Jim Cramer: Our allies — and enemies — hold the keys to unlocking this market

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If the rest of the world would simply do what is expected of it, we would have a decent stock market and more prosperity with less inflation. That just isn’t the case right now. We are in a seasonably strong period — that’s for certain. We seem to have decent retail sales on tap, at least from the now resurrected mall stores. It is a bit of a brick-and-mortar surprise, especially among the more erratic apparel companies. It appears inventories are under control and that’s enough to make investors excited. I prefer to see strong sales as a reason to buy. But given the concerns so many have about a recession, low inventories mean less debt and less promotion. That’s unless you are speaking of the low inventories at Bed Bath & Beyond (BBBY), which may be more related to a lack of credit than an abundance of perspicacity. What is confounding us has more to do with the actions of our allies and — just call it as we see it — our enemies. Let’s start with China. Here’s a country that is treating Covid-19 like it’s Captain Trips, the lethal strain of influenza that wiped out most of world’s population in Stephen King’s apocalyptic novel “The Stand.” It seemed logical, rational even, that once President Xi Jinping became president forever, he was free to end the lunacy of pretending his country’s zero-Covid strategy could work. What more did he need? Now, we are beginning to truly wonder about Xi’s ultimate plan. There is not a scientist worth her salt who says we can actually stop the infection — even with near total lockdown. Our bodies simply can’t create immunity. We have our next best thing, the vaccine that is almost 100% good at making it so you don’t get real sick, plus we have pills if you do. But China is stuck in April of 2020, and it does seem that chaos could really reign. Demonstrators and police clashed Sunday night in Shanghai over the latest round of restrictions. Not only is the production army out of whack — as we’ve learned from Apple (AAPL) and the violent worker protests at Foxconn’s flagship iPhone plant — but the consumption columns are sorely lacking, too. Is there really no viable engine and no check on a government that doesn’t seem to want one? It’s incredible how irrational it has all gone and how isolated China really turns out to be. There was a time when you couldn’t imagine not manufacturing in China and selling products here. Now I think that any company that is still in China making things for the U.S. wishes it could just close down and reopen anywhere else and just pay the price of a more expensive workforce. The double-edged sword of “we make it cheaper and we buy more because there are so many of us” will fray if this keeps up; it is amazing that President Xi either doesn’t understand that or doesn’t even care. How is that possible? How is he not watching “iPhone City” and not thinking about Captain Trips? Perhaps because he’s not a fan of Stephen King. His loss. Then there is Russia. The full-blown land war has somehow drifted off the front pages even as the humanitarian crisis ramps up.The Russians have been able to both begin the appeasement process through a chilly France, and fool the U.S. into not giving the Ukrainians what they need, namely Patriot missiles to stop the endless rockets raining hell on its people. There is no lull in this war. Only a lull in the coverage of this war. That President Joe Biden isn’t over in Europe making sure the allies stick together and offer the Ukrainians more aid is a sign that he’s happy with the status quo. That’s outrageous, given that the status quo means the madman Russian President Vladimir Putin wins. We are not dealing with Joseph Stalin here, with an army of 28 million people that’s equipped with the latest armaments complimentary of the U.S. Putin has nukes, but if he uses them he assures his own country’s destruction. No better time than to rally the allies into cutting off Russia from everything and even threatening to block any oil coming out of the country. But it isn’t happening. It’s just not rational. A bully could be overturned and a new order of peace and prosperity could beckon if the West would just show some united might. In the U.S. we have our own versions of irrationality. We have a possible rail strike over a deal that President Biden basically crafted for the unions and now seems like he isn’t involved. In 1992, we had this happen and Congress got involved fast and it lasted for two days. It shouldn’t go that far this time, but in the meantime the irrationality of the strike seems to surprise no one. We expect irrationality out of Washington. Finally, there is crypto irrationality. This is the toughest one of all. What is really happening in this world? Let’s start with a simpler question: Does it matter? Is it prurient? How much was lost? Who lost it? Will it hurt purchasing power? Were the people who lost in crypto the ones that were undeterred from shopping at Best Buy (BBY) or Dick’s (DKS), which had spectacular orders? Were they the ones who bought Deere (DE) equipment to keep their lawns looking trim or do heavy construction work? We don’t know these people and we don’t know the impact of their losses on our economy because, well, the irrationality of liking and rooting for no safety net after a century of being grateful for one. There’s too much irrationality to go for a huge rally unless things become so irrational that companies don’t want to hire the way they have been, and hiring freezes turn into layoffs. Then, and only then, will irrationality lead, bizarrely, to higher stock prices. The Federal Reserve will recognize that only the U.S. is strong. That alone will at last put pressure on prices to come down because of the end of supply chain woes and the beginning of real fear of the future, as talk of slashed bonuses and post-Christmas firings become headline news. Good — meaning too hot — is still bad for stocks. But less good? That’s what the bulls must hope for as irrationality sets in from all over the world and wends its way through Wall Street. (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.

Only a few vehicles, including one with two health workers, drive through Beijing’s central business district on Nov. 23, 2022, as the area has announced tighter Covid controls.
Kevin Frayer | Getty Images News | Getty Images

If the rest of the world would simply do what is expected of it, we would have a decent stock market and more prosperity with less inflation. That just isn’t the case right now.

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