Apple, IBM earnings reflect wealth effect

Reports from the 2 tech titans reveal increased spending at corporate and individual levels -- a rejuvenation the market isn't taking into account yet.

By Jim Cramer Jan 19, 2011 10:00AM

jim cramerWe are both a rich country and a rich world. Isn't that the ultimate takeaway from the IBM (IBM) and Apple (AAPL) earnings reports last night?

 

We fret so much about how consumers are strapped and how companies are just withholding profits and not spending, and then we get two quarters that tell us, frankly, the opposite.

 

First, the products that IBM and Apple sell are not inexpensive. The big rap against Apple is that the price point for so many of its devices is so high. Anyone who has bought a truly wireless, no-Wi-Fi iPad as I did this holiday, or anyone who has bought a MacBook Air, as I did the year before, knows these devices are very expensive compared with a plain-old but pretty good Hewlett-Packard (HPQ) at Costco (COST).

 

IBM's major growth area this quarter was its consulting business, but you don't see the pickup in software that it saw -- and predicted at the big earnings meeting where it outlined stretch goals that seemed pretty wild at the time but now seem doable -- if corporations are holding back spending.

 

Remember, I am not even talking about the $9 billion in capital expenditures that Intel (INTC) committed to, an astounding number and one that most analysts didn't like, because they thought Intel was spending too much. They failed to recognize that if demand were weak, Intel would never do such a thing.

Of course, much of this Apple-Intel growth was global, but the U.S. seems to be at the forefront of the expensive spending.

 

I think people on Wall Street might be too negative about the prospects of people on Main Street and their spending habits, as well as the spending habits of corporations. Don't forget, also, that Apple had its first dent in the corporate market with iPad enterprise sales.

One reason for my optimism for 2011 has to do with the wealth effect, that people are feeling better and spending more -- both at corporate and individual levels -- in part because of newfound certainty coming from Washington and in part because the pressures from the Great Recession are finally easing up.

 

These two reports stand out as positive exhibits of the power of rejuvenation, something the market isn't taking into account just yet at these prices at this time.

 

At the time of publication, Cramer was long Apple and Intel.

 

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.

 

Follow Cramer's trades for his Charitable Trust.

 

Related Articles

1Comment
Jan 19, 2011 3:49PM
avatar

IBM PONZI RICO Trial Advisory -

 

The media played Soft Ball with Enron.
 
Now the media is playing Soft Ball with IBM.
 
Get details and links re the IBM PONZI RICO trial when you visit --
ibmTheWidowMaker dot com
Twitter -- Twitter dot com / MadamePJBailey  (IBM Widow)
 
Get a Pulitzer Prize the easy way - be the first to break open this story !!!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123
123 rated 1
262
262 rated 2
480
480 rated 3
651
651 rated 4
649
649 rated 5
629
629 rated 6
616
616 rated 7
496
496 rated 8
346
346 rated 9
111
111 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION9
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.