CaptainJJack

Cramer's Mad Money - When the Facts Change...(10/23/09)

I subscribe to Cramer's "Real Money", and unlike many others, I think it has a lot of value.

That said, Cramer is a trader, not an investor. He will talk about missing the opportunity one day, and then tell you to sell a week later.

As far as bad calls, in February, 2000, Cramer declared that the ONLY companies worth owning were internet companies.

Still, even after all that, I do listen to his predictions or his calls, I listen to his analysis.

He is a good thinker, and I respect that.

Large Caps Could Lead the Market Much Higher

We have had a HUGE run-up of P/E multiples since March. In fact, I could argue that the ONLY thing that has really changed since March are the P/E multiples.

Anybody who has been in this market over the last year knows how notoriously bad the forward earnings numbers are -- just take a look at forward estimates at the start of this year for THIS year.

While there is a lot of manufacturing leverage now that companies have cut so much payroll, the current fixed infrastructure is currently being supported by large government (both US and Abroad) stimulus.

The key question is: What happens when the stimulus is withdrawn?

The key metric is the top line, not the bottom line: Those forward earnings are only as good as the sales projections.

As an aside, there has been a significant tax cut which, if I remember the numbers right, amounted to 2/3 of the tax stimulus proposed by some Republicans ( there never was a unified Republican stimulus alternative, but the number $400 billion was often used as the tax cut required --- and the only stimulus needed).

We should have seen the top line numbers rising by now if the tax cuts were as powerful as they were being promoted, and I for one, do not see it.

As far as I can see, the $250 Billion tax cuts have had almost zero effect, and this is similar to the tax rebates of last year--coming into effect in at the end of the 2nd quarter, after the recession was 2 quarters old, and just before the economy tanked.