[colabot1]
All my life as an investor, which now spans more than four decades, I have listened to people tell me about the real threat to the stock market, a threat that I take too lightly. They tend to look smarter than me, and they don’t doubt it. Meanwhile, I’m racked with doubt, as you must be if you’re a good investor and take every threat to the system seriously. You need to check for all possible negatives, especially those that are likely to wipe out all gains and then some. It’s always intimidating. Bears, and they are bears, are always armed with ammunition that would make you feel like you’re “whistling past the graveyard”, a cliche as varied as “canary in a coal mine”, which I think should be retired since almost no one operates in this kind of coal mines yet. Yet only once was the system threatened and that was the Great Recession. I always thought it was intriguing to be attacked by comedians disguised as left and right intellectuals for NOT pointing out that there were real problems in the system. However, I can be proud that my “highly articulated” fears found their way into the Federal Reserve Notes in 2007 where I was mocked for being a Cassandra. I’m not bringing this all up to brag, but I want to be recognized as an accredited bear when it came to being bearish at the time. Which brings me to today. I haven’t been bombarded with so many warnings about how we’re about to embark on a wave of failures of all kinds – shadow banks, regional banks, commercial real estate lenders, real estate investment trusts – at no time since 2007. And, I’m starting to wonder if these negativists aren’t getting too close to situations that might resolve rather positively. Take commercial real estate. It’s absolutely true that there are a lot of negative things about it. We have some cities where a combination of crime and working from home has decimated the office market: New York, Seattle, Portland and San Francisco keep coming back. Now, I don’t want to go as far as CEO Marc Holliday of SL Green Realty Corp (SLG) reporting over 13%, where he sees green sprouts in the most contaminated parts of New York. On his post-earnings conference call less than two weeks ago, he spoke of the “improving trends we’re seeing in New York as the office sector continues its recovery.” Holliday laments the misfortune and darkness and says their “overly negative voices overshadow some of the positive signs that portend a slow but steady recovery”. He presents evidence that train journeys are almost back to pre-Covid pandemic levels, although his qualification says almost back means 74%. In fact, Holliday spends much of that call fending off bears, even talking about bail reform, which he says would make the city safer. But not all of his qualifications look like green shoots to me, they sound like they’re glasses half full when the glasses could be more informed by a half empty perspective. I mention SL Green because it may be the most contested of REITs, real estate investment trusts, other than Vornado Realty Trust (VNO), a historically excellent New York real estate company, which just delayed its dividend. I point this out because it is often whispered as “next to go”. Now, Holliday is perhaps the most optimistic person on Earth, and he can’t be trusted at all. But maybe things are looking up since there are indeed more people returning to work. Analysts peppered Holliday with dismissive questions, which I found well-dressed, but would drive any bear up the wall. Indeed, it is an enigma: publicly traded REITs are considered excellent at what they do, almost legendary at what they do. I just don’t see them as the dreamy crooks of the big debacle of 2007-2009. When you dig in, you hear that it’s the insurers where the big bad deals are. Again, I want to believe that is the case. I want to be as skeptical as the next guy, or the guy after him, but I haven’t been able to locate insurers with the risk. Again I spotted them in 2007 so I know the forest. But this time around, I just can’t find the pesky trees, the mortgage insurers, the bond quacks or the derivative fiends; it’s a ilk I’m looking for and I thought the other day I nailed one – but, when I went deep under the hood, I saw rot but not structural rot, more penthouse rot to lengthen the analogy. When I dig deeper, I hear bogeymen lurking in private equity, shadow banks and REITs like Starwood Property Trust (STWD), quickly becoming a favorite for its use of the effect of lever. Next I’m going to read what CEO Barry Sternlicht says about being a potential grave dancer, with a high borrowing capacity, and I think it’s unlikely to be the storm that takes an entity rigorous and much appreciated. Now that big buildings are in limbo – it’s all lease expirations – I’m venturing into other links in the food commercial real estate chain and it just seems gross. Strip malls: full. Shopping centres: fully booked; shopping centres: full; shopping malls: full; triple net single-tenant lease: full. It’s so tight that there were REITs secretly hoping Bed Bath & Beyond would go bankrupt so that much higher leases without much construction could be signed. Throughout this process of guessing the weakness, I start to think, do the bears work nearly as hard as I do to probe? I mean I send platoons of co-workers out there to spot this ever-growing mold and I just can’t find it. Even the obvious things: the collapse of Credit Suisse and the unraveling of the very cool old Madison Square Park tower, didn’t faze me. Now, there are so many other places I’m sent to no man’s land between the bull and the bear that could be taken by a spring onslaught of negativity, but that just doesn’t count. Shouldn’t DR Horton (DHI), Lennar (LEN), Pultegroup (PHM) and Toll Brothers (TOL) be about to be overtaken? Instead, they are at or near the 52-week high. The consumer is supposed to be attached, but where is the dollar store business? Where is the abandonment of brands? And the cars? Did anyone even bother to notice the strength of General Motors (GM), which reported the much better-than-expected prototypical chorus of what could end up being a record-breaking earnings season? Believe me, I’m willing to hunt the obvious or dark worlds to find the various Achilles’ heels. But it keeps coming up like an insane rank in podiatry. Brunswick (BC), the largest boat company, signals and we get a prosaic pace. Yes, we get a shadow, but benign. Oh, and wasn’t this the quarter where the great cyclicals had to meet their creator? Steel has often been the first to collapse. But Cleveland-Cliffs (CLF), the largest flat-rolled steel company, has a solemn stock but not a solemn quarter, just an unremarkable one. They are the largest automotive supplier and their lines are sold out. Paper and plastic have come down a lot but not enough to worry us, especially when everything seems to be stabilizing at low levels. I understand JB Hunt Transport Services (JBHT) saying we are in a “freight recession”, but we are not getting that from FedEx (FDX) and we did six months ago. Of course, we have received real negative feedback from United Parcel Service (UPS), but I’m beginning to wonder if the fault, dear Carol Tome, is not in the stars but in yourself. Half? The bottom is in, which doesn’t mean we can climb into the valley of this death, but we can at least stop going further. I want more than ever to let my homework take me in another direction. It would be satisfying to side with at least a bear cub or two. But I need proof – and right now, right now the facts keep getting in the way of a hell of a story, a story that I can embrace but we’re NOT in a “they don’t know moment” where I truly believed the worst was yet to come. Unfortunately, or, fortunately depending on your disposition, or more importantly your positions, there aren’t four horsemen of the apocalypse before us right now, and we can’t create them when they don’t exist. , in fact we can’t even do them with ChatGPT. (See here for a full list of Jim Cramer’s Charitable Trust stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
CNBC Investing Club with Jim Cramer
Rob Kim | NBCUniversal
All my life as an investor, which now spans more than four decades, I have listened to people tell me about the real threat to the stock market, a threat that I take too lightly. They tend to look smarter than me, and they don’t doubt it. Meanwhile, I’m racked with doubt, as you must be if you’re a good investor and take every threat to the system seriously. You need to check for all possible negatives, especially those that are likely to wipe out all gains and then some.
It’s always intimidating.