Cramer admits NBC/Pravda "Big Lies"

Market forces May 20,

Jim Cramer yesterday announced a soon to be published report that indicates Jim Cramer's picks are sometimes profitable. Jim Cramer is not sure it is correct. Neither is anyone else. But Jim Cramer admitted much more. He admitted he believes it is NBC/GE/Pravda's duty to lie by spinning everything to be positive so more investors can be lured prematurely into a fake NBC/Pravda/Cramer bull market. He did so in examples as to why the Wall Street Journal and other media hurt his fake bull market by reporting the plain truth without spin. By NBC/GE/Pravda's lying in this manner it is possible for insiders to profit because the insiders can then bet against the public and profit by getting out before the public catches on, simply by saying they changed their mind… "Tough luck to us peon individual and pension fund investors."

There were actually three examples of truth telling yesterday but Cramer chose to condemn just the Wall Street Journal's audacity to report the record low housing starts rejecting the pressure to join NBC/GE/Cramer/Pravda in spinning big lies. First, Hewlett-Packard Co CEO Mark Hurd said he’s basing the latest company forecast on the expectation that the economy won’t improve in coming months. Such bold straight talk from the world’s largest maker of personal computers and printers was punished as much as 5.1 percent in late trading for admitting that sales haven’t shown any signs of rebounding. HP said that projected annual revenue will drop 4 percent to 5 percent, to the lower end of a forecast range they had given in February. In other words the truth was the sales situation got worse since February.

Second, The S&P 500 Banks Index slumped 4.4 percent after the Moody’s report that U.S. commercial property prices are now down almost 23 percent from the October 2007 peak and transactions have dropped as much as 80 percent, according to Moody’s/REAL Indices issued today. Commercial property prices fell another 1.7 percent (a 20.4% annual rate) in March from February showing no let up in the slope of the decline. "Moody’s expects continued weakness and possibly further declines in volume in the coming months,” the ratings company said in a statement.

Third, record low construction starts stirred honest concerns about the economy and Cramer's big "bull market" lie. Data showing that housing construction fell to a record low in April dashed hopes that the housing market has hit bottom because it exposed there wasn't even a hint of an inflection point yet much less a bottom. You see the NBC/GE/Cramer/Pravda big lie has been to claim that evidence of any inflection point (slow down in the rate of the indicator's free fall collapse) was a sign of a bottom). Many analysts see a recovery in housing from its three-year slide as necessary before the economy can begin to rebound and an inflection point indicates the slide is 50% over not 100% over as a bottom would indicate. The Commerce Department reported that construction of homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records going back a half-century to when they started the records. It was 510K last month and analysts had expected it to increase by 3% to 527K this month but it declined 12.8% more instead.

Jim Cramer suggested the Wall Street Journal could have supported his NBC/GE/Cramer/Pravda "bull market big lie" by spinning the accelerating housing price collapse as something good because housing inventories would decline faster. But falling home prices not only pinch consumers but also increase the toxic assets of the banks that hold the mortgages that are losing value.

The recent "Stress Test" was to assess the need for banks to increase their capital to cover the remainder of the residential and commercial property value slide. Obviously Geihtner and Bernacke do not believe the NBC/GE/Cramer/Pravda "bull market lie."


Market Outlook

The Fear Index (VIX) is below 30 for first time since Sept. 19, 2008 indicating we are near a stock market top. The Volatility Index, which traces the prices at which investors are willing to buy and sell options on the Standard and Poor’s 500-stock index, tends to move down when investors are overconfident, just before a sharp stock market decline. Before the credit crisis hit VIX typically floated between 10 and 20. In May 2008, it was below 20 but during the worst of the economic crisis in October and November during the sharp sell-off it jumped to more than 80. Now once again investors appear to be overconfident and vulnerable to another sell-off.

In addition a comparison of current FED recovery forecasts with the February forecasts shows the forecast economic turn around slipped from Nov 2009 (forecast in Feb) to Jan 2010 (now being forecast) or a slip of two months over the elapsed period of just three months. Why is this important? It is important because that is how we estimate when the stock market will bottom. Typically the stock market bottoms up to six months before the economy bottoms. So in February when they forecast the economy would bottom in November we would then estimate that the stock market would bottom six months earlier or next month in June. But with the current economic forecast (especially the several months next year when they now predict the economy will not grow at all), the earliest forecast possible stock market bottom has now slipped to August 2009. And because the economic forecast recovery keeps slipping we can expect the stock market bottom to slip further as well. In fact the stock market bottom could be as late as February 2010 now and the economic recovery could now start as late as August 2010.

We are on the sidelines until the market re-tests its lows.

Last night's Asian results were mostly lower. China down -0.9%, Hong Kong down - 0.4%, India down -1.8%, and Japan's market up +0.6%.

European markets are mixed in the range of -0.3% to +0.6% mid way through their day.

US futures indicate the markets will start up about 0.3% today.

Cramer admits NBC/Pravda make "Big Lies" because he believes it is their duty to spin a positive rather than an honest forecast of financial markets.

They are lying as much now as they did during the DOT COM bubble when every announcement suspiciously seemed to match Pravda expectations. Now every piece of news suspiciously beats expectations and inflection points are announced as though they are turning points. Hewett Packard was punished 4% yesterday for telling the truth and not going along with the NBC/Pravda "Big Lie."

We estimate we are about half way to a housing turn around and about a year to go to pass this economic crisis bottom. And after that we will enter uncharted territory where we can only hope that the creative destruction resulting from future American innovations can offset the socialist governmental quagmire the Democrat-Socialists are creating with their complete control of the three branches of American government.