• 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. / Jim Cramer

Jim Cramer: Here's Why the President Is Gambling With Stimulus

The market is reflecting a triumph of big business over small business, and here's what that means for individual stocks.
By JIM CRAMER Oct 06, 2020 | 06:25 PM EDT
Stocks quotes in this article: LEN, HD, LOW, TGT, WMT, COST, GPI, CVNA, AN, LAD, KMX, F, PTON, AMZN, FDX, UPS, YUM, DRI, CMG, PEP, CAG, CPB, BMY, JNJ, REGN

You knew from Monday's bizarre session, when everything couldn't go up, that you couldn't have the Biden stocks -- the stocks of companies that want business in China -- and the Trump stocks -- the opening of America trade -- both work at the same time.

You knew that one had to be wrong.

But both?

That was surprising and disappointing to all of those people who have lost their jobs or are about to lose their jobs, because the enterprises they are working for don't have enough money to pay for them. The airlines? They are like milk with a past due date for their employees. You have to wonder where the 14 million people involved in the hospitality industry are going to go with their pink slips.

Maybe all of the newly unemployed can learn how to swing a hammer and hit some nails into Lennar (LEN) bought two-by-fours to take advantage of the red hot housing market.

I know there were plenty of people who just wanted to surge the wave of new money coming from Washington. This is a market that thrives on liquidity and the president just pulled the plug on the ocean of cash that seemed to be headed to peoples' pockets.

What drives this decision, one that seemed to be unthinkable as long as Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi seemed to chat daily about numbers? They seemed to be getting closer, not further away, until President Donald Trump arrived back in the White House from Walter Reed Hospital.

Plus, speaking of surprise factor, not that long before the Twitter-announced pull, Fed Chief Jay Powell said that he favored doing more, not less, because the possibilities of downside were worth avoiding pretty much at all costs.

I think it's a calculated risk taken by President Trump that the economy is stronger than most in Washington and Wall Street think. He's a huge believer that we have a "V"-shaped recovery and he touts it every chance he can get, including Tuesday when he said that "the stock market is at record levels," which they were nearing before he pulled the plugged on the talks.

A president who tweets, "We are leading the world in Economic Recovery and THE BEST IS YET to come" is not one who will be trifling with negotiators trying to beat the election with a deal. Plus, the president made it clear that after the election, "we will pass a major stimulus bill that focuses on hardworking Americans and Small Business."

Can the small businesses hold out until after the election? Can the airlines make it with their cascading losses? How about the hotels that are in arrears? How about the renters who won't pay and the landlords about to go into default? How about the states that are bleeding from their eyeballs because of the pandemic?

Once again, at the risk of sounding heartless -- as someone who just closed his restaurant,  because how long can you afford to be a restaurant without any customers? -- it won't matter to the stock market. That's because the stock market is reflecting a triumph of big business over small business and when the smoke clears that will be evident.

Why isn't the president much more worried than he is, and why is he more confident than Jay Powell about the economy?

I think it's because his aides are conscious that there are lots of areas of the economy that are red-hot and will stay red hot regardless of the stimulus. Let's just call them the non-stimulus-needing portions of the economy that rely on people who has jobs, not the ones who don't.

First among these are homes. As long as pandemic rages, there is going to be an exodus from cities to the suburbs and those people need homes. Of course, if you are out of work these low interest rates mean nothing to you. But if you have a job, you can use those low rates to buy a home and furnish it to your heart's content. This bull market could get crushed, if rates were going higher, but rates are sinking on the last of stimulus, so there's not much that's going to undermine this one. I like the housing stocks and I like the stocks of companies that are in the aisles of Home Depot (HD) and Lowe's (LOW) .

Speaking of Home Depot and Lowe's, they are real winners of a lack of stimulus, because many small businesses that were hoping for stimulus have now seen their hopes dashed and they can shut their doors. Target (TGT) , Walmart (WMT) and Costco (COST) are huge beneficiaries of a lack of stimulus. You can't get stronger than these guys, now that the remaining competition has to fold.

I absolutely love these stocks, because the lack of competition, and the share donating by loser department stores and small business people trying to make it to Christmas will continue with reckless abandon. This is also a huge win for the dollar stores, because that's where those who struggle to make ends meet do their shopping.

How about the autos? Did you see Group 1 Automotive (GPI) on Tuesday? I mean that thing was on fire, because sales were that strong, as strong as those of Carvana (CVNA) , AutoNation (AN) , Lithia Motors (LAD) and CarMax (KMX) . These are mostly used-car outfits -- precisely what you need if you aren't commuting to the office anymore, lest you have to go on public transit or carpool. The president may have little fear of Covid, but if you car pool or take public transit, you aren't going back to the office. You are buying a used car. You want to stretch the field? Buy the stock of Ford (F) , which is at the beginning of a nascent turnaround.

Needless to say, if you have enough money and you have a job you are back on your Peloton (PTON) , which is a boring, but worthwhile theme. You are still making use of the internet for shopping and you are getting a chance to buy some Amazon (AMZN) , right ahead of Amazon Prime on Oct. 13 and 14. You wouldn't see Federal Express (FDX) and United Parcel (UPS) up if that theme had gone bad.

And don't forget Yum! Brands (YUM) , Darden (DRI) and Chipotle (CMG) , the first two of which were down Monday as they are anti-stimulus stocks. That's because stimulus keeps the little restaurant alive until the vaccine arrives, and the latter is the last man standing.

Now, I don't want to be too glib here. Numbers will have to come down for a bunch of companies, but not much when it comes to technology, because technology supports the enterprise not individuals. You can watch until those sink a little lower and then pick some up. There will be people who say we will go into a recession, which I disagree with, but your buy list is shorter: Pepsico (PEP) , which just reported a great quarter, Conagra (CAG) , the same and Campbells (CPB) , too cheap to ignore. I like Bristol-Myers (BMY) and Johnson & Johnson (JNJ) and Regeneron  (REGN) when it comes to the recession-proof drug companies.

But don't out think it. This is a stock market that's filled with, and caters to, people who have jobs and work at solvent or growing businesses. There is a V-shaped recovery in homes. There is a U -recovery in autos. There was never even a downturn in Walmart, Amazon, Costco, Target, Home Depot and Lowe's.

They all work. As do the food and drugs and the stay-at-home, work-at-home Cramer Covid-19 stocks, because as much as it looked good that the president ripped of his mask, most of us will be putting them on extra tight this fall.

The rest of the companies? What can I say? You don't buy stocks in the small- and medium-sized businesses and you were never going to invest in Bar San Miguel, anyway.

(COST, UPS, AMZN, PEP, BMY, JNJ are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

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

Action AlertsPLUS, which Cramer co-manages as a charitable trust, is long COST, UPS, AMZN, PEP, BMY, JNJ.

TAGS: Investing | Politics | Stocks | Jim Cramer |

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

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