Time running out for Wall Street's cowards

Most CEOs were too hesitant and pessimistic to ink any buyouts when they could get them on the cheap. Now the door is closing.

By Jim Cramer May 15, 2013 9:08AM

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Handshake © CorbisThere should have been mergers and acquisitions. That's right, during this whole run-up, there should have been many more deals, more acquisitions to spur growth or to take market share. We can sit here and wonder why the heck there's been such a dearth of M&A since February. Or we can reach a very logical, inescapable conclusion: Most CEOs were too stupid and pessimistic to take the opportunity to do any buying.


Well, here's some real bad news. The time for transformative deals, unless we get a broad-market pullback, has probably passed. Harsh judgment?


I don't think so.


We spend a heck of a lot of time, much more than we should, talking about why stocks shouldn't be higher. Think about all of the admonitions we've heard: There's no real revenue growth, so don't pay up. Federal Reserve chief Ben Bernanke is about to change his mind; don't pay up. Tax rates are going higher; don't pay up. Sequester's coming; don't pay up. Fiscal cliff's here; don't pay up. Europe's burning; don't pay up. China's faltering; don't pay up. Valuations are stretched; don't pay up. Commodity prices are falling; don't pay up.


I mean, the fact that I have sat here and listened to these different objections at every single milestone is a pathetic reminder of how wrong people can be. It's an incredible thing, isn't it, that a good manager like David Tepper can come on CNBC's "Squawk Box" and just be unequivocally bullish and make news for doing so?


But most chief executives don't see it that way and didn't see it that way. Instead of looking for bargains when prices were lower, they sat on their hands and bought back their own stock instead of the stocks of others when they had the chance.

Most -- but not all. Think of the ones who did. Think of the people who did step up to the plate in this period. First there's the totally and correctly beloved Warren Buffett, who bought Heinz (HNZ) three months ago at the same price he would have to pay for it today, except he got the whole company. That's right, in retrospect, he stole Heinz, given how high Campbell Soup (CPB), General Mills (GIS), Hershey (HSY) and the likes have traded.


Or how about John Malone? At Europe's bottom he spent only $23 billion to buy Virgin Media (VMED). This one's pretty amusing. Everyone is always talking about going global, but when going global finally gets cheap, Malone is the only one who steps up. He's not afraid to make a mistake. He seizes the moment. I wonder what he would have had to pay if he had started the bidding now.


Or how about Sandy Cutler at Eaton (ETN)? Cutler knew that the economy could be in a period of lower growth, so what does he do? He goes and buys a principal competitor during a period when the antitrust department is pro-trust, or at least pro-trust in CEOs' ability to create entities that can be much more tough with their customers. Eaton and Cooper will make 2.5 times more money than Eaton and Cooper would collectively make otherwise.


Or how about Jeffrey Sprecher, the CEO of IntercontinentalExchange (ICE)? You ask anyone in the U.S. about the New York Stock Exchange and he will say it is the pinnacle of capitalism. You ask him about Intercontinental and he will tell you it is a hotel. But Sprecher had a vision, and now he will be running the largest exchange in the world.


Then there's Rich Kinder at Kinder Morgan (KMP). Rich bought not one but two companies: El Paso for pipe and Copano for oil and gas. He paid about $24 billion to get both. They were immediately additive.


Buffett, Malone, Cutler, Sprecher, Kinder. They weren't afraid. They were bold. The door is now closing, and all I can say is that, once again, the smartest guys acted. The others? They just sat on their hands when things were cheap, worried about everything instead of being bold and actually changing the fortunes of their companies to the positive.


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 and is long ETN and KMP.

