Creamer says buy with both hands....
Nov 02, 1999
The Market's Psyche
By James J. Cramer
Here's the market's mindset, its psyche. Here's what it is saying. First, and most important, it is saying that commodity prices have peaked and that inflation is now behind us. That's why the bonds are rallying on a strong purchasing number and why the highest-multiple stocks are ramping. That's what happens when inflation peaks.
There is a good reason why the highest-multiple stocks work here. The Fed is engineering what is known as a "soft landing." That is where the Fed wrenches inflation from the system by slowing the economy ever so gently so it doesn't burn up in re-entry. (Yes, it is like a spacecraft with a parachute.)
During a soft landing, the heavy-duty cyclicals get beat up because the inventory stockpiling that goes on to beat the price increases slows. People stop building those inventories, which hurts near-term profitability for these companies.
At the same time, the highest-multiple companies do better because they are not hurt by the Fed's ratcheting of rates and they benefit, via multiple expansion, from the improvement in the bond market. So, in English, people buy stocks that don't need a strong economy and they sell the ones that do because the Fed is assuring that the economy is not going to stay strong.
Unfortunately, the wild card is still Greenspan. Anytime we think that he has given us a green light to buy, he flashes an amber light. He speaks tomorrow. If we rock today, he will go amber tomorrow
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