Why you should be bullish on stocks

You have to forget the top-down frets -- this economy is making an enormous turn.

By Jim Cramer Apr 26, 2010 9:06AM
Jim Cramer

By Jim Cramer, TheStreet

 

This economy's just out-and-out strong.


Whether it be the turn in steel as articulated by Dan DiMicco of Nucor (NUE) -- he had to admit it! -- or the wood products rally spurred by the housing turn that the bearish media refuses to admit, or the decline in the credit losses that we have seen for a week, or the turn in auto builds or the aerospace boom or the PC acceleration, we are beginning to fire on all cylinders. Andrew Gould, CEO of Schlumberger (SLB), says the turn is at hand for drilling, even as the fire rages in the Gulf and some wells are poisoning water in a Southeast nat gas shale.

 

That's a lot of industries on the rebound.


Of course, you only get this "economy is ramping" view if you look from the bottom up, because top down, things look hazy. The durable goods numbers are nothing to write home about. Greece and assorted other countries take us down in the a.m. only to have us rally on domestic strength by midmorning.


The endless beat of shadow inventory and the coming decline in home prices from the expiration of the tax credit goes unabated. Post continues after video:

Why is it that the shadow inventory number isn't regarded as part of the inventory taken off the market by the restructurings and mortgage adjustments, many of which are taking, according to the banks we have heard last week? The amelioration that I heard from the 10 or so banks I listened to last week cuts heavily into that shadow inventory, and as prices go up the shadow inventory becomes saleable inventory.


Not only that, but we read these seemingly "obvious" articles about how home foreclosures are going to keep prices down for homes in tough areas, but then we go on the Standard Pacific (SPF) call and they explain that those homes are in specific areas and that away from them, things have turned.

In other words, the homebuilders are not building where the foreclosures are rampant, so there's no price arbitrage. Why is that so hard for the media to get? I think, again, because it is top-down.

 

Find a new broker and start trading

 

Simple things tell the truth. Sears (SHLD), which is universally reviled, is doing well. Of course, we then chalk that up to some government program. I chalk it up to an AMAZING tide that can't help but lift all boats.


You don't get all of these ancillary housing plays like Sherwin-Williams (SHW) or Williams-Sonoma (WSM) or TJX (TJX) and Bed Bath & Beyond (BBBY) and Big Lots (BIG) roaring if things are dormant. What the media misjudges is the velocity of sales, the true indicator that drives retail.

 

I was flabbergasted to read an article in the Journal Friday that said that people are going out to eat now, an article that did not contain a single caveat that made the article seem wrong. That's evidence, again, of such a powerful turn that it can't even be pooh-poohed by the media.

 

I point these things out endlessly. Why? Because they -- not the macro data like mass foreclosures or jobless claims or durable goods -- explain why the market's going up. The assumption is that if you take away the government stimulus, everything goes away. My assumption is that you'd better be careful if you bet against this economy, because housing's going to be a driver in the second half and that can be a powerful employment elixir.

 

I agree with Nucor's DiMicco that not enough is being done to create jobs because the infrastructure component of the stimulus was so minuscule compared to the gifts to civil servants. But I now believe that will come, too.

 

It is a remarkable turnaround that (other than that restaurant article) has not been remarked on. That's OK. That's the worry that allows the jumps we see in the averages. Many people on this site disagree with this whole thesis, especially my friend Doug Kass. I just felt that before the week is over, I needed to state the bull case that often gets buried by some Realtytrak story or a protest in Greece. Hate to miss the good times, because they never do last.

 

At the time of publication, Cramer had no positions in the stocks mentioned.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

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