A certain academic – OK, it’s The New York Times’ Paul Krugman – seems to think that the economy isn’t improving, it’s simply “getting worse more slowly.” He’s one of many who use a top-down analysis, poring over gross-domestic-product numbers, the unemployment rate, retail sales and the like to draw their conclusions. This group credits government spending – and only government spending – for the market’s months-long rally, and they expect a rather quick decline as soon as Washington cuts off the cash flow.
Well, Cramer prefers to look at things from the bottom up. He’d rather pore over the earnings reports, conference calls and press releases. He follows the CEOs and their statements and visits company Web sites for their analyst and investor presentations. What has he found by doing this?
“We’re not getting worse more slowly,” Cramer said, “we’re actually getting better – maybe much better. And it isn’t all government spending.”
The government isn’t buying Coach’s handbags or True Religion’s $400 jeans. Nor is Washington flooding J.C. Penney’s new Manhattan store. Consumers are responsible for this uptick in spending. They’re opening their wallets for Apple iPods and iPhones, too, and that benefits more than just Steve Jobs’ company. All of the parts makers – ON Semi , Skyworks Solutions and Tellabs – are seeing their share prices rise as well.
Positive signs also are appearing in other parts of the economy. Banks are up 30%, 40% and 50%. Aluminum and paper are rebounding, boosting the stocks of Alcoa and International Paper . And China isn’t the only reason steel prices are up. Plus, while the “cash for clunkers” program has been a success, that’s not why Ford has climbed to $7. The growing demand for autos was already there.
The consumer isn’t cash strapped, Cramer said, “just frugal.” Commercial real estate, the collapse of which is the latest doomsday scenario, is “containable.” The car build was seeing “somewhat normal demand that [exceeded] inventory” even with out cash for clunkers. And given all of this, “why shouldn’t the market have gone up?” The rally over the past few months was always based on a “getting better than we expected” attitude, Cramer said, and that’s far better than “getting worse more slowly.”
Of course, investors can choose to follow Krugman’s lead. But those that have so far missed the 45% jump from the March lows. What about Mad Money viewers? They could take profits on Tuesday, Cramer said, “and lock in some fabulous gains.”
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