Demand for money. Demand for homes. Demand for data processing. Demand for anti-cancer drugs. Demand for programming. Demand for fabulous cellphones. Demand for planes. Demand for stock.
I could go on and on but it is demand that's driving this market, not the Fed, not trade talks and certainly not the election, that's driving us to all- time highs.
It seems like a confusing moment. There's a cacophony of sound about how things have gotten weak and the trading war has shut down international trade. I don't want to sugar coat; there's a definite decline in worldwide growth year over year and a lot of it is from the trading war.
But the stocks of many companies anticipated a more stringent series of tariffs and we didn't get them which has launched many a stock that would have otherwise been stuck in the mud or flailing in quicksand.
Let's go over where the demand is most palpable and you can see the underpinnings of how we have gotten so high.
First is the demand for money. With interest rates very low banks are doing a brisk amount of business, especially with the consumer. This rally really started when JP Morgan (JPM) reported an immense quarter with Citigroup (C) and Bank of America (BAC) not far behind. When we look back at this earnings season I think we will realize that the consumer's strength was able to offset the industrial weakness that stems from world trade and given that the consumer is two-thirds of our country's gross domestic product, you had to recognize that this time really was different, we really do have a consumer spending within her means and borrowing prudently. That's how you get these tremendous moves in the banks that were thought to be value traps...until now.
Companies also have rapacious demand for money. So many realize that they can borrow to buy back stock that they can be the marginal purchaser when the market goes down. Hardly a day goes by where there isn't a plethora of corporate debt offered. More than a trillion dollars' worth so far this year. When I look at what they are doing with the money I see that some is to expand, but some is to buy back stock. It's easy to dismiss all of this, saying that the Fed is propping everything. But our rates are higher than most of the developed world, so that's just inane prattle.
What matters is that when there is demand for money then you have good earnings for banks, and if you have good earnings for banks then you have big buybacks and big dividends and stocks from this giant cohort that are investible.
The demand for housing is hard to see because there aren't enough homes for sale. That put a crimp on the aggregate numbers, but they are changing hands and changing hands pretty rapidly since the last dip in mortgage costs and the Fed's rate cuts. What matters, as anyone who is in real estate knows, is turnover. You need to see lots of deals being done changing hands and that's a principal driver of the U.S. economy. Yes it is true that housing is only 10% of the U.S. economy but when you think of all the things that go into a home you will realize how important the newfound resurgence in housing is. You might know my acronym WATCH, which stands for Walmart (WMT) , Amazon (AMZN) , Target (TGT) , Costco (COST) and Home Depot (HD) . These all have a huge tailwind at their backs: home purchases. If you go aisle by aisle you will see how much can be directly related to homes changing hands. They are also a reason why stocks like Visa (V) and Mastercard (MA) and PayPal (PYPL) and so many other payment processors are doing so well.
The greatest secular theme of the era is all of the data that's being created. Data, in itself, isn't all that valuable. Data curated, messaged, identified, parsed, manipulated, fathomed? Now that's what so many companies are about: Adobe (ADBE) , Oracle (ORCL) , Salesforce.com (CRM) , SAP (SAP) , Splunk (SPLK) , Cisco (CSCO) , Twilio (TWLO) , Nvidia (NVDA) , Facebook (FB) , Twitter (TWTR) , Alphabet (GOOGL) , Amazon... they are all about harvesting data and making wonders of it. Data's one of those amorphous concepts that doesn't lend itself to being a commodity but it is until it is divined, categorized and interpreted. This morning Spotify (SPOT) reported and it was a much better than expected quarter. We interviewed outgoing CFO Barry McCarthy this morning and you can bet that Spotify has been able to use algorithms to push what you want to hear. If Spotify seems like a mind reader, well, you are right. It has the map of your mind and it can show you the way.
Of course there are companies that are thought to be using the data nefariously. There remains a whole host of politicians who care more than the people but less than the newspapers about what Facebook's doing with your data. I don't know the answer: I do know that data is the coin of the realm and if they get the data voluntarily than what's the matter with that.
Data's also behind the big run in the stocks of Intel (INTC) and Advance Micro (AMD) . You need them to process it whether it be at the p.c. level or the data center of which Nvidia is beginning to dominate again. We know that Amazon Web Services, Google Cloud, Microsoft's (MSFT) Azure and IBM (IBM) all have capabilities to store and process the data.
When we look at the drug landscape we notice rapidly that many drug companies are based on anti-cancer formulas. The merger with Bristol-Myers (BMY) and Celgene (CELG) , puts together two amazing cancer franchises. AstraZeneca's (AZN) anti-cancer franchise is incredibly strong. Amgen's (AMGN) trying to crack in. Merck's (MRK) Keytruda is already there. It's the most lucrative portion of the drug universe.
Right now we are in the golden age of entertainment where entertainment companies are desperate for something to have us watch. Does Apple (AAPL) have a programming deficit? How about HBO? Disney + (DIS) ? Anyone who makes content is surging. We will see what Apple and HBO have up their sleeves tomorrow.
Speaking of Apple, tomorrow we will find out how its new phones are really selling. The iPhone 11 was supposed to be a dud but I think people underestimated the three cameras and the better battery life. There are a whole bunch of semiconductors in Apple phones including Skyworks Solutions (SWKS) and Qualcomm (QCOM) . The pin action is outstanding.
We had American Airlines (AAL) CEO Doug Parker on Mad Money Friday night and he's talking about trying to being reimbursed by Boeing (BA) for up to more than $400 million in losses owing to missed out fares because of the flawed Boeing 737 Max. He's not alone. But the thing that matters is that demand for air travel continues unabated. Most people in this world have not flown in a plane. There are only two big plane companies in the world. There aren't enough of them.
All of this activity breeds an environment where stocks represents superior value because their earnings streams aren't as dependent on the Fed as the macro folks would have you think. They are constantly jabbering about aggregate data without ever talking about demand. That's because you need to listen to the calls to know who has demand and who doesn't. Right now the demand ayes have it and that's a chief reason why we keep going higher.
(JP Morgan, Citigroup, Amazon, Home Depot, Mastercard, Salesforce, Cisco, Twilio, Nvidia, Facebook, Alphabet, Microsoft, Apple and Disney 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.)
