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It's worldwide and it's deepening. We know that. It has transcended residential real estate, transcended commercial real estate. We know that too. The battlegrounds are now unemployment and rates that are too high worldwide because it is obvious we cannot pull ourselves out of this one.
That's why this week is unfortunately so crucial. It is going to be difficult to advance ahead of Thursday's European rate show and Friday's unemployment number, although the force of this market is to run ahead of these key numbers, not behind, as the dominant force remains short covering and these are events worth covering shorts for.
What do we need to see? We want full-point reductions in rates in England and Europe, something that seems pretty doubtful but are as necessary as they were in this country last year. We need to see China making a definitive plan to put millions of people to work in infrastructure projects that absorb gigantic surpluses in minerals. We need to see some risk-taking and some financing and some taking advantage of the, in some cases, absurd declines in stocks of companies like United Technologies (NYSE: UTX) (Cramer's Take) or Caterpillar (NYSE: CAT) (Cramer's Take) or General Electric (NYSE: GE) (Cramer's Take), companies that tell us they have financing and can do things. We need to see the consumer spend, but, alas, that will simply not happen on any level we need if unemployment creeps to 10%.
Finally, we need to see the new administration because the pathetic response of the markets to the speeches of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, albeit exacerbated by exchange-traded fund shorting of all major indices coupled with the disastrous magnification of moves by Pro Ultra ETFs, shows that there is no confidence in this team, save the sainted Tim Geithner, and they must be swiftly broomed.
So it all comes down to not just one big bad event but three of them: the European Central Bank, the Bank of England and unemployment, a troika of opportunity and trouble that will define whether we take out the lows of November or not. We strike out with small cuts and big unemployment and we will be there for certain, so there is no incentive to buy things unless, A). stocks fall hard ahead of the troika, or B). you want to go along with what could be a Wednesday short-covering rally. I prefer the former as a strategy: less risky but certainly less opportunity.
Random musings: I have been using a $2 billion loss figure now for some time, a $5 a share hit, for Goldman Sachs (NYSE: GS) (Cramer's Take). I do not know why the analyst community isn't there. From the looks of Tuesday's Wall Street Journal it is at last on the table.
Jim Cramer is co-founder and chairman 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 General Electric and Goldman Sachs.
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Reader Comments (Page 1 of 1)
12-02-2008 @ 11:19AM
Paul said...
The economy tanked because of the housing market, low interest rates that began with Alan Greenspan, he made money almost worthless, borrowers were given 100% loans with no credit, the markets reflected numbers that did not support the direction of the economy, with over 10 Trillion Dollar Debt the Government will continue to add billions of tax money to those who caused the problem, it will take many years to overcome this problem, for many it is to late, they will never get back their losses in the market, long term unpredictiable
12-02-2008 @ 3:27PM
joe said...
Cramer was touting Goldman up to a few months ago, now he is a genius? Jim's a joke!
12-02-2008 @ 4:36PM
John said...
Jim is not a joke folks. Despite all his ranting and raving and foolish antics (showmanship) the guy has predicted everything. He's probably one of the most optimistic people on the street. So when he's nervous, so you should be. What's even scarier is reading between his words. This man is genuinely scared of a total colapse. It still is very possible and everyone should get their hands on cash. Call it chicken little, but have you seen one person besides him who understands this mess? Study the depression, and you'll see that rings familiar. Lastly, in the great depression the market fell some 80+% from it's high. Contrary to most peoples knowledge this happened not in one day but over several month's. The market is now down 40+% from last year. Even if we don't hit 80% at what time does it become the little depression, or medium depression? 50% 60% 65% unemployment at 18% 19% 20% (it was 25% in '29) think about it, then call me chicken little.
12-02-2008 @ 5:13PM
beachpaul said...
The market holds because Jim, Bernanke, down to the humble day trader, all know, if the 8200-8500 floor gives out, the market will go to 4,000. That will be the other 40%. So far it seems to be holding. The pressures will increase. Going to zero interest rate is not an answer. Japan tried it. The loan underwriters at the banks are almost paralyzed by fear of making a wrong decision and losing their jobs. The hoops you have to jump through to get a loan, even with 800 credit scores, are exhausting. Even for short sellers, taking that elevator down to the 4th floor would be suicidal. So, What do we do? We wait, we watch, we invest.