Market expects a budget deal -- eventually

Given the baffling array of stocks that have good charts, investors believe the US will avoid the fiscal cliff.

By Jim Cramer Dec 10, 2012 10:01AM

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Nicholas Monu iStock Exclusive Getty ImagesWe all know about how the U.S. could be thrown into a recession if Congress and President Obama fail to agree to anything before year-end, because the "fiscal cliff" was meant to be a doomsday machine to unravel our economy.


It's hard to believe, but at the time the politicians set up the cliff, they meant it to be so onerous that even fractioned and partisan leaders could arrive at a compromise. In retrospect, I don't know why the Republicans went with it, given that so many had pledged to implement no new taxes. However, I think very few Republicans knew how bad Republican presidential nominee Mitt Romney would be as a candidate; most likely thought Obama would lose handily, given the economic weakness and poor U.S. payroll numbers.


Yet, right now, despite the meetings, the pressure that's set to come from the cliff just isn't great enough to move the rank and file. When it comes to the prospects of a recession vs. the certainty of breaking the no-new-taxes pledge, it seems so stark to go against the Democrats that the stalemate makes a ton of sense. Also, it isn't as if the Democrats are saying, "Let's raise the age of Social Security or lets raise the cost of Medicare Part B." They aren't doing anything of note on spending, other than trying to increase infrastructure dollars. They are totally in the face of the GOP, for certain.


That is why, when I looked at the charts this weekend, I was so confused. There are so many good-looking charts, and from so many good areas, that you have to believe this market is expecting a deal either now or later -- because these stocks, for the most part, are economically sensitive.


Let's just go over some of these so you know what I am thinking. First, if the U.S. is to head into a recession, you'd have to think we shouldn't be seeing such good performance out of Ingersoll Rand (IR), Ametek (AME), Pentair (PNR), Precision Castparts (PCP),Xylem (XYL) and Rockwell Automation (ROK).


Sure, regarding Ingersall, after some activist pressure from Nelson Peltz, on Sunday night the company announced that there will be some disposals. There's an aerospace cycle in the works, which explains Precision Castparts, but this company would be hit by a sequestration. Same goes for Ametek. Rockwell Automation? Is anyone really building new factories? I guess they must be, because that's a big part of Ametek, too. Pentair and Xylem are signifying infrastructure spend. Could that be a result of Hurricane Sandy? Again, it's very hard to figure.

I know the home trade seems to have been stopped in its tracks by the Toll Brothers (TOL) beat, raise and then collapse. But Vulcan Materials (VMC), which you need to develop new developments, is very strong. Whirlpool (WHR) and Leggett & Platt are integral to fixing up your home and making the place nice. There are also two oddball home plays worth noting: Discovery (DISCA) and Time Warner (TWX).


Now, it isn't as if everyone is thinking the U.S. could stay on the expansion path no matter what. The strength in Kellogg (K), Heinz (HNZ), Clorox (CLX), Procter & Gamble (PG) -- yes, Procter & Gamble! – Sysco (SYY), International Flavors and Fragrances (IFF), Smuckers (SJM), Hormel (HRL), Kroger (KR) and Tyson (TSN) can only be regarded a sign of deflation. Or, at least, it might point to plastic and grain deflation.


One could argue that insurers are doing fabulously, too, because of the possibility of a deflationary recession. Again, though, some of that could be an increase in premiums post-Sandy, which explains the strength in Travelers (TRV). Perhaps some of it is a comeback of some bad invested assets, as in Aflac (AFL).


But there are plenty of other stocks whose strength has to be simply because people believe the worst won't happen. We're seeing incredible strength in Brinks (BCO), the security company; Thermo-Fisher (TMO), the biotech-tools company; and business-services firms Insperity (NSP) and Fiserv (FISV). Then there are travel stalwarts Marriott (MAR) and Royal Caribbean (RCL), both of which need a strong economy.


Now, there are hardly any retail names with good-looking charts. PetSmart (PETM) holds in, and so does Limited (LTD). The same applies to Hanesbrands (HBI), to stretch the topic. There are no banks with good charts, no utilities, and only one positive-looking tech chart -- Adobe (ADBE), which is a mystery. As for healthcare, unless you consider Tenet Healthcare (THC) to be a play on that sector, you don't have many here, either -- and I consider Tenet to be more of an Obamacare story. There are no oils or minerals, precious or otherwise, anywhere near looking good.


