A pile of simply horrendous advice

Caution has clearly been the fool’s way in this market.

By Jim Cramer May 20, 2013 8:56AM

thestreet logoImage: Blindfolded woman (© PhotoAlto/Jupiterimages)You've been an idiot if you've sold almost any stock so far since the start of 2013. You've been a moron if you've been waiting for revenue to pick up before you've bought. You have been a fool if you've feared the Federal Reserve would act imminently.

You've been a total bozo if you've listened to President Obama about the crashing of the economy because of the sequester -- particularly if you've sold the defense names, which have been the best-acting stocks in the book.


In fact, the moves are eerie. It is as if there had been an edict that every stock -- other than gold stocks, a copper or an iron ore stock and maybe a few steels -- that everything has to go higher.


To me this speaks directly to the notion of underinvestment and the supply and demand of equities.


For years and years now, companies have been taking in supply. Other than the equity sells mandated by the Troubled Asset Relief Program and the endless master limited partnerships, very little stock has been issued. One year after Facebook (FB), and the only two initial public offerings of any real size have been Pinnacle Foods (PF), a $3 billion company and Quintiles TransNational (Q), about a $6 billion company.


Plus, it isn't as if we have had a lot of stock-for-stock deals that have seen a flood of new equity from mergers and acquisitions -- hardly. The very few deals we've gotten have tended to be cash-related.


Meanwhile, the share retirement is out of control. While this market has simmered for the past three years, a huge amount of stock has vanished. Procter & Gamble (PG) has gone from 2.9 billion shares to 2.74 billion; CBS (CBS) has shrunk from 694 million to 638 million; Time Warner (TWX) had 1.145 billion and now has 950 million; Intel (INTC) went from 5.5 billion to 4.9 billion; Pfizer (PFE), at 8 billion, is now down to 7.2 billion; Wal-Mart (WMT) went from 3.87 billion to 3.3 billion; and Exxon Mobile (XOM) went from 4.8 billion to 4.48 billion. Even growth stocks like Celgene (CELG) have taken down their share count. Celgene's has fallen from 469 million to 432 million.


These were simply random stocks that I looked up -- just anything that came to my head. It is astonishing. It's almost impossible to find stocks with increased float. Only the banks haven't been able to retire stock due to the Fed. But, believe me, if they did I have to believe these stocks would march much higher.

I think these buybacks are creating the situation we have now. Fund managers who have been skittish for years, and hedge funds who try to run balanced books, are just getting their heads handed to them. In fact, anyone who has sold anything has had their head handed to them, and there is no way you could have beaten these averages without using leverage, which I know mutual funds don't do. While I am sure there are hedge funds that borrow to buy, there simply aren't that many out there that do so.


So you get a situation in which people start putting money into their IRAs and 401ks again after years of what I bet are desultory contributions, and the funds have to reach just to do any buying.


That's the only explanation I see for these wondrous charts. For years it was all zero-sum: When you saw UnitedHealth (UNH) or Allstate (ALL) move up, you could bet that Eaton (ETN) and Cummins (CMI) were being killed. There was no way you could ever have the airlines, travel and leisure and oil all go higher. These moves we're getting now had been inconceivable at any time since the start of the millennium.


I know, doesn't matter. We will hear the same old questions asked time and again: Doesn't the Fed scare you? Aren't you worried about the revenue not coming through? May isn't over, so maybe it isn't too late to sell, because it is such a horrid month.


It's been a huge pile of garbage. All that cautious advice has been horrendous. But there's one thing you know for certain. Those who have dispensed it, or have been worried about it, are never wrong. They just aren't as rich as they should be.




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 FB, PF and ETN.  



More from TheStreet.com

May 20, 2013 9:32AM
So, according to Cramer, if you've recently taken some money off the table after realizing significant gains over the last few years, you're an idiot.  I guess locking in profits is just stupid, eh Jimbo?

Let's look back to March 11, 2008, about 10 minutes before Bear Stearns went belly up.  Here's what Cramer said on CNBC:  "No. No. No.  Bear Stearns is fine.  Bear Stearns is not in trouble.  Don't move your money from there.  That's just being silly.  Don't be silly."

Sound familiar?

