But what about oil?
But what about the dollar?
Is it enough?
Is it too much because of inflation?
Are they behind the curve?
Is it wrong that hedge funds get bailed out?
I have no objections to any boilerplate questions about the Fed and its rate cuts. They make sense. I do, however, occasionally want to suspend suspicion and cynicism and even, yes, skepticism, for the moment after something as monumental as yesterday's half-point cut.
I say that because sometimes my job conflicts with the need to be the skeptical reporter. That's because there's an overriding need on this site and in what I do for a living, which is try to make people money.
People want to know how the market will react, they want to know if it is time to buy, or too late to buy, or okay to buy, or good to sell. Those questions are obfuscators. They are theoretical. They get in the way of making money, and if answered incorrectly, they block the chance for making money.
Of course all of those issues are concerns, chiefly oil. It's not "good" that oil is going higher, even though to anyone with a car, it is obvious that it hasn't filtered through. I paid $2.60 yesterday, a dollar lower than I would think I would have had to pay given the price of crude. Weak dollar, possible inflation flare-up -- all bad.
But the simple answer is that things were not right going into the meeting. Big things. You shouldn't have T-bills so high when the 10-year is so low. That's 105 degrees on the thermometer. Those who fought 50 basis points, thinking it is too much, that it means panic, are the same people who would deny children antibiotics lest they scare the parents! It's all nonsense. Retail, autos and banks are real economy sectors, and everyone knew they were hurting.
I swear, I think there were a lot of underinvested people squawking Tuesday, pointing out all of these risks. Anyone who is truly "worried" about business can't be "worried" about a half-point. Anything that gets us to where the short-rates are lower than the long rates is a win for business and business people know it.
Why would their stocks not gravitate higher when that's the case?
When you have the CEOs of outfits like Ford Motor (NYSE: F) and General Motors (NYSE: GM) calling for rate cuts, that means something. They can afford to offer lower-cost financing to move inventory. Strapped homebuilders could get some relief as banks are now going to lose a half-point less when they are renegotiating.
People will feel better and spend more at retail, helping a Kohl's (NYSE: KSS) , a Target (NYSE: TGT) or even the hated Sears (NASDAQ: SHLD). How can that not be better?
As far as whether rates can "save" homebuilders and stimulate buying, all I can say is: How can it hurt? The summer and fall are already miserable. The firesale will prove to be a blip for Hovnanian (NYSE: HOV), but at least a blip that shows you that Hovnanian may be solvent. So don't buy the homebuilders, but you can't short them any more.
Or how about the banks? Do you feel worse about buying Washington Mutual (NYSE: WM)? Wachovia (NYSE: WB)? Doesn't it make you feel better about the margins a Thornburg (NYSE: TMA) could have or that a Downey (NYSE: DSL) or a First Federal (NYSE: FED) could have? I would buy them both.
In the meantime, the effects of cash rates being lower of course lowers the competition to an AT&T (NYSE: T) or a Verizon (NYSE: VZ) or a Con Edison (NYSE: ED) or a Genesis Lease (NYSE: GLS) , like I had on last night with its 8% yield. What a great story that is!
So, let's put away all of the theory and shelve the morals. Today's a better day than before the half point. As someone who even the New York Times acknowledges was the most vocal critic of the Fed because they didn't know how bad things were out there, I relent and praise.
They know something is very much awry. They had to suspend the worries that I mentioned up top because they had to save jobs. Because they had to save the economy, and anyone who thinks they didn't is simply a simpleton. Sure, if they wanted to, they could "break the back" of inflation. But things had gotten out of hand very quickly and there's no reason to cause a recession in order to try to knock down the price of oil and corn. If houses were in the CPI, you would see that their goal might very well have been to stop deflation, not stop inflation.
In sum, don't be distracted. It's not too late to buy. And if you are short or underinvested you've got to get your butt on a site, in a newspaper or on television expressing those qualms I ignore at the top of the page.
How else are you going to bring in the shorts and put money to work on a sale?
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Sears Holdings.
Additional stories from the Street.com:
The week in preview: Mulling over techs, financials
'Crash-and-burn economy?' 'Bailout beer bust?' What should we call America's economic disaster?
Yogi is right: Ninety percent of this (economics) game is half-mental
Reader Comments (Page 1 of 1)
9-19-2007 @ 11:05AM
Mort said...
The Fed bowed to the Wall Street money boys and financial institutions. So much for America's "free markets." But my guess is that the bold .50% cut was mostly about building confidence and media. The housing/real estate sky still looks overcast with lots of storms to go through in 2008.
9-19-2007 @ 11:26AM
wildbill said...
The economy now hinges on the consumer. Will the rate cut promote confidence as intended? Those that have to re-negotiate loans may have a degree of fear instilled and may pull their ears in instead of going on a new spending spree. The "graying of America", fixed income segment is large and many of us rely on the interest from savings for expendable income. At 5+, I spend, but at 3 I don't. While the concept here is to make certain areas of the consumer market cheap, due to low rates, it does nothing to mitigate the cost of oil, food, utilities and the rental market.
9-19-2007 @ 11:36AM
Michael Levy said...
Why do I feel an ego that changes its mind every headline is not to be trusted?
