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TheStreet.com's Jim Cramer says if we're flat or down ahead of the right Fed action today, several sectors will take off.Every rate cut matters now. We are in that zone where money in can overwhelm existing stocks and move them up simply because there hasn't been a lot of new supply -- ex banking preferreds -- and the buybacks kick in.
Let's take the homebuilders. As crazy as it was, the homebuilders bought a huge amount of stock back, and the supply is unusually low. That means you get exaggerated moves as that money comes in from the sidelines.
Same with stocks like Whirlpool (NYSE: WHR) (Cramer's Take) or Black & Decker (NYSE: BDK) (Cramer's Take), where just a little bit of buying seems to move the stocks absurdly.
I think much of this is a function of money not getting a good return on the sidelines, and we see that the shrunken floats actually work.
There are tons of companies that have bought back stock in the last two years, and frankly, it didn't matter because money's been coming out of the stock market for years; the Fed's actions should be and are reversing that flow. (So many good things happen with low rates that the media never talks about.)
That's why I am inclined to buy any weakness we get today off a 50-basis-point cut, although I think the market could RIP on a down 50 if we are unchanged or down ahead of the meeting announcement. It is amazing, though, how lately we go right to the brink up 100 points, making things much tougher. As a betting person, I expect that the futures' burst upward will most likely preclude buying, so you do have to pick some things up on potential weakness this morning.
What would I buy? Financials, of course. Numbers go higher on a 50-basis-point cut.
Retail, too.
And last, industrials.
Anything less than 50 basis points and I would STILL BUY THE SAME STOCKS. I would just be careful of the blast of futures that might knock them down at a frightening speed.
Random musings: Lehman Brothers' (NYSE: LEH) (Cramer's Take) dividend boost goes far toward showing that this firm is not a mortgage house despite such characterizations. ... Yahoo! (NASDAQ: YHOO) (Cramer's Take) is really amazing. I cannot believe the lack of ability to monetize. It is amazing. Plus, how did they get so much staff? How did they get such poor gross margins? Why don't they put themselves up for sale? Anyone could do better with their pageviews except themselves ...
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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 had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
1-30-2008 @ 10:06AM
kluji said...
Cramer is a financial tv IDIOT who eventually sends all the sheep off a cliff. History will repeat itself and once again Cramer will lead everyone into financial dire straights! He did it in 200/2001 and he will do it again. Patience!
1-30-2008 @ 10:45AM
Don said...
I cannot stand to listen to Jim Cramer. His voice is so grating. Whether he has anything important to say is not relevant to me because I can't get past his voice.
1-30-2008 @ 12:19PM
KGar said...
Take a deep breath, still not out of the woods yet. I will wait until inflation and unemp. #s come out. Still looks like recession to me.
1-31-2008 @ 7:13AM
Linda said...
I like Cramer. The only thing that bothers me he reminds me of so many preachers, who get on their soapboxes and scream and yell as if they just hit on something big. Its a motivation tactic. This works especially well on the young and inexperienced investor (who by the way could easily get turned off to the market for good). Question: Why does he want people to BUY all the time? Possible Answer: Uncle Sam probably backs him. Our government wants us to invest in the stock market, esp. here at home, so businesses will get back to spending and get the whole money cycle going again. One of the problems is many of us are sending money overseas first for the products we use every day, including manufactered products by US companies, and also to invest in their markets. The highest return I have had on any investment in the last two years has consistantly been on a global fund. Our US companies MUST lead the way by investing in us with factories and workers (not illegal imigrants). Do the Japanese have us making their car parts?