Foundation of the rally is built to last
Moves that begin with when employment turned up show meaningful staying power.
The actual number added, 157,000, plus the revisions, puts us in a solid position to go to all-time highs and beyond and I think we will do just that. And, we will do it much faster than most people, including many of the featured writers on Real Money, expect.
That's OK. Real Money has never been known for its uniformity and I have always felt that its hallmark of duking it out and squaring off makes you a better investor.
As part of some longer-term work I am doing in conjunction with a review of Action Alerts PLUS for the last five years, I have been honing in on what data, what numbers, what pieces of evidence have staying power vs. what inputs are relatively meaningless, even as they seem to have terrific import.
I started with the presumption that there were dozens of indicators, numbers and quarters that could have meaning to the market. I tracked each one through the last five years to see if the moves subsequent to them had any real oomph behind them.
It was a shocking exercise. The only one, and I mean the ONLY one, that mattered was employment. Moves that began when employment turned up or seemed to turn up -- employment as expressed by the payroll numbers -- showed meaningful staying power.
Nothing else, not PMI, not retail sales, not durable goods, not consumer or wholesale price data, not Fed minutes and not any particular quarter or quarters, even from stocks we all track as bellwethers.
The consistency of it was astounding. The beginning of the unraveling of this market after we hit the highs came after the hideous payroll data, sharply worse than expected.
When subsequent numbers and revisions confirmed the weakness, we got hit again. And again. And again.
We did not get stabilization in the market until we saw a deceleration in the rate of joblessness. The bottom, literally, was put in when we got several consecutive payroll numbers that simply weren't as bad as the last ones.
The upswing began in earnest, again, in lockstep with better employment numbers. It was almost uncanny how simple it all was. You could tune out every other piece of data.
That's why I believe these Friday numbers will create a foundation that is built to last.
The conditions are about as bountiful as they were parched when we visited these levels on the other side last time. The multiples are appreciably lower and the earnings power tested in much leaner times. Try as the bears might say, the bond market's competition is nil. Some negativists are trying to say that the stock market will somehow be dinged by a takeout of the 2% level on the 10-year. I think that's fanciful. One hundred basis points higher won't damage a tape that is founded on employment growth.
- Also see: Amazon vs. Netflix
I know there will also be people who are so Fed-centric that they will regard the employment number as somehow a negative because we might "lose the Fed."
Nonsense again. Sustainable rallies, at a certain point, don't need the Federal Reserve. We just need earnings and dividend boosts and a clear path for global growth. We are on the verge of that.
The one thing that is indeed different this time is the lack of stock available for large accounts to buy.
Many have tried to make heads or tails of retail investors coming back. To me, the nascent return, the one we have seen since 2013 began, means nothing. Because of the buybacks I don't think it will take that much additional firepower to take us higher. Companies will compete in a meaningful way with these buyers as the cash they have on hand doesn't really have another home.
I am sure to many this whole thesis is antithetical. The endless tarring and feathering of the bulls for not understanding either the tape or the macro doesn't disturb me. That's because the rejectionists will ultimately provide the fuel we need to go another 1,000 points in the Dow, if not more.
Let me leave you with one last thought.
Sure, we are supposed to bet against retail. That's ingrained. But you don't bet against them in one month. Maybe not even one quarter, or even a year. Yes, it has been that long since retail's been in stocks.
But the most negative cohort has been the analyst community. Stephanie Link, co-portfolio manager of Action Alerts PLUS, and I marvel almost every day at the downgrades. They downgrade on valuation. They downgrade on macro concerns. They downgrade on a revenues being light, even if the bottom line is terrific.
They downgrade on anything.
They are the ones who are going to be dragged back kicking and screaming. You want to know when to sell? When those who downgraded here begin upgrading.
Talk to me then.
Maybe then I will be the one who downgrades. But certainly not here. Not now. Not with this fundamental base at last in place. Built to last, people. Built to last.
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.
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so then, your discovery is "when employment is good, everything else is good".
gee.....who'd have thought?
let's take a hard look at that 157,000 new jobs added.
First 90 percent of them are minimum wage which means they contribute no new taxes to the IRS and they are low enough paying jobs that not only do those people qualify for food stamps they also will qualify for paid health insurance next year. So they are getting about $10,000 a year in minimum wages and going to qualify for $3,000 in food stamps and $8,000 in health care so they are going to cost the Federal Government $11,000.
Yep those jobs are really going to get us out of the hole --- nope they are going to dig the hole deeper.
