Cramer lists reasons to book some profits in this lofty market. ‘You only need to get rich once’

Nobody wants to leave a good party, least of all, me. But the good news is the stock market isn’t a party. You don’t have to leave all at once. You can step out a bit, if the party gets too hot, and then come back when you think it’s more appropriate. Sure, you have to give back some stock, preferably the most overheated kind, but that should never be an issue. Let me give you a perfect example of what I mean. On Saturday, my wife, Lisa, and I, signed bottles of her mezcal, Fosforo, at a terrific location on Long Island, The Wine Guy. We got a sold-out crowd and among the mezcal lovers were many CNBC Investing Club members. It’s always a spectacular thing to meet so many of you (hence my desire to either have a Vegas weekend or a cruise, where we can all meet and have classes and teach and learn from each other). Something pretty amazing happened. I learned how many of you had made hundreds of thousands if not millions of dollars on Nvidia (NVDA). It was a rather incredible time. With each person who had bought Nvidia, many after I had re-named my late rescue mutt Nvidia, I reminded them that we haven’t made money until we take something off the table. I’m certainly aware of the “own it, don’t trade it” doctrine that got us here. But it’s a cross-discipline to remember that and so you have to take something off as a compromise that few want to make. But it must be made. This brings me to this weekend’s missive. Unlike the ridiculous short squeezes that brought about GameStop ‘s (GME) meme-stock maina 2½ years ago, the current market is making some sense. We are all supposed to love a broadening of the tape, taking in health care, industrials, transports, financials and the like, to get beyond tech. We are also supposed to like tech beyond the Magnificent Seven: Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Tesla (TSLA), and, of course Nvidia. (All are Club names except Tesla. In autos, we like and own Ford (F), which has been quietly zooming higher as we wrote about last week.) But there’s a real problem here. The broadening in the market must be accompanied by an improvement both in the macro economy and the micro and/or the broader fundamentals and the fortunes of the individual companies. We have to challenge ourselves here. Have either changed? Or are we just acting out of relief to the government compromise over the debt ceiling deal and the Federal Reserve’s potential interest rate hike pause, which could be accompanied by damning rhetoric? As much as I would like it to be the case, nothing truly is better. In order for the Fed to make a legitimate case for a skip at its June meeting in the week ahead, you have to have some signs of an actual slowdown in the economy that impacts the day-to-day impingement of the working person. Or, to put it simply, something bad has to happen that’s broader than what we got with the mini-banking crisis in late winter. Has it? I don’t think so. Wages are stable. They need to retreat. Home prices are up. They need to go down. Rents are higher. they need to be lower. Food costs have stabilized and started to go higher again. The strength in travel and entertainment demonstrates that there is still too much liquidity in the system. The ease with which people can find jobs tells us that we aren’t in a situation where wages are going to go down. Of course, some things are going right. Used car prices have fallen by single digits. We have discounts for the first time for new cars, a development that just happened this month. We do have student loans back in play, and that could be the Fed’s best friend. You could have millions of people hit the workforce to meet those payments. We also have a whole new class coming into the job market. However, it must be said that there is so much stimulus money coming into the economy that getting a job will still be way too easy. And the fact that people are still working at home on Fridays and often Mondays is not a sign of a brand new way of doing your job. It’s a sign that job-hopping for higher wages is way too easy. All of this could be captured in the government’s consumer price index (CPI) out Tuesday morning, on the first day of the Fed meeting. (The producer price index is out Wednesday morning, just hours before the Fed wraps up its meeting and delivers its rate decision in the afternoon followed by Chairman Jerome Powell’s news conference.) A hotter-than-expected CPI is something I do dread if only because a hot one will mock a skip the next day. On the micro side, there’s not much good to report. Home Depot (HD) this week holds an analyst meeting after its disappointing quarter. Will management have to cut numbers again? Or will they tell a positive story about renovation and remodeling because people are not moving out of their homes due to having locked-in mortgages so low before the surge that it makes it foolish for them to leave? Beyond that, we can see the drivers of the economy slowing. Banks are lending less and will pay the FDIC more. Industrials, if they are not involved in aerospace or infrastructure do not have stronger fundamentals than they did last quarter. Yes, tech has stabilized, but the stocks outside the Magnificent Seven are moving because they have pivoted toward profitability and have also no longer seen their numbers cut. Is that a good reason to go higher? Before you say “as good as any,” recall that we have not had enough new initial public offerings (IPOs) to get new customers the money they need to buy enterprise software. And, of course, we have to be mindful that while artificial intelligence (AI) matters right now it only matters to a smattering of companies that are frantically trying to get Nvidia’s H-100 cards in order to FIGURE OUT what can be done with AI. The use cases are still few and far between despite the endless trumpeting of the wonderful changes it has brought. Wonderful changes in my world mean accelerating growth with less cost. The only company that fits such a depiction is, yes, Nvidia. Does Amazon really have enough customers to make it so its Amazon Web Services (AWS) cloud unit stops slowing, simply because AI produces such a great return? Have you heard of one company with a better return on investment because of AI? For me, Club holding Palo Alto Networks (PANW) has. Maybe Broadcom (AVGO) and Club Bullpen name Marvell (MRVL)? Yep, not enough to do the job. Now, one of the reasons why the S & P 500 has been able to manage four straight weeks of gains is the absence of news coupled with the debt ceiling deal. The money on the sidelines fearing the catastrophe of a default has been put to work rapidly. The shorts are totally routed. There’s enough chatter of positives, especially with the Seven, that you think we are in a broad market built on solid ground. But let’s think about this. What has been built beyond new heights? Beats me. So what does all of this mean? I think it means something not perilous but something murky. Obviously, if the CPI is cool we have more to rip. If the Fed is gentle, we have more to fly. If Home Depot says things have gotten better, we have a bigger slate to buy from. If China has a couple of good numbers beyond a solid set of Baltic Freight indicators, we might be OK. If oil can show strength, if copper can show resilience, we might have a stronger fundamental backdrop. To me, though, that’s a whole lot of “ifs.” That means by Wednesday’s Club meeting, right ahead of the Fed rate announcement, we could have a backdrop suggesting that we deserve to broaden. Right now, though, in almost every industry I follow, there are one or two stocks that lead and not enough followers. That’s why I come back to the idea of doing what we called “schnitzeling” at my old hedge fund, a simple process of peeling back to make it so if the “ifs” don’t materialize in a positive way, we aren’t bereft and besides ourselves. Remember the people in line at The Wine Guy for Fosforo. If we go up from here, that’s nice. If we go down from here, we are without the aid of the macro or the micro. I can’t think of a reason NOT to take some profits as we have been doing other than a bet that we will have five straight weeks of S & P 500 gains because it feels good. I have learned not to trust “feels good.” It often proceeds “feels bad.” Often but not always. If we get a continued rally will we really feel that we missed it if we schnitzel? No. Bottom line Until Wednesday’s Club meeting you know my mindset. Nothing’s guaranteed. I stress when I am wrong, not when I am right. Maybe a week from now, I can say, “How wrong was that to take off a little stock.” But that seems like a silly worry. So while we look for a new name to start a position in because it may still be down and the fundamentals have, indeed, changed, we need to take some gains and be grateful for them. See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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