Obama, Bernanke As Market Catalysts
During the latest presidential campaign, John McCain’s team sarcastically called now President-Elect Barack Obama as “The One,” referring to Keanu Reeves’ Neo character in The Matrix. Like Neo, Obama was the savior the world was waiting for, the superhuman who could do no wrong, the candidate with a seemingly bulletproof – or was it bullet-dodging? – reputation.
Well, Obama’s ability to positively affect the markets seems to only add to that mystique. While there was a late-day sell-off, Cramer credited Obama for the strength we saw through much of Wednesday’s trading session. Just look at the performance of the sectors that Obama’s blessed.
Infrastructure names like Jacobs Engineering, AECOM , Nucor and U.S. Steel were all up, as were Joy Global, Freeport-McMoRan and Caterpillar, on anticipation of an Obama stimulus plan.
Obama appointed former Iowa Governor Tom Vilsack to the secretary of Agriculture post, and then Deere, Potash and Mosaic jumped.
Even the alternative-energy companies – think First Solar and Trinity – finished the day with big gains, and that’s with oil dropping to a more than four-year low.
And believe it or not, Ben Bernanke had something to do with Wednesday’s good action, too. Granted, there was a point when Cramer saw Bernanke as a lot closer to The Matrix’s evil Agent Smith than Neo, but yesterday’s announcement that the central bank was willing to save the markets and the economy “by any means necessary” has redeemed the Fed chief.
Now the market knows Bernanke means business, Cramer said. Bernanke will push down mortgage rates enough to force a rebound in housing. That’s why KB Homes, Lennar and Toll Brothers surged. The federal funds rate is so low that bank can borrow money and find profits in one-year Treasurys. Formerly toxic mortgage portfolios will be worth big money again. Hence the moves in Morgan Stanley and Goldman Sachs.
Tuesday’s interest-rate cut will push down the dollar, boosting exports here in the U.S. Obviously, the industrials will benefit here, but so, too, do the drug stocks. Schering-Plough was up big at certain points during the day, and Cramer’s still bullish on Johnson & Johnson.
And lastly, someone in the Obama camp might be watching Mad Money. There’s discussion about creating a trading desk to encourage the buying and selling of mortgage-backed securities. Of course, this paper has been at the heart of the U.S. financial crisis, as neither side of the transaction can settle on a price because of the volatility of the loans that comprise the bonds.
Cramer sees a government-led trading desk solving that problem. The government could take a buyer’s lowball bid of 30 cents on that dollar and match it with a seller’s much higher asking price of 70 cents. As intermediary, the government could buy at 49 cents and then sell at 51 cents. That way these mortgage-backed securities finally have a real valuation, lending stability to the banking system, and Washington can earn some profits for making it happen.
Jim's charitable trust owns Freeport-McMoRan, Goldman Sachs, Morgan Stanley and Johnson & Johnson.
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