Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: Probart who wrote (9123)	6/2/1999 2:22:00 PM
From: Jenne	Read Replies (1) \| Respond to of 19700

You Can't Fight the Fed By James J. Cramer 6/2/99 2:03 PM ET Rates don't matter at all. If the Fed raises rates, it won't hurt stocks, because the buyers of stocks don't buy into the fragile link between stocks and bonds. The dividend discount model, the notion that stocks are priced off of long or short rates, that's all gobbledygook, meant to throw real buyers off the scent. The Fed could raise rates by a point and it wouldn't affect the growth rate of the Net. Factoring in interest rates is like factoring in the Super Bowl indicator, the hemline indicator or the Greenspan briefcase indicator. There, I have summed it all up, in one incredibly Wrong paragraph. One real gem of a stupid preamble. A mockery of a farce of a parody. I can't stress this rate point enough: This rally we had off the Oct. 8 low was caused by the Fed's easy attitude toward rates. There is a cause and effect. When the Fed tightens, the market can still rally. In fact, it probably will rally, especially if the Fed says that it will now "wait and see" after the tightening. (Some people, such as Tom McManus of Banc of America Securities, are saying to buy stocks now because the tightening is factored in. If I ran billions, I would probably be in agreement that I would have to start now, ahead of the tightening. But I run $250 million and am in no hurry.) When I started in this business, I used to be glued to the views of Marty Zweig, who had done the best historical work on this subject. Now Zweig doesn't get heard from very much, but I will never forget his most important tenet, one that was drilled into my head by his repeated, almost jackhammer-like admonitions: "Don't fight the Fed." If you bought when the Fed was easing, you made money. If you bought when the Fed was tightening, you made less money or you lost money. That's just history. There is nothing different this time. The online buyers may be less sensitive to rates than others, but as long as the mutual funds are run by people who can identify what happens when the Fed tightens, the market will not perform as well as before. Period. If you print out one phrase of one article today, print this out: "Don't fight the Fed." It doesn't work. For as long as I was in disagreement with Padinha about the strength of the economy, I was bullish, in part because I perceived that the Fed was on the team. Once we had the bias change, I became less bullish and more of a believer in Padinha's viewpoint. NAPM sealed it for me. And now that we have Fed guys on the tape every 10 minutes when we have this strong data, we will soon be fighting the Fed by buying stocks. I won't fight the Fed. I will wait until the Fed has told me, in words and in deeds, that the coast is clear. I will trade this market, but not invest in it. Sorry to those who would want to ignore rates. You have no history on your side. Random musings: The Journal says Vinik's fund sold his tech. Come on, he's a trader -- he could be right back in. You can't use those old filings to pin people down. Everybody knows that. --------------------------------------------------------------------------------