TheStreet.com's Jim Cramer says Tuesday's action addressed the systemic risk, but not the earnings problems.Oh, shoot ... the fundamentals. Remember them? The ones not covered by Caterpillar's (NYSE: CAT) (Cramer's Take) rosy forecast for 2010? Yeah, those bits and pieces called earnings?
That's how I always feel after a big rally day when I know the economy is slowing, not getting better. We get some terrific news from the Fed as we did Tuesday, and we want to sound the all-clear. Instead we have to now deal with companies' earnings, and we know from Wellpoint (NYSE: WLP) (Cramer's Take) et al and Texas Instruments (NYSE: TXN) (Cramer's Take) et al that the Fed safety net doesn't take everything in with it.
So what did happen yesterday? After pondering it for seemingly every waking -- and sleeping! -- hour since it happened, I am thinking that yesterday's Fed move took off the systemic risk of a major financial failure.
By being creative and actually addressing the bad inventory that is clogging the system -- consider it a drain, if you will -- it made it so the system is unlikely to back up and overwhelm all who are using it. If you clean out the debris, the detritus of AAA mortgages that is making it so everything is stopped up, you give the system a chance to refresh.
I have always felt that when you get rid of the systemic risk you bring in sidelined people and sidelined money. You also -- and this is very important -- get the shorts to stop laying on everything and making it so refinancing is impossible. It is difficult to get off the canvas with the shorts laying all over you.
That's what happened yesterday. We eliminated a major catastrophe, which matters.
When we eliminated a major catastrophe in 1998 -- Long Term Capital -- the market exploded upward.
Is this the same? No, that was isolated. This is spread out. But the mere hope that things can get better made it so shorts cover, new money comes in, companies like Washington Mutual (NYSE: WM) (Cramer's Take) can get new money because the other money that came in isn't wiped out, and we put in a bottom.
That's what I felt happened yesterday. We put in something that will bring buyers back if we go back there.
Obviously you want to do more than put in a bottom. But taking systemic risk off the table is very important and that's what I saw happen yesterday. Doesn't solve earnings; does solve insolvency of the system.
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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)
3-12-2008 @ 10:19AM
John said...
Hello Cramer,
I'm just a restaurant owner who is an optimist and I've made a lot of money from this business and shopping centers. As an eternal optimist, I think even a basic 101 economy student can see the BIG FALL, we are heading for.
The wall street "sharks" are just feeding off each other and all the markets, are totally disconnected from reality!
The $150,000,000,000 stimulus package checks coming out in May, are now being eaten by the $300,000,000,000 A DAY, excess gas prices we are paying.
No one lives on core inflation. Everyone has to pay for gas, food & utilities!
Just because the "experts" tell us the room is only 75 degrees and shows us their fixed thermometer showing the same, but the real temperature is 100 degrees....we're still sweating at the 100 degree temperature!
Regards, I'll see you the other side of the DEPRESSION!
John Laou
3-12-2008 @ 10:29AM
ME said...
john laou: i am right there with you baby! i am a former business owner who couldn't ride this last wave and as a former "optimist" on this market i am now a "realist" on the game. i am telling everyone---family and friends----read between the lines. we all need to hang tight and stay tight and create new ways to exist thru this upcoming depression. loved your comments!
3-12-2008 @ 2:33PM
Ben said...
I've been planning for this for 3 years...I los tmy job last year and was luckily bale to sell my house near Atlanta for 20% gain over 1 and 1/2 years (enough to pay agents and moving exspenses)
3-12-2008 @ 10:47AM
Proper said...
Your comment:
I've been planning for this for 3 years...I los tmy job last year and
was luckily bale to sell my house near Atlanta for 20% gain over 1 and
1/2 years (enough to pay agents and moving exspenses)
3-12-2008 @ 12:52PM
william lindblad said...
Prediction: Summer hit TV show
The victory Garden.
3-12-2008 @ 1:36PM
Robert said...
CRAMER! What makes Kramer so damb creditable? In this context, he's nothing more than a marketeer on that infommericial, CNBC!
3-13-2008 @ 6:07PM
phillip said...
Folks,
It's NOT all over. We are still kicking butt and taking names buying single-family, foreclosed real estate $30-50k below market, earning 15-30% cash flow yield renting our houses out, and enjoying great tax benefits.
The beauty of it is that there are so many nice foreclosures to choose from!
Everybody needs a place to live! Buy foreclosed real estate what the gettin' is good!
Phillip
http://www.mylifechanger.com