Cramer Assesses the Reality Behind Retail

Jim Cramer
Jim Cramer

Sometimes, statistics are nothing more than "lies, damned lies," Jim Cramer said Monday on CNBC’s “Mad Money.” Quoting Mark Twain, Cramer referred to the slew of U.S. economic data coming out of the government that defies the logic we hear from the sector leaders themselves.

Just look at today’s retail sales numbers, he said, which fell for a third-straight month and showed a much worse-than-expected 0.5 percentdrop in June retail sales. The markets swooned after that, and the Dow Jones dropped 49 points to 12,727, the Nasdaq fell 11 points to 2,896 and the S&P 500 suffered a fractional loss to finish at 1,353.

Despite the data, though, Cramer remained skeptical. “If the consumer’s so tight-fisted, then how the heck can Target, Wal-Mart Storesand Costcobe hitting their 52-week highs?” he asked. He noted that all three major retailers have done so over multiple days in the past week. Retail auto sales are also soaring — with the industry now running on a 14.4 million annualized sales rate. Chrysler sold 20 percent more cars than it did in 2011 and more than any year since 2007. General Motorssaw its sales increase 16 percent, and Ford Motoralso reported sales that topped analysts’ estimates.

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But no bright spot can compare to what the banks have been telling us, Cramer said. In addition to positive earnings out of Citigroup, JPMorganand Wells Fargo, JPMorgan also cited retail spending and retail lending as the key areas of strength for the bank, and it was about more than just good margins. “JPMorgan saw strong sales in precisely the areas that would most impact consumer spending,” he said.

Perhaps even more remarkable than that was Wells Fargo’s second quarter. “It’s got the pulse like no other in the single most important sales category out there,” he said. “The sale of homes.” Now, Wells is the largest and most aggressive lender in the nation, with more than 30 percent of the U.S. mortgage market.

But several “really amazing” statistics from the firm have gotten lost in the fray of earnings season. Just consider these salient pieces of contra-data that Wells has to offer, Cramer said.

First, the bank’s mortgage business has spiked 90 percent from a year ago and 11 percent in the previous quarter alone, as borrowers continue to refinance their homes at low rates. “You can only imagine what they can do to retail sales further down the line,” he said.

Wells’ refinance business surged 43 percent from the first quarter — up to over $19 billion. The company said this indicated “continued strength in the overall housing market” and an increase in sales and pricing among even the hardest-hit areas of the U.S.

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Commercial loan growth has also jumped a substantial 31 percent through both portfolio acquisitions and “organically increased credit card penetration.” And yet there hasn’t been any rise in defaults, as the charge-off ratio for bad loans decreased to 1.15 percent — the lowest since 2007.

And lastly, CFO Timothy Sloan has said the mortgage pipeline has more than doubled from where it was in 2011. That should mean more record revenues ahead.

At the end of the day, Cramer’s not saying all government statistics are wrong, though he does think many of them should be called into question. “I’m simply pointing out that when you combine strong retail sales at the store level, the auto level and the housing level, you sure don’t get a picture of weakness,” he said. “You get a picture of strength.”

The bottom line: The stock market takes its cue from more than just disappointing governmental statistics. “It takes its cue from what the companies are saying themselves, and they are saying things might just be better in this country than you think,” he said. “Maybe even a whole lot better.”

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When this story was published, Cramer’s charitable trust owned JPMorgan.

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