On paper, the market should be big, not tight. This is the opportunity | Wilnesh News
As I watched Thursday’s rally, I began to realize that we have become so binary and so close that we have lost the ability to think about what matters. Big fish data is sandwiched in small fish details, and we end up with rallies that are ridiculous and, therefore, unfounded. Of course, this tells you that these newfound percentages can be taken away without any basis. This is why we are stuck and intellectually deficient. I’ve now studied every aspect of Thursday’s beautiful game for the Bulls, and I can conclusively say that heading into 8:30 a.m. ET, it was a game that favored the Bulls — better than normal. Stock trading begins one hour before the game. That’s when weekly jobless claims are released. The components of this print – somehow – make investors on the sidelines more comfortable that the Fed will cut interest rates in a recession, so buying is a no-brainer. They struggled to handle the opening at 9:30 a.m. ET, with industrials and technology stocks getting the benefit of the doubt. Was it the program based on S&P futures that revived stocks both in the morning and at the close? It’s hard to say. It was a positive meeting. How can the numbers released every Thursday actually act as a catalyst? The absurdity is obvious. I mean, you could hire 10,000 actors and then fire them, and you’d probably have a massive sell-off because the hard-landing types wouldn’t be restrained. Then again, is there any more outrageous behavior than watching unknown large institutions sell off U.S. stocks in response to the Bank of Japan raising interest rates on Monday, causing Japanese stocks to fall more than 12% in a single day? This crazy move and its aftershocks sent Wall Street’s fear gauge, the VIX, to a 52-week high of 65.73 intraday, another crazy indicator of incidental frivolity that alternately scares some people and makes others feel like the whole thing is over. It’s got to be a little too much. Meanwhile, the S&P 500 is holding at levels that are fueling the fire. In comparison, the VIX index was at a 52-week low of 10.62 on July 19. Let’s take a step back and remember where we are now: We’re in the midst of a rocky earnings season, with serious disruptions across industries drawing attention. All positive points were taken away due to the craziness associated with Japan. For example, bank stocks soared at the start of the quarter on huge numbers, reasonably huge numbers led by Bank of America’s stunning quarter. Less than a month later, we hit a tsunami of selling that seemed particularly dire to the financial picture. On top of that, reports that Warren Buffett is selling off Bank of America stock in a big way seem to mean that he no longer likes banks as a whole. No one questions whether Buffett is simply selling off all assets that have yet to be identified, including the club’s holdings in Apple. Or maybe the baton has been passed and the new manager wants to start fresh. But somehow Buffett was doomed financially, in part because he was caught selling his best stocks. Of course, looking back, the immediate priority for the press was to find the reasons why the yen carry trade remained and legitimize the sell-off. We cannot simply say that a group of over-leveraged cowboys who thought they were infallible ended up destroying their winning bank positions and turning them into losses. Then, some old Buffett selling plans appeared again, who knows why. We can’t say that because it makes us sound stupid. So we think bank stocks are falling because historically bank stocks have performed poorly when the Fed starts cutting rates. We let stories get in the way of facts. Interest rate cuts are very good for banks. The possibility of credit loss will be retained. The holy grail of net interest income (NII) may give way to loan growth and, in some cases, better payout numbers thanks to the help of artificial intelligence. We are now improving urban areas, recognized by the strength of commercial developers SL Green and Boston Properties. Office building disasters appear to be a thing of the past. As the yen carry trade unwound, a string of technology companies reported earnings. Even if our cell phones recover, and even if our PCs refresh (an otherwise landmark event), what matters will be excessive spending on data centers and rumors that Nvidia’s Blackwell chip platform will be delayed indefinitely. Nvidia has always been an honest company. This rumor cannot be put to rest because Nvidia is in a quiet period before its earnings report on August 28. Enter the 0DTE option – or the zero-day expiry option. We’re talking about tools like DraftKings that are used only to verify obvious negative behavior. I find it hard to believe that we’ve been seeing Nvidia news all week, including stories that said the eye-popping earnings simply didn’t make sense. Does anyone stop to think that it has overtaken AMD and is still the number one performer in the S&P 500? Has anyone bothered to read or listen to what overturned the Super Micro? Are there too many orders to fulfill? Has anyone bothered to check that club name Meta Platforms apparently placed an order so big that Meta either misjudged or possibly over-promised? Did anyone consider that one of the great data center companies, Arista Networks, reported a staggering set of numbers indicating that all is well with the expansion? No. It also took with it several fallen stars: Micron Technology, Dell, Hewlett Packard Enterprise and club name Advanced Micro Devices. The latter is meaningless as it is opening up a gap with Intel at the low end of the market, and if Nvidia does have production issues, then AMD is the de facto winner. Nvidia is again being blamed. In