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Cramer’s 7 Black Holes Revisited

Back on Sept. 11, 2008, Cramer picked out key stresses that posed systemic risks to the market. Until these problems were solved, he said, retail investors, which are integral to any recovery, wouldn’t feel safe enough to buy stocks. And no earnings-based rally could be sustained without their participation.

Well, General Motors’ bankruptcy filing on Monday filled in what Cramer had called the market’s black holes, paving the way for retail investors’ return. Now, “the worst is over,” he said, “we’re out of the woods.”

What changed? The government seized Fannie Mae and Freddie Mac before the securities they issued to fund themselves became worthless. Lehman Brothers was allowed to fail, much to the market’s detriment, but it spurred Washington to act, making sure something similar never happened again. One of the best banks, JPMorgan Chase , bought one of the worst, Washington Mutual, which was weighing heavily on the sector. About $200 billion proved enough to save AIG, and Citigroup doesn’t seem to need any more capital to keep its doors open. Lastly, Alan Mulally’s leadership at Ford has put the stock in close competition with Toyota as a great play on an autos recovery, and GM has finally entered bankruptcy court.

As Cramer pointed out, it didn’t matter much how these holes were filled as long as they were. This should lend much-needed confidence to the rest of us, those who don’t manage billions of dollars of other people’s money, enticing us back into the market. Sure, there had been plenty of reasons to fear investing Armageddon, as he called it, but that time seems to have passed.

So “stop moaning,” Cramer said, “start buying.”






Cramer's charitable trust owns JPMorgan Chase.

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