 

 

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108Comments
May 15, 2013 9:24AM
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a lot of CEO's are out ot touch with their fundemental business plan.  they never started the company, and at best want to maintain status quo.  or their intent is to simply tear down an existing company cashing out for a nice personal bonus
May 15, 2013 10:52AM
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Ya that 2 trillion on the sidelines, they enjoy having it there and would rather hoard it then spend it.  When your company is run by accountants and lawyers and not someone with vision then you get stagnation and eventually a slow grind downward.  Either companies expand and change with the times or eventually they get obsoleted and die.
May 15, 2013 9:22AM
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Some big money gets bigger..(while)..Little money watches from the sidelines, until it too late..
May 15, 2013 10:31AM
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SteveG1956 is correct. I made it to the Boardroom in my career and I respected that person at the head because they had built that venture from scratch. I had the displeasure of being in corporate and institutional Boardrooms with hired-in morons o'plenty and could have vomited at the culture. What we need is a giant flushing of pretentious idiots. The modus of the person-type hurting us the most is- one who is visible only when there is recognition to be had. Charities, named positions, events, etc. It's as if philantropic achievement now exceeds genuine ability. That has to end. Who EXACTLY said that the Founder could leave the business and pariah could just slip-in and take it over? At the point where the Founder severs all ties (retires or dies), that puppy needs to be put up for liquidation or purchased. The buyer doesn't get corporate anonymity, they get to PERFORM to pay off the debt. We never needed a bigger group of platforms to suppress us into Oblivion, we needed functional businesses to carry forward the great legacy of the American Dream, Ingenuity, Life Liberty and the Pursuit of Happiness. We have none.
May 15, 2013 9:45AM
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We all know what happened yesterday and no one believes any longer you or anyone else knows what will happen tomorrow.  So sit, gripe, and keep your eye in the rear view mirror and prate all you like.  No one has ever figured this market out.  And your suggesting folks are stupid for being careful?  Most successful business folks are conservative and venture forth always with a bit of fear.  These are normal seasoned managers. Jumping into the water without first checking the depth is for young people with much to learn. I sense a little "snake oil" salesman in today's post.  Like your spurring folks along to hurry up and do something because Jim is impatient for activity.  The variable reappearing that I see positive is that as the present sentiment is now turning to boring which means business folks can relax and think out decisions without the added fear of the FED, Obamacare, Asia, Europe, and any other part of the world blowing up and making their decisions look foolish.  The present crowd in DC now appears to be engaged in destroying each other while the business folks can now get down to doing what they know how to do without the fear from the Politicos.  Business involves timing and patience.  I believe these good folks are like brewers and need to wait for the yeast, malt, and hops to do their thing.  Never rush a good brew Jim.
May 15, 2013 10:30AM
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If you could sit back and imagine Bernanke being successful pulling off the QE exercise the desired results would be what again?  I suspect as he slowly turns away from QE and he does it with the right timing and appropriate amounts we may well actually see the markets continue higher and the negatives becoming marginalized.  JMHO.
May 15, 2013 10:25AM
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Doda...Along with your two points, I think ACCOUNTABILTY is a major problem...

 

And then a "Deservent Attitude, of Selfishness abounds" with many..Me,me,me.

Everyone gets a trophy or ribbon..Kids and people do not acknowledge wins and losses.

No one readily excepts blame anymore (damn few). For anything..

Either they point fingers in 10 different directions or drag everyone available into the melee.

 

People in Power, Officials, Politicos, Elite/Rich that buy the others off,want to keep anyone underneath them, on or near the bottom..

And the People on the bottom or halfway up are too goddamn stupid to realize it, or do anything to change the way it is playing out..imo.

We do not function as true Americans anymore, within our own founded belief systems.

The few left are fighting a losing battle...The others only have themselves to blame.

May 15, 2013 11:39AM
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Weak CEOs that care more about short term gains than keeping the company steadily growing are the reason why their companies are going down. It takes real leaders to stand up for the company itself and put the company's well being above stock holders gripes that actually achieve greatness and ultimately fat and happy investors. CEOs like Mark "the Butcher" Hurd cutting HP's R&D departments and hacking employee pay caused stagnation and the exodus of top talent.
May 15, 2013 10:17AM
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The union haters may be surprised when the workers in China, India, Bangladesh, and many other parts of the world finish organizing into Unions as many are now.  As these folks organize and demand a better life for themselves and their families they will raise the cost of their efforts and in turn improve the manufacturing profitability here at home.  The stupid American needs to now rely on the foreign workers to improve their lot?  So at some point the tail wagging the dog will finally become a part of reality.  JMHO
May 15, 2013 10:09AM
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The vast majority of CEOs are founders of their company and have every incentive to do right by them.  Obviously this isn't the case with most huge publicly traded corps.  Nice to see company founders like Ralph Lauren still at the helm of some big, publicly traded companies - he deserves every dime he gets because it's his baby and always has been, IMHO.