9-19-2007 @ 11:38AM
DAVIDL WEST said...
THIS DROP IN INTEREST RATES WILL ONLY TEMPORARILY SPUR THE ECONOMY. IT WILL ALSO BE INFLATIONARY, WEAKEN THE DOLLAR, INCREASE OUR TRADE DEFICIT, LIKELY INCREASE OUR NATIONAL DEBT TO OVER 9 TRILLION $, AND LIKELY INCREASE COMSUMER DEBT: ALL THE WRONG THINGS FOR THE FUTURE GENERATIONS. WE ARE IN BIG LONG-TERM TROUBLE! WE NEED TO LOWER OUR STANDARD-OF-LIVING AND REVERESE OUR TRADE DEFICIT AND STOP BORROWING!! I HATE DEBT! DRASTIC MEASURES BUT IF WE DON'T START NOW, OUR DESCENDENTS WILL ULTIMATELY PAY THE PRICE OF OUR LUXURIOUS QUALITY OF LIFE. RESPECTFULLY, DAVID L. WEST
9-19-2007 @ 11:42AM
bert shlensky said...
Isn't it interesting that with all the declines and increases basically nothing has happened to the market in three months. The comment about headline comments changing to get attention rather than based on real expertise seems quite true.
9-19-2007 @ 12:01PM
Tim said...
BEST STOCKS THIS MONTH
http://www.yieldpulse.com
9-19-2007 @ 12:13PM
Howard Goodman said...
It's nice to hear about an 8% yeild, but since Jim has been touting GLS on his show, it's been down about 15%, and he has been predicting that the Fed will bail out the market. Where exactly is the value in this stock?
9-19-2007 @ 12:23PM
Steve-o said...
To the naysayers: Maybe you are right, but it doesn't matter now. Quit whining and adjust to the new reality. Your job is to profit as best you can from whatever conditions exist at the time. If you can't profit, cut your losses and wait for better times. When a driver runs a stop sign and comes at you, don't waste time griping that he should have stopped, lessen the impending impact or avoid it as best you can. Act in your own self-interest, and stop worrying about everybody else. This isn't a zero sum game.
9-19-2007 @ 1:09PM
steve-o said...
Jim Cramer is a circus side-show. Wall Street has been a losing proposition for years and cannot find their ass with either hand. When this country realizes we are only a piece of the global economy perhaps our investing habits will change. The notion that individuals cost of living rises and falls with the CPI is absurd. The combination of the historic benchmark returns of the "market" coupled with the flawed Feds benchmark of inflation is making it impossible for people to set and meet their financial goals. Cramer sucks.
9-19-2007 @ 1:37PM
Steve said...
I'm surprised to hear Cramer say that he job is to make people money. I remember in '02 when the market was in the dumpster he said on his website that he and his fellow brokers should be pushing their customers to buy stocks because that was their job.
Seems to have changed his tune!
9-19-2007 @ 2:30PM
jamzncpa said...
So sorry to see AOL embrace Jim Cramer. I do not look forward to seeing his comments featured on a daily basis. Following his recommendations is a sure recipe for disaster in anyone's portfolio. He may be the worst of all the many flacks we try to block out of our financial thinking.
9-19-2007 @ 2:45PM
Bernal Powers said...
I have been a small investor/speculator for years.
When Jim Cramer has been "imposed" upon my consciousness in some financial show - not that I sought him out - I have never been impressed.
9-19-2007 @ 4:00PM
MTfunds said...
They are hinting more about a war with Iran and we have record national debt. America is becoming a dog eat dog society, every person for themselves so take care of you and yours. If you have unmanageable debt or are upside down on your mortgage seek relief through bankruptcy, foreclosure, or refinancing it all. Once your slate is wiped clean or your debt manageable think about your future. Stop buying excesses and buy only necessities. If you have extra money stay ahead of the dropping dollar through investments. Some say foreign currency, oil, gold, wheat futures, grocery store stocks, etc. Basically depression proof investments. It's your call but if **** hits the fan, everyone has to eat.
9-19-2007 @ 6:38PM
Sy said...
This rate drop will only provide another opportunity for the unscrupulous mortgage brokers and bankers to further peddle their questionable merchandise to unsophisticated speculators and to innocent, hardworking individuals, with limited resources, seeking onlyto own a home. It was these brokers and bankers who caused this mess in the first place. When greed is the motivating factor, it is naive to think they will have learned and will not be at it again.
9-20-2007 @ 12:40AM
BURG said...
The value of your dollars just went down .... Hello
From this point on the dollar will be dropping even faster. Preserve your savings, and the value of your dollars
BUY GOLD AND GOLD SHARES NOW !!! and do it fast.
10-02-2007 @ 11:16AM
vic said...
A guest on a recent talk show predicted the stock market would crash if Hilary got elected Pres. since she would raise the capital gains tax to 30% or 40%. - it would be "black Wednesday".
Question: What say you?
10-05-2007 @ 12:01PM
V.S. said...
GM stocks will hit $55.00 by the end of the year...Their ability to move their products under the new contract and with their new product line has no way to go gut UP! This is a win - win situation for the consumer....getting a better product and the stock market will show it by the end of the year!