There’s a disconnect between the ivory tower, those economics Ph.D.s who predict we’ll suffer a double-dip recession, Jim Cramer said Tuesday, and the companies at street level. That’s why the Dow can soar 147 points, with the S&P 500 running 1.5%, despite the academics’ doom and gloom.
If these “eggheads,” as Cramer called them, listened to individual companies, rather than focusing on Washington or blaming the banks for everything that’s gone wrong, they wouldn’t be predicting a double dip. Because for the first time in a long time, the fundamentals of individual companies now matter more.
Look at CSX , which reported earnings this morning. This railroad is the perfect barometer of the economy’s health, and it said that things are good: “Economic recovery expected to continue driving growth,” was the quote. Every segment of the business, intermodal, merchandise – everything except coal – was up in double digits. And CSX is hiring again. The developing world may be leading this train, with the US as the caboose, Cramer said, but “we’re moving again, and that’s what counts.”
Novellus yesterday quieted critics who had predicted a drop in pricing for the company’s dynamic random access memory (DRAM) and flash memory. “I’m not sure we’ll see those decreases,” management said, thanks to continued demand. DRAM and flash sell into the two biggest end markets of tech, Cramer said, computers and gadgets, and sales of both are going strong.
Then there’s aluminum company Alcoa , which noted, “It seems that some airlines, or the airlines sector in general, is turning the corner.” Also: Orders are “up significantly.” And don’t overlook this: “Growth is pretty much in all regions driven very strongly by increased global activities.” All of these are bullish statements that fly in the face of the pundits.
And “the companies are telling us the truth,” Cramer said.
People worry about job creation, too, but the focus has been on small businesses and their struggles to grow. Cramer, however, thinks companies like CSX, Novellus and Alcoa could take the lead instead. He said that small business often follows big business in this respect, and more people will have to be put to work based on what these companies are saying, “probably sooner rather than later.”
So given this, who knows what they’re talking about, the companies themselves or the egghead prognosticators?
“I’m going with the companies,” Cramer said.
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