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Sell Block: This Haven Isn’t So Safe Anymore

Thursday, 17 Sep 2009 | 8:38 PM ET

Cramer on Thursday put “one of the safest investments on earth,” as he called it, in the Sell Block. A tested vehicle for protecting cash is about to lose its hallowed status.

Sell Block
Cramer tells you which stocks you ought to be selling right now, either to take profits or to cut your losses.

“I think the big run in US Treasurys has ended,” Cramer said. “It’s time for you to sell 10-year and 30-year” bonds.

An economic rebound inevitably brings with it inflation, and, as Cramer pointed out last night, a recovery is on the way. The higher inflation goes, the less attractive the yields on Treasurys become in comparison. Plus, the Federal Reserve will have to raise interest rates once inflation and the economy trend higher, and that will push Treasurys lower. If Cramer gets his wish and the US government issues $1 trillion in 30-year bonds, that, too, will hurt the value of Treasurys.

What should investors buy then? Master limited partnerships like Kinder Morgan Energy Partners and Enterprise Product Partners and their high dividend yields may seem attractive, but in the end these are stocks that carry at least some risk. Money-market funds aren’t 100% safe either. At least they won’t be after Friday, which is when the FDIC will stop backing them. So anyone who wants to sleep at night must look elsewhere.

Cramer could recommend an ultra short ETF – say, the UltraShort 20+ Year Treasury ProShares TBT – to play the ending run in Treasurys, but he’s pretty clear on his dislike of those funds. So certificates of deposit seem the best bet for investors.

“Start buying CDs,” Cramer said, “our preferred place for cash” thanks to the protection of the FDIC.

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