- "Mad Money" host Jim Cramer found 10 reasons for why the stock market, which drove the Dow Jones up more than 330 points on Thursday, may be getting ahead of itself.
- Cramer noticed that "natural sellers" are not forthcoming in this market, a sign that investors are eager to flaunt what they own rather than pare their gains.
- With many strategists turning negative on 2018's prospects, the "Mad Money" wanted to explain some of the market's wildly positive trends.
"Investors decided they were willing to pay more for stocks because good, old-fashioned companies, not just autonomous-driving, bitcoin-operated, artificial-intelligence-led, machine learning [plays], keep delivering upside surprises," the "Mad Money" host said. "In short, you have to abandon all cynicism to understand this market."
In a market where old-line companies are delivering alongside high-tech, Silicon Valley giants, sellers are few and far between, Cramer said.
Meanwhile, most Wall Street strategists have gone on the record to say that they're very negative on 2018 because of how stretched valuations have gotten.
"If big-time money managers are really worried about next year, they need to start selling now," Cramer said. "Their funds are too big to dump everything on December 31. But at the same time, these funds need to outperform the averages or they'll lose their clients, and in a raging bull market like this one ... you need to own stocks in order to outperform."
"They face this impossible situation," Cramer continued. "They want to leave because of 2018, but if they leave, their annual performance will suffer, which is why natural sellers, right now, aren't surfacing."
So with buyers aplenty and prices on the rise, Cramer gave 10 reasons for why the stock market feels like it may be melting up and ignoring the fundamentals.
First, Cramer pointed out that large institutional investors can't find sellers until stocks get a serious boost.
"Just look at how little volume it takes to move stocks up," the "Mad Money" host said. "[That's] something that happens when buyers need to pay up before anyone's willing to sell."
Many of the stocks that are on the rise have older companies behind them, the kind that tend not to issue shares of their stock to their employees and therefore are in control of the supply.
That means there isn't a readily available supply of their stock. As such, those companies turn to share buyback programs as ways to use their excess capital and boost their stock prices, Cramer said.
"We're so used to the government hurting the stock market that we don't know what to do when the capitol helps the market," the "Mad Money" host said. "Having a president who views stocks as a barometer of his success is clearly a good thing for people who own stocks."
If the GOP's tax bill passes, plenty of businesses across industries will see their taxes cut and their earnings grow.
"That's a common characteristic of what's rallying," Cramer said. "It's a government-mandated rotation into domestic companies and companies that can repatriate assets."
In the meantime, the global economic backdrop is improving.
"For the last decade, there's always been some region that was holding the world back," usually Europe, China or the United States, he said. "What's bad now? Not much except Venezuela, which, by the way, is actually good for oil because it will curtail their production, and remember, this market likes higher oil prices."
The United States' domestic data isn't too shabby, either.
Inflation is low, employment is high, wages are middling but decent, and consumer spending is solid, trends that Cramer said are typically not supposed to happen.
"But it's happening. Sure, we'll have rate hikes, although at this pace it'll take two years before they start to crimp business," he said.
With Kroger and Costco reporting decent results in the face of Amazon's foray into grocery, Cramer said the market's seventh driver stems from industries' defenses against the e-commerce giant.
Cramer's eighth reason was a fairly simple calculation.
"What the heck else are you going to buy?" the "Mad Money" host said. "There are still plenty of stocks that yield better than bonds, backed by companies with fabulous balance sheets that, unlike bonds, will actually raise their payouts over time."
The lack of earnings disappointments is another contributor to the market's good sentiments, Cramer said.
"We're not at peak housing, we're not at peak auto, we're not at peak aerospace, we're not at peak travel. In fact, we're not at peak anything," he said. "At least for now, and that's all you care about in this market."
Finally, cynicism has turned out to be a faulty investment strategy, the "Mad Money" host said. The negativity, even around struggling giants like General Electric, has all but been drowned out.
"The bottom line: good is good," Cramer concluded. "Sure, there will be things that go wrong — and heaven help us, if we don't get a tax cut at this point, we're going to lose 500 Dow points in the blink of an eye — but right now, virtually everything is going right. This is a what-have-you-done-for-me-lately kind of market, and the answer at the moment is plenty."
Disclosure: Cramer's charitable trust owns shares of General Electric.