Jim Cramer: Market top indicator

Posted by Josh Friedlander | No Comments

Don’t get your hopes up. We’re merely in the eye of the storm. You don’t throw an economy as out of whack as we did (370% debt to GDP) and expect a year of moderate malaise to work it out, especially when you’ve paid the rent you couldn’t afford by borrowing more money to pay it! We’re in for some serious penury.

How else do I know? Well, Jim Cramer says in the latest NYMag that Helicopter Ben ‘We will not monetize the debt’ Bernanke has “averted the Great Depression Two.” That’s enough for me. Depression on!

Cramer, as you might know, is that former hedge fund blowhard who makes buying and selling companies look like a game. He made a lot of money in the boom years by having access to information denied to average retail investors — not insider trading, but smart trading, recognizing that analysts moved stocks and that he could influence analysts or, leveraging his commissions, stay better informed than the competition on what calls they were likely to issue.

Pretty clever, right? But what it means is that he learned how to dodge and weave and fake as a basketball player. As a commentator, he might predict what a real player would do, but he’s no longer on the court. His first-person access to information is dramatically reduced. He deserves praise for having played the game in a peak way, although maybe even that is going a bit far: the market is not rational and everyone who makes it more irrational is fractionally responsible for the damage it inflicts.

And don’t give me any of that “we provide liquidity” garbage. Liquidity is no virtue unto itself. There will always be risk capital. The misallocation of resources can happen one way or another, but I’d prefer the base case of someone not stepping in to buy instead of everyone bidding up the wrong things. Look, for instance, at what speculation can do to the razor-thin demand equilibrium for commodities.

Cramer played no part in thoughtful capital allocation. He’s proud of it. Pay attention to what he knew and how he knew it. Read his Confessions of a Street Addict. Cramer advises that only a sucker would buy a stock because he thought it was cheap. He pretty much craps on a value strategy, on long-term predictions — indeed, on long-term thinking. His entire game was information arbitrage: what will the analysts do? What will the big institutional investors do? What will company management do? Will earnings be over or under estimates? What will that make the sheep, the retail investors, do?

All very valid and all very succesful and all entirely useless if you’re trying to analyze the health or future of an economy. How this guy gets the chutzpah to even step up and pontificate on where the economy is going…it’s beyond me. He should know better. He should have some humility, but I don’t think the guy has any. Not real humility. He’ll play his I’m-just-some-lucky-shmuck shtick, or gee-golly-gosh schtick (as he did on the Jon Stewart show), but a guy who really had any humility wouldn’t barf his logorrhea, his laughably-selective rambling argumentation, all over the media like a sick cheerleader projectile-barfing into the stands.

This guy, who at the nadir of the 1998 crisis perfectly — PERFECTLY — MIStimed the bottom of the market by telling readers of TheStreet.com to give up apparently has the institutional memory of a fruit fly. In that instance, Cramer’s wife saved him by recognizing/predicting the reliability of the ‘Greenspan put.’ Greenspan convened a special session, lowered the rate and saved the day. This time, Bernanke has lowered the bar, built a cellar, figuratively dug a ditch to China, which is where all of our prosperity will sink now that the pain has flowed down that hole and into their foreign exchange reserves.

Cramer says Bernanke’s March 21 appearance on 60 Minutes was a turning point. Wha!? March 9 was the low. The S&P 500 index was already up more than 100 points from its low by the time we were subjected to the gross spectacle of on-camera professional question-asker Scott Pelley making such faux-profound statements as: “You know, Mr. Chairman, I think the Federal Reserve, for most people, is a mystery.” That’s not surprising given the quality of journalism on display these days.

Cramer says Bernanke threw off the shackles of the Bush administration’s laissez-faire economic outlook. Its what!? Its “endless faith in the markets”!? What!? I’m sorry, but wasn’t all that free funny money fed stimulus during Bush II? Aren’t we just doing more of the same but on a much bigger scale? Is Cramer living on Mars?

People need to ignore this schmuck.

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