The Dow snapped back into positive territory before closing Thursday, despite a trading session led by massive selling in the financials. The bad news from both Citigroup and Bank of America that first weighed on investors was gone by the afternoon, as Wall Street seemed to shrug at the possibility that these once-great banks could virtually disappear.
But that’s just how it goes sometimes, Cramer told viewers, because investors can only take so much negativity. When the market’s as morbid as it was after today’s opening bell, following multiple days of declines, a rebound is all but inevitable.
Was the market right, though, to assume we’d live through the failures of BofA and Citi, should they happen? Could we handle, say, government intervention that dilutes the former’s common stock and nationalizes the latter? Given our perseverance through the debacles that were Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac and AIG, Cramer thinks so. In fact, he said a government takeover would do these two institutions some good.
There’s no question that President-Elect Obama plans to severely limit the business of any bank that feeds at the federal trough. Maybe this was on investors’ minds earlier today. But regardless, Cramer said, sentiment was too negative. The market can only be stretched so far in one direction before, as we said, it snaps back. Even the Steve Jobs news wasn’t enough to spark a flight from Apple.
Now this doesn’t mean we’ve bottomed. Don’t get this confused with the bottom-like trend where bad news just can’t send stocks any lower. Cramer still wants investors to buy companies with high (and safe) dividend yields. Think Verizon Communications and AT&T, both of which offer upwards of 6%. Aside from the dividends, these stocks tend to bounce back the best when the market acts as it did Thursday.
Home Depot and Caterpillar can be owned for their dividends, too, Cramer said, and it looks like Research in Motion is breaking out. So consider buying RIMM.
Join Cramer live in the studio for Mad Money: The State of Cramerica, a special town hall-style show on Wednesday, Jan. 21. Get your free tickets here!
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the Mad Money website? email@example.com