fact, Apple is the only stock not affected by the Nvidia relationship, and it hasn’t had much trouble making profits. But by the way, Buffett later dismissed that notion, saying he didn’t want to sell Apple, which he apparently did around the same time. Maybe that’s why people are selling stocks in shock. Ironically, the “Magnificent Six” stocks (we own them all) have been weighed down by all of this, even though the market sees good quality in all quarters except Amazon, which is considered an unmitigated disaster . This makes it one of my favorites because the story is complicated by orders dropping by the minute during major news events including the assassination of Donald Trump and the Olympics. Until this quarter, no one cared too much about any disruptions and weak sales. We didn’t realize how little profit there was on smaller same-day packages. We’re completely ignoring the incredible cloud performance of Amazon Web Services, which is so powerful and has huge gross margins that it should offset Amazon Prime’s weakness in retail. I love this quarter. For those quarters that were generally strong, we ended up with a huge decline that almost seemed destined and was the start of a new bear market. Not only that, we also vigorously use artificial intelligence. Now it feels like there is nothing gained. Some of these papers are fake. We just don’t really understand how AI works because many AI clients don’t want to reveal what’s really going on behind the scenes: Consultants like Accenture, Deloitte, McKinsey, and Ernst & Young are advising C-suite executives to delay hiring because using AI tools makes employees’ jobs Efficiency seems to be doubled. So why not fire half the people in your organization? Do you really need that many? Who knows? When I meet with senior executives who are using AI, they tell me they’re not sure how many people they need — just fewer than before? No one wants to talk about it like that. Sensitivity about firing employees is now higher than expected. As a result, the AI-enabled storyline has become unpopular, with the exception of ServiceNow and perhaps the now-disappointing club name of Salesforce. I can’t believe how few executives realize that if they don’t start explaining how they use artificial intelligence, we’ll start punishing them too. I’ve been saying that both companies see artificial intelligence as the backbone of their business. I hope to find someone else. I don’t. Where does this leave us? I think where we are moderately oversold, a lot of people are just anticipating a drop or a retest to start the week. I knew we were looking for one and wanted to use the money we took out of the market to open new positions, but those positions were too small to matter. This is a topic I’ll be discussing during this week’s live broadcast of our monthly club members meeting. Lost in the shuffle – with the exception of Apple, which has a historically low P/E ratio – everything else is cheap. Even Apple, if you look at service streaming as its new top priority, can’t be considered outrageously expensive. We’re getting an opportunity for industrials, aerospace and defense stocks to shine. Even though we are about to enter a world of Fed rate cuts, everything else seems to be going as normal. To recap, despite the good fundamentals, despite the impending Fed rate cut, despite the growing likelihood of a soft landing, despite the fact that there will likely be a lot of money coming off the sidelines because of lower interest rates, our trade does Very bad. Unless we get a positive data point for the day like last Thursday. It makes us wonder what we’re missing. If Vice President Kamala Harris becomes president and she appears to want to raise corporate taxes at favorable times, requiring immediate budget cuts? If Trump were to re-enter the White House, would he be a capricious Trump? Now, we don’t know, which makes things even more tenuous, especially since famous market shorts have been launched and appeared on television to show us how strong they are, even though they haven’t made any money in a long time. At least they’re not Cathie Wood, you can see how bad she is at stock picking. Her endless buying at a stupid level was matched only by endless selling well below that level. Considering how tame interest rates have become and how impressive earnings are, we’re not optimistic, although I think we should be. Sure, we’re about to get a lot of revenue, but only retail seems to have a problem. Either way, I think a lot of Home Depot and Lowe’s buyers are going to buy based on some sort of argument for last quarter’s underperformance. That’s one reason I’m looking forward to positive action on our housing-related stories. This is what the textbooks tell you to buy at this time. Ultimately, though, it’s my confidence in the data center — I believe Nvidia’s roadmap can move the stocks of so many companies, including those that have taken a beating over the past three weeks — and my belief in a rate cut. That’s essentially good news. This should have been a beautiful moment, but it wasn’t. Huh? This is the opportunity. (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation is created or created by any information you receive in connection with the Investment Club. No specific results or profits are guaranteed.
Jim Cramer.
Rob King | NBCUniversal
As I watched Thursday’s rally, I began to realize that we have become so binary and so close that we have lost the ability to think about what matters. Big fish data is sandwiched in small fish details, and we end up with rallies that are ridiculous and, therefore, unfounded. Of course, this tells you that these new found percentages can be taken away without any basis. This is why we are stuck and intellectually deficient.
