What do we make of the stalled-out industrials versus the red-hot techs? What does it say about both the United States' and the world's economies? Is it a judgment that things have cooled off or that there's no more upside for those companies that need a strong economy?
No, I think it is all about the fact that this market has gravitated to who will have the biggest upside in the second half of the year now that it looks like the Trump steamroller has run out of gas.
Remember how the stock market works. It looks ahead six to nine months. It wasn't that long ago that we expected we would see repatriation of foreign assets, lower taxes and lots of deregulation.
We are still getting the latter in spades. Classic example: Last week, the president sent in two names for the Federal Energy Regulatory Commission. They seem like the types who would fast-track pipelines. He's already put in people who favor consolidation in television. There's a hope that he might appoint people who are pro-phone mergers in the Justice Department. He's got Wilbur Ross making deals with the Chinese that are very pro-agriculture and he is looking into protecting the entire steel industry by declaring it a national defense asset. That would cut off imports at a level that has never happened.
But when it comes to corporate tax reform, it seems like that's going to have to take a backseat to the Comey-Russian investigation as well as, at least in the Senate, a total holding pattern over health care.
There isn't even talk right now about the border tax because the House seems to have somehow deep-sixed the entire package. We have no idea where it is even as Treasury Secretary Steve Mnuchin has periodically surfaced with rates and timetables and one-pagers about what has to happen.
And it seems the president wants to spend more time trying to verify his election rather than getting the business done. He's not putting his political capital right now behind the "massive" tax cuts because I think Congress, a.k.a. the swamp, has very different ideas.
We've got some winners for certain, namely the companies that may very well be taking some Chinese business from the big infrastructure projects that are being announced. Chinese excavator sales rose by triple digits last month and Caterpillar (CAT) and Cummins (CMI) are getting their fair share of orders. So those kinds of cyclicals are doing quite well.
You usually don't want to say this, but thank heavens for the Chinese projects because our federal infrastructure program that Trump ran on seems hopelessly stalled. In fact, the biggest projects in our country are state highways, notably California and Texas. Who would have thought the once-strapped California would be leading in the highway remake?
The oils are trying to rally off the joint announcement between the Russians, the world's largest producer, and the Saudis, the world's largest exporter. The big move in oil, flirting with $50, may seem like a surprise, but the stocks anticipated it last week and have quickly stalled out because Americans know all too well that the U.S. producers just lay on the futures, especially at the $50 level, because the extra income creates a nice profit cushion for those companies that are fairly profitable at the $45 level, which is where the Permian oil pretty much breaks even. You sell the futures and there's your profit.
But the stock market, like nature, abhors a vacuum. There is no way all of this money that's been made in the stock market leaves the stock market. You see it in these filings the SEC releases today with the money floating from one group to another.
Let's start with the N that's itching to replace Netflix (NFLX) in FANG. You might be wondering how is it possible that a stock can go up day after day for four straight days after reporting last Tuesday. It's an important question because this is the stock of a company that is so richly valued that it is leaving all semiconductor companies in the dust.
Nvidia's (NVDA) stock sells at 38x earnings, which, while not Amazon-like (AMZN) , is much more expensive than Facebook (FB) or Alphabet (GOOGL) . It sells at a much higher price to earnings multiple than almost all the software companies, too.
Why is that?
I think you just need to listen to the conference call to recognize that CEO Jensen Huang isn't just tossing out the term "artificial intelligence" (AI) like so many others. He's pioneering it. There's a moment in his call where he says legendary venture capitalist Marc Andreessen once said that while "software is going to eat the world, artificial intelligence is going to eat software and it is going to be every aspect of software."
He goes on to say "every single software developer has to learn deep learning. Every single software developer has to apply machine learning. Every single software developer will have to learn AI. Every single company will use AI. AI is the automation of automation."
Those are strong statements and what they say is that all the money that is going into software stocks would be best to go into artificial intelligence stocks.
There's only one problem. There is only one artificial intelligence stock: Nvidia. There are no other pure plays.
There is a second one, but it's got a ton of other businesses related to search and advertising: Alphabet. When you see an announcement today that Lyft is going to cooperate with Alphabet's Waymo on self-driving cars, you cannot ignore this as some sort of space-age pie-in-the-sky announcement. I drove in a self-driving car when I visited Waymo and I think Alphabet is way ahead of everyone in the category. When you get in that car and tell it to go to Roots Steakhouse in Summit, N.J., you can sit back and enjoy. It's a much better driver than any driver would be. Alphabet makes its own chips others' are too expensive. But look out if Intel (INTC) can lower the cost of manufacturing Mobileye's (MBLY) chips. It's going to be a foot race if they can.
On any given day, there's always a story that makes tech look good. This weekend's ransomware attack ignited a moribund group of cybersecurity plays from Symantec and Palo Alto (PANW) , which disappointed recently, to a rejuvenated FireEye (FEYE) and Proofpoint (PFPT) , the latter being at the epicenter of trying to halt the attack.
We have become conditioned after last week's slaughter of retail at the hands of Amazon -- the elephant in the room -- that there are so few winners and a lot of losers. I am not disagreeing with that. But I want you to think about an outfit like Domino's (DPZ) . Here's a company where there are technologists galore figuring out easy ways for you to order. Can you imagine what happens if they come up with an easy GPS system that enters the order for a driverless car? In the interim, they will soon have the ability to program drivers with orders from you specifically telling you how close they are. The big factor is how many pizzas they can deliver on a given evening. Can you imagine if you get a signal on your Apple (AAPL) Watch or your Alexa that the delivery truck is around the corner, so put your light on or stand outside? That's harnessing technology to make even more money for shareholders. (Facebook, Alphabet and Apple are part of TheStreet's Action Alerts PLUS portfolio.)
I say as long as Trump's at an impasse with Congress, get used to this kind of outperformance. Look for ancillary plays like a FedEx (FDX) or an XPO Logistics (XPO) for delivery or a Broadcom (AVGO) or an Analog Devices (ADI) for a wide-ranging set of opportunities, or Lam Research (LRCX) and Applied Materials (AMAT) , so necessary to making all sorts of chips.
And don't forget, those who are buying these all think they are cheap in the 2018-19 timeframe. They won't be dissuaded so easily by the need for near-term earnings. They want growth; these companies have it, they have it in spades.
Cocktails & Cramer
Join Jim Cramer on May 23 for an exclusive party at Bar San Miguel, his Brooklyn tavern. You'll get to watch a screening of Mad Money, after which Jim will arrive fresh off of the CNBC set to mingle, pose for photos and answer your investing questions. Participants will enjoy dinner, drinks, an autographed copy of Jim's book Get Rich Carefully and a one-year membership to Action Alerts PLUS, Jim's club for investors. (Current AAP members will receive one extra year of membership for free.)
When: Tuesday, May 23, 6 p.m.-9 p.m. ET
Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.
Cost: $375 per person
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