Cramer/TSC. Wrong! Tactics and Strategies: The Fed Cries Uncle
[Flickers of hope returning...]
thestreet.com
By James J. Cramer
9/6/98 4:30 PM ET
Enough is enough.
The Fed said Uncle Friday night. The bias is to ease. It is
the first step we have toward returning to a semblance of
order in the market and it is a clarion call to at least
consider buying if you have not bought during this decline. I
know during the previous week, I was worried, and we lopped
off 5% in a hurry.
But Friday's session was a joke. The selling in names like
General Electric (GE:NYSE) or American Express
(AXP:NYSE), big cap names that have Asian and Latin
exposure, but are not idiots cruising along the road
blindfolded at 100 mph, was too much. Now that the Fed is
moving to the bull camp, away from its angry at higher
prices stand, these stocks can be bought. Maybe not even
for a trade.
Let's get out the old Fed Ease chart. At the first sign of
easing you buy the financials, particularly the savings and
loans. I have been banking that the Fed was going to blink
once Latin America got thrown into the stew. This group has
been annihilated, laid to waste, drawn, quartered, diced and
sliced.
The most important reason why this group goes from being a
sell to a buy is that the yield curve, burned by high short
rates, rates that are higher than long rates in most instances
these days, is crushing them. But if the Fed eases we
should see short rates go down and long rates stay the
same or even go higher as the bond vigilantes -- if there are
any of them left -- go apoplectic that with employment so
tight, the Fed is easing. What a bunch of garbage that is
when the world is on the verge of a meltdown, but these
guys have always been small-minded. Lots of times
short-term trends change after three day weekends. Right
now I am betting that when people look at the prices they
are left with from Friday they will buy not sell.
The Barron's is a classic this week. Everything that I am
short they say is awful and going lower and I sit here and
pray that everyone reads it and takes action so I can cover
my shorts. Without Barron's I think my shorts are about to
cost me some money after weeks of coining it with them.
I know Jeff and I are both predicting it. I called him just now
and asked him, "Are you feeling it?" And he said "The
Squeeze?" Either we just did a true Vulcan mind meld,
Bucks County, Pa., to Westport, Conn., or it must be
obvious to everybody that with the Fed blinking, that's the
signal we need to do some serious bottom-fishing Tuesday.
Now if only those darn futures don't open 27 points higher
letting nobody in and causing the whole thing to go right
back down.
Random musings: Technically, I could not help but notice
that the advance decline has improved and that we are down
more than 10% from the 200 day moving averages, both
things that spelled bottoming out in my 1990 analogy. If the
savings and loans take off, I know I am right.
James J. Cramer is manager of a hedge fund and
co-chairman of TheStreet.com. Under no circumstances
does the information in this column represent a
recommendation to buy or sell stocks. Cramer's writings
provide insights into the dynamics of money management
and are not a solicitation for transactions. While he cannot
provide investment advice or recommendations, he invites
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