Next the 157,000 new jobs are just keeping up with the new population that needs jobs it will not address the 35 million Americans not working now. For that to be meaning full 15 million jobs need to be created a year which is 1,250,000 jobs on top of the needed 157,000 or about 1,407,000 call it 1.5 million jobs need to be created a month.
We are only at 1/10 the level of new jobs that we need.
Pretty much the stock market is being held up by the Federal Reserve and that will not last out the year.
By years end the stock market will see the DOW at 2,000 if not zero
This is the year the plug gets pulled on the US economy.
Obama will get his wish which is the total destruction of America.
I truly enjoy reading an article on how the market will reach new highs when as the article is posted on-line the market is down 112 points. I know one day is not a trend but still;
Great stuff Jim.
In case no one else said it...If cramer beleives all is great, then a BIG down trend is surely in the works
These employment numbers are pathetic. They use numbers of jobs added without thinking or saying how many should be added. If you equate in the retiring boomers only the numbers quickly become anemic.
10,000 per day retiring.... Lets say only half of that do 5,000 per day X 30 = 150,000 open jobs per month.
jim, just when i think you have matured and gained some sanity, you write this stock-pumping claptrap. no mention of the $17 trillion debt growing $1 million per minute (see usdebtclock.org) or the papered-over decay and rot in the EU, the fake numbers from China, the coming inflation, or the now mega-national debt political battles and sequestration soon to be upon us as a nation before we join greece as another broken socialist state..
you go right back to being a myopic technician who reacts only to macro moves up or macro moves down. oh well, once a broker .....
A foundation is in place? Remember the 3 little pigs who built their houses out of straw, sticks and bricks? Our economic house was built with paper, and lots of it. And when the big bad wolf shows up, all the dumb Keynesians will be lining up outside with their pants down, thinking he's there to huff and puff and blow them. Stupid Keynesians.
So the employment is good, is on the right track, but the unemployment went up 0.1%.
Another article, cannot remember by whom, said that this is because of the new workforce (recent graduates …) entering the field; this seems like a reasonable explanation.
But when the new jobs added are increasing but slower than the number of unemployed people then you can end up with a “strong” economy but the unemployment goes higher and higher; not a good sight but possible.
The employment is good for the analysts that have a “sound” logic, or an interest in their own investment, hoping that some will follow their advice.
"Why don't they put some trade tarrifs in place and bring home some good jobs here for regular people... how are they ever going to build the tax base?"
It's actually worse than that. I cannot write enough about the stupidity of Emergency Financial Managers inflicting paper-based cancer on cities nationwide. Where are the Emergency Small Business Animators? Where are the Emergency Career Recoverers? Where are the Job Creators? We see "numbers" but we know factually that most data is spun. As a Lender for years, I was subject to be diverted to the bookkeeper or accountant for "data" on why the business was failing, but more often than not, stepping out of the office suites to the operations told me all I needed to know about why the business was failing AND how to revive it. Sure, my rants about this and that piss off dim-witted money grubbers, but rarely am I wrong about the course of degradation. WE... that is every American... needs to see bureaucratic relief and a war on paper and button pushing. Anyone not thinking the social network and connectivity isn't driving us to a ruin we cannot recover from- is probably overly absorbed and entranced by it.
Somewhat true...Thousands of boomers and/or others retiring from the workforce..
The others being...: Being people far past "boomer age" or some other reason that younger people may be leaving the work force such as pregancy, family reasons or movements even to other Countries ??
For education, jobs, relocation or travel...
For decades these retirements have played into "workforce adjustments"; Not really anything new.
But there are probably a few more then normal, because of the boomer and after War's ramp ups or Techno Explosion in the 60s-80s...A lot of people were employed at a higher rate, then anytime in our History....And we still had a lot of Manufacturing base..
All that has changed in the U.S.A. that we know today..?
wELL cgt1....i NEED A LITTLE LOWER TAKE BACK (found it) today, been working some limit orders on this correction...DCAveraging on an Auto company...
And gonna do some speculating on a Bio-tech...I'm trying to be as careful as I can..In this Obama Market...taking your advice...cgt.
Who didn't EXPECT a correction or dip..Everyone has been discussing and yelling it over and over.
I don't know about a Foundation or a sure thing,?? But I will give Cramer credit for mentioning it..
Someone has to, and if he is wrong; You can all yell at him later..I'm sure some will.
I'm sure we will get some bigger dips down the road, but a crash as some want to call for,I just don't see it coming anytime soon...But keep talking AND maybe you will be correct someday ??
Just like Cramer...
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