'As much as it pains me to say this, the current situation combines... some of the worst characteristics of those four past breakdowns.’
That’s CNBC’s resident market maniac Jim Cramer dropping heaps of FUD (fear, uncertainty, doubt) on his audience Monday night as stocks continue what he described as a “slow-motion train wreck.”
He talked about the only four times in his career that he’s ever dumped his entire equity portfolio. Three times it worked. Once it didn’t.
In October 1987, it was a whipsaw mechanical plunge that became known as Black Monday, and “now it’s algorithms and ETFs,” he said. “They’re like machine guns mowing down any buyers, like we saw today.”
Then there was 1998. Cramer talked about unloading his stocks ahead of what he predicted would be “a total collapse” as major hedge funds ran for the exits. The Federal Reserve’s Alan Greenspan stepped in with an emergence interest rate cut that propped stocks and Cramer, who calls it the worst professional mistake he’s ever made, says he hopes the Fed would do the same today.
We all know what happened in March 2000, when the dot-com fantasy came crashing down. “The economy was robust, but the bankers flooded the market with too many low-quality internet IPOs and secondary offerings, then the whole thing collapsed under its own weight,” Cramer said.
And finally, the financial crisis of 2008, when Cramer went off on his epic “they know nothing” rant. Bernanke “has no idea how bad it is out there,” he yelled.
Which brings us to the current climate.
“Right now, the stock market is signaling that the economy’s in for pretty rapid deterioration, just like 2008,” Cramer said Monday night. “We have a Fed that’s lamentably unaware of the danger... the Fed is making the same mistakes as in 2007. They’re totally misjudging how weak some major parts of the economy are.”
So how can much deeper losses be avoided? Cramer explained that the Fed either has to change course on rates or Trump has to end his tariffs.
““If Fed chief Jerome Powell actually starts listening to the stock market and wakes up to the damage that [Trump’s] tariffs can do to the economy, then maybe he’ll shift gears, just like [then-Fed Chairman Alan Greenspan] did in ‘98,” he said.
The market was on the mend a bit on Tuesday, with the Dow Jones Industrial Average DJIA, +0.66% up triple digits, while the S&P 500 SPX, +0.41% and Nasdaq Composite COMP, +0.28% were also peeking into positive territory.
October 30, 2018