There have been lots of studies done on CEO compensation and it can get pretty tricky.  If you pay someone a flat salary with no incentive, they don't have any skin in the game.  But if you make the compensation package too incentive-based, some CEOs will do some crazy things to boost profit margins for a few years and then cash out, before the effects of the shady tactics are inevitably felt.  Kinda like Pete Rose betting on baseball.  On the surface, as long as he's betting on his own team, some might not see the harm.  But inevitably, he'll start using up his bullpen in dumb spots, or being over aggressive with the baserunning calls, and it will hurt the team in the long run, just so he can win a bet.

As far as this article goes, is it possible that CEOs weren't stupid and didn't miss the boat with regards to M&A activity?  Is it possible that they made absolutely the right call in this era of perpetual uncertainty?  It's not a matter of possibly over-extending, it's a matter of there very well being no incentive to expand at all.  Why risk the capital and possibly incur more debt if the reward doesn't justify the risk?  Evaluating possible M&A isn't just about finding a bargain, it's about managing risk versus reward.  If the reward is smaller than the risk, it's not worth it, no matter how small or insignificant that risk might be.

May 15, 2013 1:17PM
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Talking about deal making of a different type, it's funny how the Majority Speaker wants folks to go to Jail for the current IRS issue but not a whisper from him about Folks going to Jail for a far bigger scandal, the Massive Global Banking Scandals.
May 15, 2013 2:06PM
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GOODO and SLG are handing in there and they are REITs, but commercial real estate only.  No residential mortgages.  Maybe the residential mortgages would perform better if we bundled them together.  Just a thought.

 

 

May 15, 2013 10:17AM
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All these CEOs should listen to Bobo Cramer as he was such a successful CEO himself .....he took his company the street dot com from $80 or so all the way down to $1 something ......with that kind of performance he should be in the running for any CEO job ......he does however take money out his own company every month in options so that makes hime even more worthy ! 

:)
May 15, 2013 1:48PM
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We stick to what we said earlier, would be nice to end the day flat to a bit up....Hopefully nobody got suckered in this mornings bogus rally; yup, we were up about 80 some points, how about now.....For the umpteenth time, there are plenty of folks trying to bring these markets down every single day, that's what they live for....A little over 2 hours to go, hopefully we will hang in there...More after the close.

May 15, 2013 3:48PM
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If only all those coward CEO's had the hindsight and smarts of Jim Cramer...
May 15, 2013 3:47PM
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Scumbags, the perfect description ... as explained by a the CG21 posting below. 
May 15, 2013 1:43PM
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Gotta go count money and then it's nap time...zzzzz

                                                                             zzzz

                                                                                Z

May 15, 2013 4:36PM
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I think my work here is mostly done. Most writers are expressing and providing facts regarding the very dangerous position we are in. The markets rise daily but there is NO economy. Days like yesterday and today make millionaires we will never need and wipe out more and more who when gainfully employed actually make economy and revenues and support communities and amenities... you know, all the things in life that amount to something. Grubbers hoarding excessive cash NEVER amount to or are ever worth it. Democrat? Republican? Tea? Libertarian? Who gives a crap? Earthling? Yep, that's the one that matters and it should matter a whole lot right now. The world needs grubbers gone and that's a battle cry you will hear next. The French tore down the Bastille (and it's guards) with their bare hands. History is full of stories about what happens after the tipping point. Srange... but it's almost like there are souls who grub and never get it and end up returning time and again. Talk about loser karma. Sell, fools.
May 15, 2013 3:57PM
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Article should be titled, Cramer: Wall Streets blow hard.
May 15, 2013 4:41PM
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And I hit  #100.....Stick a fork in me....yahooooooo!!
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