But I come away from the chart exercise emboldened that the strength is widespread -- it's just not clustered in areas where people know to find them.


All in all, I found the charts to be incredibly positive vs. the backdrop. It's just another instance of exactly how hard this market has become as it remains dominated by Washington -- and not Wall Street.


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 PG.




More from

Dec 10, 2012 7:16PM
Well I guess....We can call today a GREEN day in the Markets, but that's about all...
Dec 10, 2012 7:14PM

ABS.....I left you a nugget of WISDOM, but didn't post or publish, Maybe prob here..??

NOT going to do it again....Not worth the troub...Did mention a couple things though...

First, I ain't NO darkie.....Cretin.

Second, You can't BUY ME, 3-4 times over.....Cretin, Lol..

Thirdly, I'm not on the dole....Cretin....What I get, I worked for, contributed/paid for, or deserve.

Fourth...Yes I encouraged that guy to declare bankruptcy, he's never gotten a break....Cretin.

He's 67...Should be retired....In a very rough Industry.....He's worked for 45+ plus years...

He's paid his FAIR share and TAXES all his life...No one is going to hire him now...

I don't want him to lose his house and maybe a car...He and his wife may be close to destitute and in depression....It's time for him to relax a little...And supposedly he has never taken any handouts..

UNLIKE YOU CRETIN...We probably need more like him that helped build AMERICA.

NOW, Let's just drop this now....And all shall be forgiven. 

Dec 10, 2012 6:11PM


Losers like you are the Democrats secret weapon, with friends like you Republicans need no enemies.

Have a nice day................ eh.

Dec 10, 2012 5:59PM
So tomorrow is the official protest over Michigan's deadbeat Congress slapping together a Right to Work piece of shipt legislation that the Governor is already whacking off to sign so he can appease his puppet-master-- DICK DeVos, the inheritor of AMWAY. Yea that's right, the multi-level marketing business that pumps beauty products made in China. Michigan still mainly makes cars and has a massive number of union employees. Without unionization, the likelihood of lesser quality due to suppression of wages and appropriate worker conditions would guarantee a loss of world market share. Figure it out... China doesn't pay well, care much for worker safety or conditions but they do make a really cheap cruddy facsimile of stuff we used to make well-- here in America. There will always be another country willing to suppress a workforce and press it into slave production. The Fate of quality hangs in the lurch. Help us... help Michigan by adding your voice. Our LOUSY Governor is already pushing a bridge project we don't need through and his allowance of fireworks this years caused MASSIVE damage, not to mention those damaged by wearing no helmet on their motorcycle (I know one personally). We aren't interested in New World World. Either you ignore what's happening until it happens to you and there is no one left to stop it... or YOU WAKE UP AND STOP IT before it can spread more. A nation of Order has no Freedom.
Dec 10, 2012 4:04PM
The longer we sit and wait for this market to decide which way to go the more risk increases in my opinion. The risk of losing out on some minor rally is now below  the water line in my opinion. I don't invest to break even and I am sure many are deciding to take the low road and stay in cash for now.  I just have this negative feeling some new big surprise is in the offing.  Between The Street, the politicians, and relying on the rest of the world I am getting a very averse feeling.  Soo much funny money, funny info from overseas, and funny info out of DC.   gimme some truth!  This is no longer funny.  Trying to predict the weather seems much more doable now than which way this mess is going to settle out. JMHO 
Dec 10, 2012 2:08PM
If you don't agree with Cramer don't worry. He'll change his tune tommorrow.
Dec 10, 2012 2:07PM
A budget has been absent for years.  This is simply a tax increase on hard working families and the shackle of 50-60K in growing debt on our children and grand children.  The uncaring and selfish Obama administration refuses reason and will leave office in four years with a weaker and dying America. 
Dec 10, 2012 2:01PM

Good old MG spouting his poison.  True Confessions - Guess he would have considered my deceased mother a deadbeat (part of the 47%) the last four years she lived.  You see, dear old Mom had an income of $34,000 , but she came down with a little disease called Alzheimer's, so we had to place her in a dementia unit at $145 per day ($53,000 per year) and she also had COPD which required 24/7 oxygen.  So her total medical bills after insurance came to $63,000 per year.  So we itemized and she didn't have any taxable income.


