The bears' reign seems to be ending

They are no longer in control of the agenda. They have cost people too much money.

By Jim Cramer Apr 11, 2013 8:56AM

thestreet logoBear markets create problems. Bull markets solve them. Bear markets sow seeds of worry. Bull markets harvest the seeds and turn them into something worth chowing down on. Bear markets frighten people out of stocks. Bull markets let the rest -- those with fortitude, those who are implacable -- enjoy the gains after the weak hands have left the table. The bear has objections. The bull rebuts them and trounces them.

 

Go back four short months ago. What was the prevailing wisdom?


1. The federal government was going to jump off a cliff. Taxes would rise for 100% of the nation, particularly those in the middle class. Taxes on the rich would skyrocket and dividends would be taxed at the new, very high ordinary income rates.

 

2. At the exact same time that taxes on popular dividend stocks would at least double, if not more, the Federal Reserve was going to raise rates, maybe dramatically, because it would be worried about the inflation caused by its bond-buying. That meant dividend stocks' after-tax rate of return would plummet and make them not much better than certificate of deposits.

 

3. Europe, after some months of calm, was back on the red-hot griddle, with Italian and Spanish bonds performing badly again and the usual litany of banks about to have runs.

 

4. The debt ceiling was going to derail the U.S., even if we solved the fiscal cliff, and the sequester lurked ominously no matter what deal was made. These would, of course, throw us off track and bring higher unemployment.

 

5. First-quarter earnings were around the corner, and they would be nothing to write home about, or maybe worse, particularly with the worldwide slowdown that Europe seems to have been mandating.

 

That's a full head of bear steam coming into a year that was about to have its best first quarter in years and years. How was that possible? I think it's because the market has changed its coloration. It simply couldn't be scared any longer. For the people who were still in, they'd been hit over the head with these issues for so long that they had developed virtual helmets. Or if you want to get all Ulysses-like, they were strapped to the masts and they had heard all of these sirens before.

 

Who can blame the bulls? Let's look at what happened with the above five items.


Bull Photographers Choice RF SuperStockFirst, the tax code didn't change much at all. When it comes to income tax, 98% of the people in this nation of about 313 million don't pay any more now than they did last year. That's a phenomenal number of people who weren't impacted vs. the percent -- just about everyone -- who thought they would be. Spending had been shut down in this country because of the possibility that 98% of the people would pay much more.

 

More important, many rich people thought stocks would not be good assets with the tax-code changes. Dividend-paying stocks were sold aggressively. Many companies rushed dividends to their shareholders, putting tons of money into the wealthier peoples' pockets. It was a bonanza. That dividend money, already acclimated to stocks, flowed right back in. The whole worry -- every bit of bearishness about how tax rates would wreck dividend-paying stocks -- totally backfired. Then, as we now know, it triggered the most incredible rebound in dividend payers we have ever seen. In fact, the companies that were paying 5% are now yielding 4%, and the 4s are yielding 3s. That's been the trade of the first quarter -- the defining trade of the year so far -- and it is all on the backs of the bears.


Of course, the bears wouldn't stop. I remember saying at the beginning of the year that, now that taxes are unchanged, confidence can resume. Immediately I was hit with a tsunami of stories about the end of the tax holiday. I pointed out that the rate had only been a temporary dip anyway, and that it won't be a big deal. But the bears dug their paws in and made a real federal case out of it. Yet the last part of the rally of the previous quarter basically proved me right; this didn't matter at all. It was just another defeated bearish scenario that caused stocks to rally precisely because it was defeated.

 

Second, the Fed didn't switch its strategy because its actions are employment-based. Lots of the bears are conflated with the ideologues on this and can't accept what Chairman Ben Bernanke is doing. The bulls know it doesn't matter. Their goal is not to reason why. It's just to make money or die. These silly ideologues are fighting wars that don't matter in this turf. They are cavalry against the bulls' quad 50s and Spandaus. It's downright stupid to ever bring in political feelings about what Bernanke is going to do. Just accept that it will be the case until he retires.

 

Third, who would have thought it? The Europeans might actually be at a point at which there's nothing more to do. The big flash point had been failed government auctions to pay for bills that couldn't be paid. Now governments can issue all the bonds they want. The banks that own them can sell all they want. That's in part because fleeing Japanese have bought everything that moves that isn't yen. That's in part because there's no inflation to speak of, and in part because the economy actually may be hitting some sort of rock bottom that will work in Europe the way it's worked here.

