial in this article you could be on of those "The Real Wives of ....... " on the tube.


no mention of the huge hedgie players buying homes on the cheap with zero interest in order to turn around and rent them.  as soon as the rates rise this "housing trend" will go up in a puff of smoke on the wind.  california hot?  of course - the wealthy chinese have looted their country and are now buying US housing in advance of fleeing the country like so many cockroaches when the lights go on. 


car bubble anyone?  car loan credit is the most lax in decades now that the industry has fallen in love with the repo man and consumers have become certain that they just have to grab up stuff while rates are zero.  as in the housing bubble, if you can fog a mirror you can get a car loan or lease at any of the big brands dealerships (they should just be called "dealers").  as gas rises and sequestration sets in the economy will slow, the fringe workers will be cast aside, and the repo cars will have nowhere to go, inventory builds as these low mileage cars increase in supply and the car bubble bursts.


you don't play chess do you??  oh, sorry, guess you are too busy shopping for "slacks" and putting on that makeup for the sheeple ......  

Feb 21, 2013 12:00PM
As for Autos have you never noticed that when the auto companies offer cheap leases it means they are NOT SELLING ENOUGH CARS by traditional methods !
Feb 21, 2013 10:23AM

at best new home DESIGNS will change to accomodate multi family dwellings with shared living and cooking quarters.  but i doubt we'll see any serious change in home building progress, 


"everyone" was living with mom-dad-other the past few years and there's little reason to see that change suddenly NOW.  people learned the lesson of getting screwed by job layoffs, etc.  they will be extremely cautious.

Feb 21, 2013 11:34AM
Remember the old business cycle with autos? Boom and bust.  Well, we are heading down the downward slope with auto sales starting this year. Soon we will be able to take autos away as the reason for our baseless optimism. Housing is likely to flatten out after this slight uptick. If you haven't noticed, new lending standard recently announced will continue to lock out the first time home buyer (even those that do not have a ton of college debt).
Feb 21, 2013 11:33AM

I have really been wondering how J. Cramer would look in a Dress and a Wig...

Maybe Active has a great idea, for a new Market/investing reality show..


We can just call it "The Biotches from Westwick."

Feb 21, 2013 11:59AM

Nice BUY call on monday cramer ......I am sure you made your paymasters happy with that one --- they get out and the little guy gets hosed again .....

You greedy scumbags have been trying to get the retail investor back in for 3 years now. As long as people smell the greed of people like you ...NO SALE !

And gain what were your AA results last year? - 10% - 15% ??
Feb 21, 2013 11:57AM

"I have really been wondering how J. Cramer would look in a Dress and a Wig...

Maybe Active has a great idea, for a new Market/investing reality show.."

I think this is how he spends his weekends so there must be pics somewhere.

Feb 21, 2013 2:31PM
The Nggrs in the woodpile with you ?
is that the "we" ?

Feb 21, 2013 4:34PM
Snore - Yes, I was wrong about Obuma - didn't realize the enormity of the fix that was in and is still on.
but-- you're too stupid and "canadian" to figure out multiple voters , dead voters = Fraud

however, your ASININE comment about Apple someday going down shows the complete lack of intelligence , maturity and understanding of business.

Also , to compare the 2 situations , AGAIN shows what a worthless, immature turd you really are !
Do you even hold a job ?


Feb 21, 2013 4:03PM
testing -- testing -- testing
yup still breathing after a nice , relaxing lunch !
So much for the lefty ability to predict the future or get ANYTHING right for that matter
Yes, the civility of the loony, medicated left. So noble, so caring, so share the wealth, so much "fairness", so little hatred, so "un " racist
Look at you three cretins posts- LOL
Too funny
Die, choke --LOL
Do you three losers EVER get ANYTHING right in your entire , worthless lives ?
testing -- testing -- testing
yup still here !

Feb 21, 2013 11:48AM
Cramer and his perfect timing
Feb 21, 2013 10:59AM
What's going on down here this morning? Basically, a continuation from yesterday's selloff...Manipulators took control immediately, and not wasting any time...This morning's numbers were not good either...Do not forget, everyone's taxes have gone up (the ones that actually pay taxes), this is Obama's economy and it is horrible....Like we keep saying, if the economy and the market were one and the same, the Dow would be at probably 2500 points or so...Oh well....Lets see if anything can be saved this afternoon.
Feb 21, 2013 12:13PM
This article is code for believe NOT all the negative signs you see all around you , or in your life, if you are unemployed or underemployed.
Believe only what Obuma and his media henchman tell you !

Arab Spring !
Bin Laden Dead /GM (unions) Alive !
The economy is actually recovering ! (uhh JOE- Does gas pricing factor in,  schmuck ?)
I will go through the budget with a scalpel !
Transparency !
You will not pay one dime more in ----
a) Health Care
b) QE5 !
The attack was caused by students protesting a video (armed with rockets !)
We really need to pass QE 1 and 2 and 3 or else the world stops turning !

16 Million on food stamps
45 million unemployed (STILL AT ALMOST 8% - 4 YEARS of NEAR OR OVER 8% = PATHETIC)
Home Prices STILL down 40%
STILL NO jobs out there
Growth - None !
Budgets passed in 4 years = ZERO !
Budgets proposed in 4 years = ZERO !
Gas is DOUBLE what it was on day one of Obuma reign !

HOWEVER - for the sake of fair play
Free Condom !!
Amnesty to parasites , I mean illegal's , I mean "Undocumented" people
Gay Marriage !!
Aren't we lucky ?

Feb 21, 2013 1:16PM
Who are these scumbags , anyway ?

Can you clarify for us mere mortals ?

Feb 21, 2013 12:27PM
Wait until the fed stops pumping money into bonds. Inflation hasn't reared it's head yet.
When our notes to China are increased by interest rates rising , there will be hell to pay.
when Mortgages rates go to 6 % it will drop the market like a rock.
Consumer goods ?
These lefty cretins think you can borrow , spend and tax without ANY consequences.

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