Cramer: They Know Something!
The Fed used to know nothing, but now they know something, Cramer said after Tuesday’s unexpected 50-basis-point rate cut. The move is a complete reversal from the central bank’s inflation-hawk attitude of early August, but now it’s stock-buying time on Wall Street as far as Cramer is concerned.
“I believe the crisis will soon be over,” Cramer said. “The Fed has…recognized that it’s time to worry about your job and your home, that those issues - home and job - are more important right now than inflation.”
Even better, Cramer expects more rate cuts to come. He said the cuts should continue until the fed funds rate is well below the 10-year Treasury, and that means three more rate cuts.
So ignore the bears who say this rate cut means nothing, Cramer said – the Dow is back on track to 14,500. He might have been wrong last Friday when he said the cut would be for 25 basis points and that the market would react poorly to a cut as high as 50 basis points, but Cramer said he was happy to be wrong this time.
So what’s worth buying? Stocks that yield more than Treasurys, or 4.5%. Stocks dependent on a strong domestic economy, such as banks, brokers and retailers. International plays are still good too, and so are any of Cramer’s wild bull markets and technology.
Here’s Cramer’s “Bernanke Celebration Portfolio”: Wachovia, which has been rescued by the cut. Google for high-growth in this low-inflation environment. Infrastructure stock Foster Wheeler. Deere or Caterpillar – take your pick, Cramer said. Lastly, oil plays Exxon Mobil, ConocoPhillips or Transocean as hedges against inflation.
Cramer’s bottom line: “As of today, the whole face of the market has changed. The time to be worried has come and gone because finally the Fed is facing the right direction and making the right moves. Ladies and gentlemen, the bull is back.”
Jim’s charitable trust owns Caterpillar and ConocoPhillips.
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