 

The bulls seem to sense that. The stock markets over there are all flat now. They should, of course, be lower. But do you hear much about skyrocketing Italian rates? Cyprus made bond-buying even heavier, because bonds are safer than bank deposits.

As for the sequester, it turned out to be a brilliant nothing -- "brilliant" because it revealed that there is no hope for President Obama to get anything done, maybe ever, if the Republicans take the house. "Nothing" because it turned out to be small vs. the wealth effect, which the bears still refuse to take seriously. They do so at their own peril.

 

Think about what happened. Obama has twice tried to scare everyone that things were going to fall apart if he didn't get his way. It didn't happen. He's just an annoyance now. The press does his ceaseless bidding. He says that higher rates are still on their way, and that there will be a cap on tax deductions. Dream on. As we said on the trading desk, "take a nothing done." Plus, we will probably see a very big decline in the budget deficit because of all the tax-receipt increases. The Fear Monger-in-Chief is now the Boy Who Cried Wolf-in-Chief.

 

As for point No. 5? Looks like first-quarter earnings are going to come in and they, too, will be nothing to write home about. But they may actually be OK because of the wealth effect and because China might have to stimulate and because Europe may have hit bottom.

 

Now, all of those points may seem fanciful to the bears. But something else has happened here. The bears aren't in control of the agenda right now. They have cost people too much money. The 13-year reign of the bears seems to be winding down, going out in a blaze of their last gibberish, risk-on glory. It was never risk-on/risk-off. It was bearish or bullish. Nothing ever changes. Except the labels. Right now the label says, "Warning: Being bearish may be hazardous for your health," because you can't catch up to the averages.

 

Oh, they aren't done. They want missiles to go off in North Korea -- which, of course, would just cause North Korea to fold and create a hugely profitable South Korea. They want a run in Slovenia. They want the president to attack the rich somehow, and be potent in his destructive force. They want shortfalls galore and have indices that show they will happen. They want chaos in the streets and mayhem. All I can say is that they'd better hire some actors real quick and not use those same people you used to line up at banks in Cyprus. They didn't scare anybody.

 

cramer 

 

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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39Comments
Apr 11, 2013 11:28AM
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Historians will look back on this time and the evidence will be crystal clear; the "great recession" didn't hurt us nearly as bad as the actions that followed it.
Apr 11, 2013 11:07AM
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Well great Jim.  Now we get down to shooting the messenger.  Everything that many knew was a pile of fluff will soon blow up and you are building your case by using a sneak preemptive attack on those who were consistent in their disdain for bubble building. We always have many different individuals that go into making a market.  That is what is a market.  Buyers, sellers, bulls, and bears.  They are all part of the mix.  When we are out of balance we have excesses.  Much like a politician never admitting to an error market insiders who benefit immorally always find an enemy or someone else to fault.  We have the elites and the rich who have not only commandeered the economic process but the political process as well. This is an excess and we own it together.  But those who assume responsibility and who do not attempt to  pawn it off on someone else are those that should be in control, but alas they are belittled and made fun of  by the teenagers in the room.  Maturity brings knowledge and knowledge brings understanding and understanding says one should never scoff when crimes against citizens result in pain and suffering by those least able to defend themselves.  Bull or Bear market aside millions of Americans are suffering and have lost their futures and are very worried for themselves and their children and you feel entitled to belittle those that show concern.  Perhaps you are part of the problem.

Apr 11, 2013 12:31PM
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Banks via QE are "all in" the bull run up

 

Bernie can't seem to squeeze savers enough to push them into the market - even though it is painful with zero interest.

 

Boomers are cashing in --- slowly draining the market bubble

 

Inflation that should be nuts is all balled up in the stock market... well not all but a lot.

 

The storm will continue until some outside catastrophic event because no matter how much the boomers collect the Fed has to put more QE in...... Hey, he is a banker.

 

This whole cluster muck does nothing for employment or the good of the economy...  little to nothing.

