'Don't quit the market' when it's frothy, says Jim Cramer. Here's why
Cramer used the dotcom bubble burst as an example. During that time in the late 1990s, he said froth involved the market's continuous roar based on, at best, hype. Stocks rallied for no real reason, markets lost their rational side and companies ended up with no revenue or business plan.
Cramer said today's market is vastly different because the rational outweighs the irrational.
On the irrational front, Cramer pointed to recent IPOs such as Circle, Figma and Bullish, that each saw explosive gains after their debuts. Bullish, a crypto exchange, most recently gained more than 83% during Wednesday's trading hours. While it pulled back from its highs, it still rallied another 10% on Thursday.
Cramer cited Oklo Inc. as another example. The company wants to build a small nuclear reactor that runs on nuclear waste. That stock is up 247% year-to-date.
"Flying cars, supercharged crypto ETFs, secretive companies that consult in magical ways ... all irrational. I could go on and on," Cramer said. "Is the widespread irrationality a reason to sell down your positions in perfectly rational stocks? Absolutely not."
On the other side, Cramer said Amazon and Eli Lilly are two examples of rationality.
Amazon on Thursday gained 3% after the company on Wednesday launched same-day delivery of fresh foods to more than 1,000 U.S. cities and towns.
Cramer called Amazon's announcement "an incredibly disruptive initiative" and said it could spell trouble for Instacart, Doordash and Uber. Instacart stock dropped 11% on the news on Wednesday.
Eli Lilly also saw a sign of confidence on Wednesday, Cramer noted, when an influential group from the drugmaker's management and board of directors bought up stock in the open market.
"Sure, there's froth, but there are also perfectly legitimate moves in the stocks of great companies," Cramer said. "I am calling this the year of magical thinking, but the truth is you can't get the runs in the good ones without the runs in the bad ones."
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