Cramer: Retail Investors, Get in the Game Now!
Mad Money isn’t alone in celebrating a birthday this month. While the show turns 5 years old next week, today markets the one-year anniversary of the market’s generational lows – when the Dow closed at 6,547.
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Cramer has always referenced the Dow’s intraday low of 6,470 on March 6. And since then the index has roared back 61 percent, while the S&P 600 is up 67 percent. Oddly, though, despite these tremendous gains, retails investors have largely missed the entire move. They’ve chosen to sit on the sidelines, steering clear of American equities entirely. In 2010 alone, they’ve withdrawn $15.3 billion from US stock funds.
But look what has happened over the past 12 months:
Seventeen of the Dow 30 are up, led by Bank of America , American Express , Alcoa , JPMorgan Chase and Caterpillar . In the S&P, 290 of the 500 are outperforming the average, with Ford , Office Depot and International Paper posting some of the biggest gains. Also, the Russell 2000 index of small-cap stocks is up 90 percent, and 983 of the 2,000 listed companies posting positive returns.
Something else to keep in mind: There hasn’t been one major bank failure in the past year, while there have been 239 mergers and acquisitions announced. And the average takeover premium has been 37%.
Believe it or not, President Obama did his part in helping the rally. Cramer attributed the first half of the rally to the White House toning down its anti-wall Street rhetoric. That and the understanding that no more banks would be nationalized. Treasury Secretary Geithner’s stress tests worked well, along with efforts by banks to raise capital. And Wells Fargo really set things off when it pre-announced better-than-expected numbers on April 3.
Then China’s stimulus kicked in. This money from the other side of the world actually benefited a number of American companies, namely Caterpillar, Joy Global , 3M and other cyclical plays. Also, the housing market finally peaked over the summer, with the end of price declines in some of the worst hit areas, such as Arizona, Nevada, California and Florida.
Next came a wave of secondary offerings among the REITS, allowing them to fix their balance sheets. That took commercial real estate off the list of potential asset bubbles to burst. We also started to see health-care stocks ramp up once it became clear that President Obama’s intended reforms were losing support. And lastly, retail reported a spate of upside surprises this earnings season. Now we’re looking at lots of 52-week highs and market caps that no one would have expected a year ago.
The problem? Again, this happened without the retail investors. They were scared out of the market by the stigma attached to stocks, Cramer said, their overall lack of trust and their inability to believe in any rally without sustainable job creation. While this is understand to some degree – we did, after all, witness the worst financial crisis since the Great Depression – they can’t afford to another point’s worth of gains in the Dow.
“So on this, the anniversary of the rally,” Cramer said, “I am telling you it is still not too late to get in the game.”
Cramer's charitable trust owns Bank of America and JPMorgan Chase.
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