Cramer's Reasons for Holiday Cheer
There may be reason for holiday cheer after all, Cramer said during Friday’s Mad Money, even despite a bad unemployment number. In fact, when put into perspective, even those job losses weren’t that bad.
Don’t get Cramer wrong. He knows times are tough for a lot of Americans right now. And he’d never minimize the trauma caused by layoffs. But there are a number of factors at work in the market, which weren’t there just two weeks ago, that have him more positive than you might think he should be.
Gas prices are way down, and there’s a possibility they’ll drop as low as $1.50 a gallon soon. Mortgage rates are dropping, enticing new buyers in the housing market and offering owners the chance to refinance. And heating your home this winter should be significantly cheaper than last year. All of this amounts to a huge increase in consumer discretionary income – for those who still have jobs.
But let’s talk about that. The unemployment rate for November was 6.7%. More than half a million people – 533,000 – lost their jobs. It’s a terrible thing. But historically, when compared with previous recessions, that number low. In 1980, 650,000 got a pink slip in just one month. And in 1974, it was a full million. So forget all this talk about another Great Depression. That possibility is no longer on the table.
Cramer also pointed out that jobless claims are a lagging indicator. They follow the market rather than lead it, meaning they peak after the recession. So given today’s report we should see another three to six months of turbulence before things level out, which, again, isn’t that bad.
Even the insurers are showing strength. Hartford Financial beat its earnings expectations this week, and the stock doubled. And there’s Toll Brothers . CEO Bob Toll made some chilly statements Thursday night on Mad Money, but still TOL shares climbed 7% today.
The bottom line here is that Cramer thinks the Dow should have dropped below 8,000 Friday, and the S&P 500 below 800. But that didn’t happen. The market moved right past disappointing early-morning news about jobs and rallied 259 points by the end of the day. Cramer attributed this to the good news we mentioned before: gas prices, mortgages rates, etc. And if you believe the unemployment numbers are a signal of the recession’s soon-to-come end, then there’s reason to be positive. We’re in no way free and clear yet, of course, but things are definitely improving.
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