Dysfunctional. That's the only word I can think of to describe the bizarre movement of stocks today, a move that reminds me so much of when Congress gave the nod to TARP, the troubled asset relief program, only to see the market crater not long after.
The two are very analogous. Both failed in their first vote. TARP succeeded in the second. The bulls are sure hoping the Covid-19 stimulus passes. That is, after all, why the stock market went up.
Here's the problem. We've been in a terrible bear market, one of the worst I have ever seen. We've been down, down, down endlessly. Once again I bring up the proprietary S&P oscillator, which is continually registering a minus 20 reading, the deepest, most oversold moment in history.
When you get that amount of negativity, you have what's called a coiled spring market, a market that can basically snap back with a vengeance. That's terrific. It's very bullish that congress and the president want to eliminate bankruptcy for businesses both big and small and put money into people's hands. It's terrific that the president wants to open the country for business.
We know it happened in China. We know it happened in South Korea.
Why can't it be open here, now that we have all sorts of backstops to the different parts of the plumbing of an incredibly complex economy? If the Fed has the various mortgage markets covered and can buy all sorts of corporate paper as it is known and the stock market's rollicking again, let's get the darned thing running. We need the small and medium-sized businesses, the ones that employ 85% of the country's workforce back in action.
There, is though, one very sticky issue: What is the appropriate time to open it? We are hearing rumbles of April 12 being the day. Yesterday I agreed we should have a day when we roll up the sleeves, and the gates, and get to work. I picked D-Day June 6, and I picked that day not just because it is symbolic of another time when America won a war, but because I thought that there was an opportunity to make it so we could test everyone over and over and over and if people were sick they could get a ventilator in an intensive care unit, no sweat.
Now I am confident that the legislation's big enough to tide people and businesses over to D-Day. It will be in the capable hands of Treasury Secretary Steven Mnuchin, who is a terrific business person, and I think will administer it well. Meanwhile, I like the other side of the equation, the pledge that Kevin Johnson, CEO of Starbucks (SBUX) offered on "Squawk on the Street." He committed to pay all the firm's partners -- the company's term for workers -- for the next thirty days, whether their store was closed and they all opened. "We believe no partner should be asked to choose between work and their health," Johnson explained in his letter to his team. And enough were healthy that they chose work. I am urging employers to take the same pledge. That's what's so needed.
There's now plenty of money sloshing through the system. Checks are in the mail. There will be some demand. There's plenty pent up for certain.
So why do I have reservations?
First, hate him or like him, President Donald Trump is engaging in a debate about whether we are taking the disease so seriously that maybe it is too seriously and the downside of this shutdown may be too much for the country to handle.
I have called for that same debate. I have said that we should be trying to figure out when the illness has peeked and we can quarantine the most likely to get sick and need a ventilator while we test, test and test to see if people are healthy enough to go out, to go shopping to do what we do best, spend money.
But because we are so far behind in having all the ventilators and ICU beds we need, I think that April 12 is premature. I know every single day that we go without unleashing the consumer is a day where the entire plumbing of the system is at stake.
I think, somehow, the people who want to open the market in a couple of weeks must believe that this thing is a bad cold or flu. To them I say, are you kidding me? Have you ever had to be on a ventilator when you have a cold or a flu?
I think, somehow, the people who want to open the market in a couple of weeks must believe that this thing is a bad cold or flu. To them I say, are you kidding me? Have you ever had to be on a ventilator when you have a cold or a flu?
Maybe the people who are this bullish want to quarantine the New York area, where it is at its worst, like we live in Wuhan?
Again, I would tolerate that idea if we had the equipment we need to take care of the sick. We still don't know if we are going to be Shanghai or Seoul or Milan or Madrid. We don't know if we have the pills that get you better faster. We can't even get instant test results.
When we can, then I say: Game on. Until we have it, why put an April 12 gun to our head? We were so ill-equipped for this that it's almost fanciful to think we can get it together.
That's why we want the stimulus bill, so we can be tied over until it's safe to be a consumer again.
Which brings me to today's market. Just like sell-offs, not all rallies are created equally. A good rally is a rally that lets you in, that doesn't make you chase and doesn't make you pile in on top of an already shaky base. A good rally is one that's stair step. It goes up nicely. Then it flatlines. Then it goes up and then it rests.
A bad rally, an unsustainable rally, is like a one-day bull market, a mini run that gives you all the gains you are going to get. Consider it a geyser, it went off but it might not go off again for who knows how long because this sure ain't old faithful.
So what happens next? When you get this kind of rally analysts come out tomorrow and say that the selling was overdone, that we are back in business and you should buy, I don't know. Illinois Tool Works (ITW) up $19 or Stanley Black & Decker (SWK) , which gained almost 12 points. It's all clear to pick up some Constellation Brands (STZ) which zoomed 16 points or FedEx (FDX) , which is now up more than 17 points, since it reported a quarter where they couldn't even bother to forecast the future.
Am I saying sell the rally? No, because I have faith that we will eventually prevail over Covid-19. Like TARP, though, I think that the prospects of waving a wand full of money just won't do it. We are, as a people, too scared and too unwilling to potentially die for the economy the way the people in Milan were premature in sounding the all clear.
What would make me more bullish is if I saw something new from Washington, something that would make me it so a company that can't pay its bills can get to the promised land, the real promised land, when we don't fear getting into a plane or getting together for a birthday party rather than the weird Zoom (ZM) birthday party we held last night where we had some laughs in an apocalyptic kind of way.
There will come a time where we won't have a one-dayer. There will come a day where we won't watch stocks roar of companies doing so poorly that they may not be worth owning.
Let me tell you what we told club members of Action Alerts Plus. We sold some shares in companies that may be permanently wrecked by this interregnum. We want to be ready if our numbers go up and New York is not an end but a beginning. We don't want to find out we are Milan, not Beijing, after we did some buying. A market that doesn't giver you a chance to get in is a market that won't give you a chance to get out when it turns. Now that's something worth pondering.
(SBUX is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells it? Learn more now.)
