Can there be any doubt after Wednesday's bloodletting that it was the right move to tell people to sell enough stock to cover their big outlays for the next five years, advice Jim gave last Monday on the Today show?
We're still getting flack, being called wildly irresponsible and even inaccurate, but the decision to tell people to sell last Monday, and before that Jim's sell 20% of your portfolio call on Sept. 19, look more and more prescient and correct by the day.
Let's do some quick and dirty math. It's always easier to go down than it is to come back up. For the market to get back to where it was on Sept. 19, when the Dow was at 11,000, it would take a 22.5% rally. It only took a 18.4% decline to get there. Uphill is harder. To get back to where we were before the mauling we took on Oct. 6, when the Dow was at 10,000, it would take a 11.4% rally. It only took a 10.2% decline to get here. (All figures are based on Thursday's Dow close of 8979.26.)
As Jim said on Wednesday's show, things are definitely better than they were when we reached these levels last week now that the feds have adopted the European plan, similar to the backroom deal we proposed on Friday night's show and are propping up everybody from Citigroup, Wells Fargo, and Bank of America, to Goldman Sachs and Morgan Stanley, not to mention smaller players like State Street and Bank of New York. State Street in particular looked like it would get annihilated before we got the new plan. But that doesn't mean we won't go still lower or that we're not in for an ugly recession.
I know there are a lot of people with vested interests in having investors buy and hold, mutual fund managers who take a cut of the assets they manage, not the profits, and financial advisors who get nothing if their clients put everything in a savings account (not something Jim ever recommended – he just said you need to take enough to pay for any big purchases over the next five years, that did not mean taking, say, long-term retirement money off the table if you're not going to retire within the next five years). They really didn't like Jim's sell call, but for personal reasons, not because it was wrong. We've almost entirely repealed Monday's big rally, so enough already with the criticism.
We get plenty of things wrong on Mad Money, plenty, but telling people to take a lot off the table last Monday, or as far back as Sept. 19, wasn't one of them. It's time for the critics to acknowledge that fact.
Jim's charitable trust owns Goldman Sachs and Morgan Stanley.
Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.
Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.
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