But, I'm quite sure MG would have wanted her to pay taxes, which she did until she got "sick"..


So, net/net - MG is just one heartless SOB in my book.  And will remain so, MG---it's time to pay your fair share....the maximum rate was 90% in the 60's. 


any budget deal will have to sentence your grandmother to certain death as they take away her social security and medicare and food stamps until she is living on the streets staving to death with a terminal disease the hospitals no longer have to treat her for.


yep the Republicans want tax cuts for the super rich and will kill your grandmother in order to get them.


Nice bunch of guys aren't they.



"There is a growing group of folks looking at this and realizing that we don't have a lot of cards as it relates to the tax issue before year end," Sen. Bob Corker, R-Tenn., told "Fox News Sunday."

If Republicans agree to Obama's plan to increase rates on the top 2 percent of Americans, Corker added, "the focus then shifts to entitlements, and maybe it puts us in a place where we actually can do something that really saves the nation."



considering that S.S. and medicare are not enough to take care of people today we are going to see huge numbers of old people in the streets begging for food soon


just like the countries our corporate leaders are sending all our jobs to like India, China, Vietnam


guess they learned from those countries you can kick the old to the curb and just let them die after you broke them while working them to death.


Human economic slaves who are killed after they become useless to the super rich

Dec 10, 2012 12:36PM

MIRAGE BRAIN:That 47% is wrong just like Romney when he said it.Even minimum wage people

pay taxes.Granted, not much, but who can live on that.You shouldn`t pay taxes on that.

Besides you pay taxes on food and gas or cigaretts, if you are stupid enough to smoke.

Dec 10, 2012 12:35PM

>>>The man is a complete imbecile.  We should have no tax rate increases that do not include the deadbeat 47% that pay ZIP.   It takes a lot of moxie and nerve to ask the 5% that pay 65% of the taxes already so the 47% can continue to pay ZERO<<<


The 47% don't pay "zero".  They may not pay much in federal taxes, but they do pay local taxes, which continue to go up as the federal government cuts it's budget.  Don't get me wrong, I'm all in favor of trimming the federal budget so that free-loader, rural states can go back to being forgotten backwaters.  Without federal investment, those states will shrivel up in their own ignorance.

Dec 10, 2012 12:01PM
I notice you also just recommended half the freakin stop market in this article .....I guess it will help when you can refer back to one of your "winners" at some future date .........

blind pig and truffles so to speak! 
Dec 10, 2012 11:59AM
Hey cramer -- I hope your bosses at CNBC are not paying that nasty old  madoff scum wife for the interview with her tonight !!!!
Dec 10, 2012 11:44AM
" Market expects a budget deal ". THIS IS THE PROBLEM - expectations,hopes,revised,revisions,adjusted - none of these words mean anything positive or solid,yet this is whats been holding up this market for 6 months or more.JOB NUMBERS ?? Wait until the JAN-FEB numbers hit and the 11,000 cictibank ,Twinkies people and season part timers  hit the lines for free money.I thought the market was about business,buying ,selling and world economy.I guess all of that was so bad they just started going with the WORD market instead.
Don't even get me started on the price of oil,already $20+ over valued and headed back to 90 again.If they want to help the middle class,get oil back under control !!!!

Dec 10, 2012 11:35AM
Another manipulated garbage day on Wall Street. The markets move up a little will wallow through mid-day and finish up on nothing of value to America again. we don't need or want what business and finance are dishing out. we need JOB RECOVERY so the issue of taxes doesn't continue to degenerate America into disarray.
Dec 10, 2012 11:34AM

I`ve telling everybody for  weeks it will get settled before Christmas break.The Repubs would

love to see it not fixed so they can point their plastic finger at Obama.We know about their sour

grapes.It`s time the Repubs get off the mat, lick their wounds and work with the Pres.

Dec 10, 2012 10:47AM


How is this for fair, lets say the amount of wealth you own determines the taxes, since the top 10% have 70% of the wealth in the country they should pay 70% of the taxes.  The bottom half have little wealth and should pay little tax as a result.

Hey after Dec 31 the alternative min tax comes back so shouldn't you be loving the cliff?  Man you should have your barrel ready to go over Niagra Falls style.

Dec 10, 2012 10:46AM

charts are looking at history. 


recent history has been on the climb. 


the cliff will show up in later charts

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