Headlines Shouldn’t Scare You Away From Profits
“It almost feels like the press is trying to keep you from making money. Every story I read, no matter what it’s about, the spin is negative.” Cramer said on Tuesday.
But Cramer says that if you really want to make money in the market and really know why prices move, these days you can’t simply pay attention to the headlines. As your personal investment advisor, Cramer wants to show you the light and see the opportunities that are obscured by negative coverage.
For instance, coverage of the housing starts number, which showed a 12.8% decline in construction of homes and apartments in April, was treated like bad news the media. Cramer points out that we’ve gotten ourselves into this mess via real estate and overbuilding, so is under-building really such a bad thing? When you are building less homes you have less supply, which will ultimately lead to a bottom in housing and house price stabilization... just as Cramer has been calling for, and thinks this sort of number is what we need.
Cramer also points out the lead story on the front page of Tuesday’s Wall Street Journal, “Local Banks Face Big Losses,” which talked about the $100 billion commercial real estate problem in the banking system. But is this really a catastrophic number? Cramer doesn’t think so, pointing out that this is a relatively small portion of the real estate problem, and that it opens opportunities for the strong regional banks – namely, FirstMerit, First Niagara , Glacier , New Alliance, People’s United and BB&T , because they stand to benefit the most by purchasing failed banks.
Tuesday’s New York Times article, "Efforts to Repay Bailouts May Undercut Benefit for Taxpayers," is also unnecessarily negative, says Cramer. When the press criticized the government for dispensing all that TARP money, they’re quick to flip-flop back and criticize the repayment of these loans. The government may even stand to make money off of the TARP deal, with banks paying interest on the loans they received. We should be happy with the repayment of this money, says Cramer.
Another misdirection was from page 3 of Tuesday’s Wall Street Journal, according to Cramer. The article was entitled "Farms Start to Feel Credit Pinch," and he points out that the hottest stocks on the market have been the fertilizer stocks because the farmers are planting at a growing rate. Cramer wonders, “will this article keep you from owning Agco ? How about Deere? ” With a company like Deere reporting tomorrow, you may be losing out on some profits if you were scared away by this sort of negative spin.
The most frequent topic of these negatively spun stories is the weak dollar, which is treated as though it’s some an awful sign for the future, says Cramer, but the weak dollar is great for American exporters. Companies like Johnson & Johnson , Procter & Gamble, Coca-Cola , Ingersoll-Rand , United Technologies and Caterpillar are basically praying for a week dollar. These competitive manufacturers definitely look to benefit.
Cramer’s bottom line: Don’t buy into the spin and don’t let the negativity in the press keep you away from opportunities to make money— “The papers write what sounds sensational to the general audience, not what helpfully informs investors,” Cramer said.
Cramer’s charitable trust owns Ingersoll-Rand and Caterpillar.
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