Health care could derail stock rally
The health care bill, if it passes, is akin to a reverse stimulus.
By Jim Cramer, TheStreet
Could the charts be stronger? As I go through them, I am amazed that the only weak ones are the self-inflicted traders: Applied Materials (AMAT), Staples (SPLS), MasterCard (MA), H&R Block (HRB) and Western Union (WU), which either told a subpar story or literally took numbers down on the call.
Otherwise, it is all systems go with a lot of parabolic moves, especially in retail. You don't see charts like Ross Stores (ROST), F5 Networks (FFIV), Akamai (AKAM) and Macy's (M), straight up lately, unless we have a true, hard-hitting bull market going that's just zapping the shorts all over the place.
The diametrically opposed groups going up -- oil and airlines, coal and natural gas -- is just awesome bull-market behavior.
The breakout of the real-estate investment trusts and health care stocks, supposed to be in so much trouble either from commercial real-estate failures or Obamacare, is breathtaking.
Plus, the bases are amazing in stocks as varied as hardware and software, or rails or hotels. These seem dazzling to me.
Now, these reverses are incredible even from two weeks ago when most stocks looked like they were breaking down. You have to believe these stocks are all bouncing back because of the employment factor; people think the worst is over so they aren't going to let equities go into strength. Plus, there have been so few shortfalls that there's no reason to bet against profit growth.
We appear to be headed, all systems go, to a challenge of the January highs. What could derail us? I think there's one issue in front of us that would turn all of these stocks in a different direction: passage of the health care bill.
I used to think that any resolution would be a good scenario for the stock market. But you only think that way when stocks are going down, not up. That's not where we've been these last two weeks.
I think that most people have decided that the health care bill, which by all accounts would make it extremely difficult for small businesses to meet the government health care demands, is dead on arrival. I thought that for a long time.
In the last few days, though, it appears that the president has pretty much decided to stake everything on its passage, and when you have that kind of scenario, you have to think that it is at least 50-50. If health care goes through, I think there will be people who have bought stocks betting employment will keep improving who will turn seller. Of course, the onerous payments won't start until next year, so one could argue that the pain won't be felt until then. I think the market's smarter than that and passage brings with it a repulsing from the highs and a swift decline with it.
To these ends, we need to watch for an abortion compromise -- that's what seems to be the most glaring issue holding things up -- as a key tell for whether the bill will pass.
Of course, it is entirely possible that I am overly focused on health care and the market doesn't really care or doesn't get it, which is that there will be a dramatic expansion of the government and taxes -- neither of which has been anything but disastrous for stocks.
Still, the breakout is so near that we have to be thinking of what can put us over -- a defeat once and for all of the tyranny of health care -- or what can repel us back -- the passage of this gigantic tax on the economy, a reverse stimulus. Even if you like the bill, to not look at it as reverse stimulus is simply naïve.
At the time of publication, Cramer had no positions in the stocks mentioned.
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