May 20, 2013 10:08AM
When Cramer calls you a fool for not being in the market, it means that the market is about to have a major correction.
May 20, 2013 10:25AM
Hindsight is always 20/20, truth is most of these "financial experts" aren't experts at all. Cramer is a smart guy who has a lot of information stuffed in his head. He makes a lot of money from his show, his appearances on the financial shows, his books,and his stock picking new letters, but he is not a stock picking clairvoyant. I've made money on is recommendations and lost money as well. In the end what Cramer is selling is Cramer pure and simple, these guys always tout there successes and only rarely point out their miss steps. Truth is you are your own best advisor...... and that's a scary thought
May 20, 2013 9:46AM
So I guess you are saying if you are out, it is time to buy high and ride it higher. I have been dialing back my exposure recently. But I still have a healthy amount in equities. The ride from late 2008 was great. I just don't feel paticularly greedy at the moment.
May 20, 2013 12:42PM
All this means is that Cramer is getting ready to sell off before you do.
May 20, 2013 11:15AM
The worst investment advice I ever got was to invest in real estate.  Now I'm stuck living in a home I hate, in a state I hate even more (Illinois).  It's one of only three states out of fifty where the real estate market is still abysmal and the politicians are grossly corrupt.!  The only way I could earn a profit on this place is if I could figure out how to raffle the home off (legally).
May 20, 2013 10:48AM
Yes, Jimmie I feel like a real idiot with all these cash profits and zero debt. Hive fun working I'm going boating.
May 20, 2013 9:24AM

Ahhhhh, I love it !!

Cramer is dishing it out to you...

You (the ones) that have been dishing it to him...?


Yes Companies have been hitting their numbers, with cost controls and cutbacks.

Now to keep the fantasy alive, with their hoards of cash, they are taking shares off the table.

May 20, 2013 12:32PM
Remember the phrase "irrational exuberance"?
May 20, 2013 10:15AM

"You've been an idiot if you've sold almost any stock so far since the start of 2013. You've been a moron if you've been waiting for revenue to pick up before you've bought. You have been a fool if you've feared the Federal Reserve would act imminently."


The only fool is the one not assessing the damage from Kool Aid and corruption. We don't use pencils much any more, Jim. You'll need to huck something else on that street corner you'll occupy soon. The architecture for catastrophic failure is in place, all it takes is one component to ask for validation.

May 20, 2013 9:19AM
avg gas prices in 2004 were in the 1.80/gal retail eastern USA.  what happened??
May 20, 2013 12:43PM
I think the biggest idiots are people who watch CNN and other outlets and buy or sell based on commentators advice--along with a horde of other buyers and sellers, of course, which negates any good advice. (And good advice there is unlikely but possible--even flipping 20 heads in a row is possible).
May 20, 2013 2:36PM
These guys are weathermen at best, just guessing when it will rain...
May 20, 2013 10:36AM

DLH......Did you see that...?? A poster said Bobo "had a lot of information, stuffed in his head.." 


You and I both "know" what that "stuff" is.....

You can go ahead and clarify it with  ISKITALL, my pleasure.

May 20, 2013 10:28AM

NTU....Let me pose this question..?


Is that Algebra, Calculus(sp), or Physics...you use.??


I just go with "Buffet's Rules", much easier for me to understand.

And they pertain to investing too.

May 20, 2013 1:32PM
Too bad Jimbo did not have his money in the market this year. 
Calling yourself a fool is funny.
May 20, 2013 10:15AM
Your an idiot if you think a major fall is not coming. The problem is no one knows when. But it WILL be more than a 10% correction.
May 20, 2013 10:13AM
Thanks for supporting my explaination for the last several months Jim.  Yes when you have z number of shares, divided into Y an increasing supply of money, you get z increasing share price.  Seems very simple to me.  Supply and demand is an empirical fact, much like gravity.  So as long as money supply continues expanding and folks continue seeking the increases in share price to counter future inflation, party on.
May 20, 2013 11:01AM
Cramer is a a cheerleader to rigged criminal system as is much of the financial media.  Fundamentally the economy is in terrible shape.  Our policies have trapped us into a low interest cheap money to float the whole dis-functional system.  Our government has been buying its own debt for over a year now.  Interest rates are just above zero and have been scary low for years now.  We are in a depression and have been since 2007.  We cant feel it because the fed and the world central banking authorities have been paying the Visa with the Mastercard for well over 5 years now.  Cramer what would happen if interest rates went up to say 4%?  How about 7%...?  it would be a total collapse and he knows it...
May 20, 2013 10:23AM

IDK/ME......You must live a horrible life..??

Guess you have never heard of Karma/Kharma....Right ???

You probably will someday...?

And "no need" to be Jealous, that's another fault; As much as Greed.

Guess they call it Envy...?

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.
100 character limit
Are you sure you want to delete this comment?


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.


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

Top Picks

TAT&T Inc9



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.