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Seeing Through the Bear’s Disinformation

Thursday, 3 Feb 2011 | 7:45 PM ET

The bears’ chorus of negativity, what Cramer called a “Bureau of Disinformation,” is constant to the point of predictability. But that doesn’t mean it’s failing at its job of scaring “Mad Money” viewers out of stocks. On Thursday, he tried to expose that false doom and gloom for what it really was.

When Bears Attack
Retail sales were better than expected. What does that mean for your money? Cramer's on the case.

Consider retail. The talk prior to Thursday’s same-store sales numbers was that a combination of lousy winter weather and high prices at the gas pump would hurt the whole group. But that’s not what happened. TJX Cos. , Limited Brands , Ross Stores , even companies Cramer didn’t like that much—Nordstrom and Gap —performed much better than expected.

Then look to Europe. The concerns over bond auctions in places like Spain, Greece and Portugal turned out to be unfounded. Spain held its own last night, and the country managed to get its borrowing rate down significantly from even last month. Reporters called the demand tepid, but Cramer disagreed. That’s like saying a restaurant is full of customers, he said, but no one’s eating.

But it’s inflation worries that are really weighing on many stocks here in the States. The bears judge companies by the same litmus test: Can they pass on those rising costs or not? And even if they can, the bears say, those companies can’t be bought because it’s only a matter of time before the inflation catches up with the economy. Either way, investors lose out.

Now, Cramer’s just as aware of commodity inflation as the next guy—which is why he steers viewers away from stocks with too much exposure to it while recommending natural-resources names—but this latest of bear theses ignores one important fact: that most companies, save Whirlpool , aren’t being hurt by these rising prices. At the same time, companies that actually should fear commodity inflation, Hershey and Kellogg , are rallying because they’re able to push through price increases and cost cuts.

The biggest point to make here, Cramer said, is that commodity inflation is a very small percentage of the cost of goods and services sold in the U.S. He’d be more worried about labor inflation, but that’s just not a problem right now given the amount of people out of work and America’s productivity, which would offset any inflation that in fact hit the system.

“In other words,” Cramer said, “don’t have a lot to worry about on that front.”

Investors should keep these points in mind the next time the bears start growling about the latest earnings report or data point. Otherwise, they’ll continue to miss out on some great profits.

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