Apr 11, 2013 10:45AM
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Doom and Gloom is hardly the case. Reality is the case. Even a fed sponsored Bull run can't avoid it forever. Europe is in a recession that will only get worse. China is totally bogus. Japan is falling apart while good old US of A is printing fake money like there's no tomorrow. But hey, call facing facts Doom and Gloom. Seems to have worked so far. It won't last and everyone knows that.
Apr 11, 2013 2:11PM
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Please understand this -- Cramer makes money selling a newsletter - the performance of said newsletter over it's life time is WAY BELOW the market indices and he started at a market low after 9/11.

When markets are bearish people do not purchase "advice" so those that sell advice have to be bullish virtually all the time.

The last time cramer was super bullish was about 5 years ago and we all know what happened then.

Remember this is the man that said EVERY SUBPRIME MORTGAGE IN AMERICA COULD GO BAD AND IT WOULD NOT MATTER !

And let's not mention his bear stearns call ........oops I mentioned it !!
Apr 11, 2013 9:45AM
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doom and gloom is always around.  elements of the concepts have merit.  they always have.  the concepts provide key people to take actions so they are averted. 

 

the sad part is when people in the know can make serious money off the fears of others. 

 

i wouldn't be surprised if people don't also control the media to insure these doom and gloom issues are ever present. 

Apr 11, 2013 11:17AM
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IMO, the bears have been right about most of these things, the timing has just been a little off.  The problem that most bears have (myself included) is that they underestimated Bernanke.  They underestimated the absurd lengths he was willing to go to keep propping us up.  They underestimated his stubbornness.  And they underestimated his hubris.  3 years ago, well after the crash of 2009, well after TARP, stimulus bill, etc..., no one ever thought that we'd be here, in the spring of 2013, on our 4th round of QE, with $85 billion being pumped into the economy, month in, and month out, with no end in sight. If anyone would have made such an absurd prediction 3 yrs ago, they would have immediately been classified as a conspiracy nut, kooky fruitloop.  And yet here we are, trillions of dollars later, and still going full steam ahead.  No one saw this coming.
Apr 11, 2013 10:38AM
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A Dialogue:

 

At the home of Mr. Mrs. Re-tog

 

KNOCK KNOCK...(on re-tog's front door)

Miss Lilly opens the door.

 

Doda52:  Can Re-tog come out and play????

 

Miss Lilly:  "Re-tog...you have company...now go out and play and get some exercise...

 

C'mon  Re-tog....COME OUT AND PLAY!!!!

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Ok Cramer what planet are you on???

 

Things are going great when the Federal Reserve has to pump $85 billion plus a month into the economy just to keep it from collapse???

 

Things are going great when servicing the debt of Europe , Japan and the USA can no longer be done without their central banks pumping trillions of dollars into their economies.

 

Why is it that taking out the top 10 percent of wage earners that the average yearly income of Americans have fallen 25 percent over the last 5 years and 50 million of us are on food stamps.

 

The reality of the situation is that the USA, Europe and Japan are not going to survive economically much longer.

 

China has signed trade agreements with all it's major trading partners except the US to trade in yuan. Australia has just signed up for selling iron ore to China in yuan and not the dollar.

 

The world has walked away from the dollar as a trading currency and soon those effects will force our country into hyperinflation.

 

The picture is not rosey at all Cramer and everyone should be worried to death about what is happening to the world economy.

 

The USA, Europe and Japan are about to implode into a black hole of finance.

 

Your article ignores the reality of the coming shape of the world to be.

 

There will come an hour in which the US dollar turns worthless.

 

 

Apr 11, 2013 11:54AM
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HEY MSN MONEY... isn't this article a cry for serious mental health help for Cramer? You realize he is attempting (futily) to coax more money into a false market because the psychopaths in it now have run out of fool fuel. We already know that Ben Bernanke has committed felonies through monetization and even the Kool Aid addicts in Congress are questioning what QE has actually done. You know... even the clinically insane have sober moments on occasion. MSN MONEY.. you fall short of your readers by not having columnists who are talking UP anything other than dumping your life savings into the Black Holes of Wall Street. Bulls and Bears? Not. It's Corruption vs. Commonsense. It would be nice if you got with the times. The times are tough and there is no Kool Aid on Main Street. That's Reality.
Apr 11, 2013 5:34PM
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Hey Cramer, if you are so good why not put your multi-million dollar portfolio up for public view beginnig in May 2007?
Apr 11, 2013 2:23PM
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As previously noted, the last time Jimmy led everyone aboard the never ending Bull Train, we had the so-called Great Recession. Jimmy was then stating how he was so sorry he didn't warn everyone and how he should have seen it coming. Fact is, he did see it coming. So did the Big Banks. He also sees what is really coming now. keep that in mind when the Fed's Gravy train ends.
Apr 11, 2013 1:45PM
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Okay first off ABS...Doesn't win his bet, I'm not here to engage anyone, not even Bobo...

