• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Jim Cramer: What Does Politics Have to Do With Johnson & Johnson's P/E?

The answer is plenty, but you can't trade that.
By JIM CRAMER Aug 22, 2018 | 07:05 AM EDT
Stocks quotes in this article: JNJ, BMY, MRK

What does Michael Cohen's guilty plea have to do with the price-to-earnings ratio of Johnson & Johnson (JNJ) ?

This is the central issue all professional investors are struggling with this morning -- and they don't really have answers, but they know that people won't necessarily pay less for JNJ after this, so why sell?

After all, it doesn't impact JNJ's pipeline. It doesn't impact the quarter, or the year. If anything, a weakened president means a weakened dollar which is terrific for JNJ. And that means you might actually want to pay more, currency adjusted, for the stock of this great company. President Trump has not been a friend of big pharma by any means, he hates their annual price increases. That said, he's been ineffectual in reining in anything involving the drug companies -- including the pushing of opiates.

More important, the guilty plea of Michael Cohen and the guilty verdict for Paul Manafort, while stinging to the president, particularly because they came down simultaneously, will be less stinging by the day because of the way the news cycle works.

Of course, investors who think Trump is great for the stock market have to worry that Cohen will go to Special Counsel Robert Mueller and tell him what he knows about Russia and the President -- that's the needed nexus for reduced jail time.

But the president could pardon Cohen today and that would be the end of that. Can you really put that past Trump?

How about the idea that the president is tripped up by Cohen's "excessive" campaign contribution, as part of the plea agreement?

Same deal. Easily pardoned. I suspect that the Deputy U.S. attorney in New York who prosecuted the case, Robert Khuzami, would like this campaign finance matter to be referred to Washington for some sort of prosecution of the president, IF the documents are clear and Cohen wants to testify. But Justice is controlled by Attorney General Jeff Sessions -- and you could see that he won't want to make the case. Could he create a special prosecutor for this, an unrelated matter to the Russian investigation by Mueller?

Sure.

Unlikely though.

Why are all these things so sure and yet so unlikely. Why is it so hard to process for the entire market, not just JNJ.

Because the Republicans control the House and the Senate. As long as that is the case, you simply do not want to bet that any of these cases matter. As long as the Republicans stand by the president, and the mid-term elections go the Republican Party way, you can just see pardon after pardon with no real consequence.

  • U.S. vs. the World: The Fed Is Walking a Fine Line
  • Retail Earnings Roundup: Millennial Power Is at the Heart of Getting It Right

I am sure there will be people who want to sell in August and go away... until after the elections -- not that alliterative, but definitely true.

Their sales could weigh on the market. That's actually what I think is happening today.

The counter to that sell, though, is a belief that the Chinese will wait until the mid-terms, too, betting for a change in Congress.

If that's the case, you can expect heightened rhetoric, not lessened rhetoric. Aren't we all waiting for the president to say "if it says 'made in China' don't buy it?" I know I am.

But back to the matter at hand. The parts of the market that have been hurt before by worsening tensions -- some industrials and some techs -- will be hurt again. Nothing new.

The rest of the market will benefit from the rotation out of those stocks.

If you ask me, the most important aspect of yesterday or today's trading will be.. irony. This is now the longest running bull market in history. The bears will have a field day if there is a double top: The S&P took out its high intra-day but not at the close. You can see an interpretation that says, "how fitting that the market peaked on the day that Cohen pled guilty and Manafort was found guilty. That's a real top."

But what if the market rallies from here? There goes that thesis.

So let me give you the bottom line: There's enough here that cuts either way that making a decision based on politics will most likely be wrong, because even this form of politics does not have anything to do with the price-to-earnings ratio of Johnson & Johnson.

One last thought: I used to say that these kinds of events had nothing to do with the P/E of Bristol-Myers Squibb (BMY) . These days, so many other things do -- like an ascendant Merck (MRK)  -- that I'd rather just move on to a better company.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Healthcare | Markets | Politics | Risk Management | Stocks

More from Consumer Discretionary

Apple's Price Charts Are Getting Badly Bruised

Bruce Kamich
May 12, 2022 1:10 PM EDT

Here's what the odds favor.

RH and Its Charts Don't Have That Homey Feeling Right Now

Bruce Kamich
May 12, 2022 8:32 AM EDT

The technical signals of the home furnishings provider indicate more downside to come in its stock.

Crocs Is Still Slipping to the Downside on Its Charts

Bruce Kamich
May 11, 2022 7:44 AM EDT

The footwear maker isn't seeing a lot of technical support at this point.

Screening for Deep-Value Stocks Turns Up a Pair of Possibilities

Jonathan Heller
May 9, 2022 10:00 AM EDT

A producer of small appliances and a maker of fishing, camping and kayaking gear pop up as possible value plays.

Bearish Bets: 3 Slumping Stocks You Should Consider Shorting This Week

Bob Lang
May 8, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:24 PM EDT PAUL PRICE

    An interesting chart

    I'm betting heavily that stocks will be way up aga...
  • 10:10 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "Market Timing for Dummies"
  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login