This market’s a triple sell, Cramer said during Monday’s Mad Money.
You might remember him saying exactly that on Friday. He urged viewers to trim 20% of their portfolio both to preserve capital and to raise cash. Investors always want at least some money on the sidelines so they can buy stocks when the time is right.
But that time is not now. Cramer’s seen an environment like this before. It came immediately after the crash of 1987. The rally that followed was overshadowed by fears of systemic risk in the system. Sound familiar? We rallied big late last week after a crushing few days of trading, and then today we’re back down again. Washington’s moves to correct the system – whether they be Treasury Secretary Henry Paulson’s bailout plan or the SEC’s ban on short selling – haven’t yet removed the fear.
Think about it: Goldman Sachs , the firm that got subprime right, has been teetering on the edge of collapse. That doesn’t exactly instill confidence in the market. The way Cramer sees it, Paulson’s plan, the short-selling rules and the conversion of Goldman into a deposit bank may have removed the possibility of this once-great investment house’s collapse, but “it would be insane to feel good about anything financial,” Cramer said. “And by the way, all stocks, at the end of the day, are financial in a world where Goldman came that close to the brink.”
It’s hard to be bullish when oil spikes over $16 in a day, too.
Then there’s the SEC and its temporary ban in short selling. Cramer’s not a fan of the move, but at least it prevented the collapse of the Western financial world, he said. But stocks are too high because of these rules, so more corrections could be coming. And it’s not like Wall Street hasn’t already found a way around the rules, namely through put strategies and futures selling. Look at the declines the banks took today: Wells Fargo down 11%, US Bancorp down 8%, Bank of America down 9%. What happens when the rules are withdrawn?
Investors should play it as cautious as possible. That’s Cramer’s advice. Raise cash, buy gold. Even if Paulson’s plan goes through, there’s still earnings risk to worry about. It doesn’t make sense to get in ahead of a potential earnings miss.
Oddly enough, Cramer noted, the best investment you have right now could be your home. Both sides of the aisle are trying to solve the problem, which means a solution will come. Money will be available, tax credits created, fewer houses built and there will be fewer foreclosures. Finally, it appears this sector’s going to see some stability.
Cramer’s bottom line for this market: “If you’re already on the sidelines, stay there. If you’re not, keep on selling until you get that cash up to a respectable level and then go buy some gold.”
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