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Stop Trading!: Expect More Rate Cuts

The yield curve is showing that the Fed should cut another 50 or 75 basis points – “maybe even 100,” Cramer said on Stop Trading! Wednesday.

One of the best ways to play the end of that curve? Annaly Capital. CEO Mike Farrell has the necessary portfolio in place and he has a plan to buy up distressed subprime mortgages, Cramer said. JMP Securities initiated coverage on the stock Sept. 18 with a “strong buy.”

According to Cramer, the bears have massive positions to cover in Downey Savings & Loan and FirstFed Financial, two stocks he said were “the most dangerous shorts in the world.” Ten million of Downey’s 21 million shares outstanding are short, and 7 million of FirstFed’s 13 million shares outstanding are short.

“Are the shorts expecting Bill Poole to put through a tightening?" Cramer asked.

Cramer remembered October 1998 when the Fed signaled a cut and stocks like DSL and FED made “100% moves.” He recommended buying before the shorts race to cover.

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  • Jim Cramer

    Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

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