 

Second I'm not mad at anybody, why should/would I be ?

 

Third...I said I would be lurking, because I do some of my research here on MSN and Watchlist'.

Fourth...Royalflush, said a sabbatical last a year; I should take a hiatus..I DIDN"T KNOW THAT..?

 

Fifth...Yeah I like fifths..Miss Lilly just picked me up a couple in the City..Whiskey that is, not Gin.

   Haven't drank much gin, since seeing Art Arfonse(sp) drag racing his "Green Monster" back in the 60s..Think it was the "first jet engine powered Dragster"..I was into drag racing in the late 50s-70s.

Got drunk and sick on Gin/7up...Plus hotdogs...OMG...oh gawd...

 

Sixth...ABS is never going to figure out where I live..

Seventh...I just seeded and fertilized that.....GET OFF MY LAWN.

Eighth...I'll be around, just not to read a bunch of doom & gloom..

Ninth....Since going over 10K...I just want to get a copy of all the Dribble I wrote..this is 10,002.

Tenth...No MSN...Didn't give me a prize or thank you for participation..

Ciao...no he doesn't win the bet..I was gonna go until 10,003.

***edited***

BTW.....The 1st. QTR 2013.....Saw one of the biggest "influxes of money" into Mutual Funds in the last several years...The Oldies are coming back with THEIR CASH....figures, too late.

Apr 11, 2013 4:36PM
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Re-tog and VolckerFan on the same day?  Good times.
Seems to me the bears have been declaring the end of the bull market for over a year now, keep saying it and eventually you will be right.  When corporate earnings start to flounder then you will see the market head the other way.  Maybe when the FED stops QE but really they will continue operation twist for years in order to service the national debt so really it's all about earnings. 
Apr 11, 2013 3:24PM
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I remember Grandpa Munster's drag racer.  It was a coffin.  Somebody still owns the thing somewhere.

 

I also remember Tommy Ivo's four-engine dragster, it had four Chrysler hemis.  It was too heavy to win any races.

 

Apr 11, 2013 11:09AM
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"Bear markets create problems. Bull markets solve them."

 

No they don't. Bull markets without economy to back them are CORRUPT. Did you cringe? It seems to be your mantra. Ever hear of cycles? Gravity? What goes around comes around. What goes up must come down. Birth Growth Maturity Decline Death or ReBirth.

 

You are afraid, Jim. You should be. Psychopath.

Apr 11, 2013 10:53PM
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Cramer was a bit late getting off the bull train when the bear started. But he was right on when the bull started.  Fleck. was 100% right before the teck bubble burst, though quite early.  He was right on at the begining of the  gold boom.  Fleck. doesn't tout his holdings, but i know he held msft during the current bull.  What else i don't know. Marc Faber was right on the bear and ts bearish now. Doug Casey was right on gold though a bit early, hes still bullish on metals like Fleck. Martin Weiss was 100% right on the banking trouble and bear market.  He's bearish now. These guys have been right on both sides although sometimes early or late. It seams to me  the bulls are often late moving to the bear side thinking it's just anouther correction.  The point, be alert,  be nimble, be smart use protection. don't stay at the party to long.  Good investing!

 

 

 

 

 

 

 

 

 

 

 

Apr 11, 2013 3:17PM
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"All I can say is that they'd better hire some actors real quick and not use those same people you used to line up at banks in Cyprus. They didn't scare anybody."

 

 

That's funny!          Jim gets off a good one every now and then!

 

 

Apr 11, 2013 5:10PM
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Joe Kernan is 100% right.This bears have been wrong for years now.We should be excited.

You never hear bears say "It`s time to buy, the bear market is over".It`s all about earnings,

and earnings are good.If Obama was 100% white people would be acting like they hit the lottery

with the market up over 100% in 4 years.

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According to this article, all Bears are Democrat Presidents.   But aren't they the Donkey Party?  I am getting confused now.   We should get rid of him and then we would always have Bulls.
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