Ever hear of Ockham’s razor? It’s the theory that the simplest explanation is usually the best one. Cramer during Tuesday’s Mad Money used Ockham to explain the market’s action both today and since the March lows.
Look, the Dow recently soared to 10,470 from a late-winter low of 6,500. And today the index rebounded from down 91 points to close just 17 points lower? What could explain this largely bullish action? It’s not the product of a short squeeze or uninformed buying by naïve retail investors, which is what the punditocracy has been saying. No, it’s simply because the underlying businesses that drive stocks are doing better.
Ford shares wouldn’t have reached a two-year high if the company weren’t performing well. Nor would Costco have hit a 52-week high if consumers weren’t shopping. Stanley Works also bested its previous 52-week high, because homeowners are spending to upgrade the properties they just bought with low-interest mortgages. These glaring positives, for both American businesses and its citizens, Cramer said, indicate that “things have gotten better, not worse.”
Of course, the good news doesn’t end there. President Obama’s intended health-care reforms have been watered down, sending the stocks of companies like Bristol-Myers Squibb and WellPoint higher. The weak dollar is helping Emerson Electric and its industrial cohort. UPS predicts that shipping will increase. Tech, excluding Dell , looks “pretty good,” Cramer said. Rising corn prices are boosting the agriculture stocks. And so on and so on.
Cramer wouldn’t deny that employment is a still a major concern here in the States, and that Washington’s inability to address the problem could derail the progress we’ve made. And he knows that the banks will be forced to issue new shares to pay back TARP, which is why the financial stocks have lagged. The oils, too, are hurting because there isn’t sufficient demand to continue the recent run in crude. He’s also accepted the inevitability of some kind of new tax on Wall Street.
“I just want to report that, contrary to everything you hear,” Cramer said, “there are lots of good things happening.”
He reminded Mad Money viewers that the stock market is an accurate reflection of what’s going on now and what’s likely to happen in the future. After all, didn’t the Dow bottom six months ahead of the initial turn in housing, autos and retail? So investors should ignore the pundits’ continued attempts at negative spin. In this case, the simplest explanation is the right one.
Cramer’s charitable trust owns Bristol-Myers Squibb, Emerson Electric and UPS.
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