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Unemployment? A Double Dip? Who Cares?

Thursday, 12 Aug 2010 | 7:03 PM ET
Glass Half Empty, Or Full?
Cramer answers investor fears on whether the market is headed back to early July lows.

Worried about mortgage defaults? Wondering why there seems to be no new small-business lending? What about lower demand for commodities, a slowdown in China and Europe’s sideways recovery? If so, you probably shouldn’t stress these “canned worries,” Cramer said Thursday.

See, these fears are drudged up all the time. The only thing that seems to matter, though, is where the market is when they hit. Because investors are much more sensitive to bearish arguments when we’re up than when we’re down.

“When the market's high, the glass is half empty, although to listen to the bears you'd think it was completely empty,” Cramer said. “When the market's lower, the glass is half full. The same problems that we shrug off when we were below Dow 10,000 make us terrified when we hear them when we're above it.”

Examples? Below Dow 10,000, China’s slowdown is a soft landing. Above 10K, investors look for a revved up Middle Kingdom to justify the big commodity moves, which are based on Chinese demand.

Below 10,000, statements from the Federal Reserve that the economy is weak are met with relief that the central bank is on the side of investors. But the same statement north of 10,000 makes investors question why the Dow is so high.

The same goes for jobs. Under the 10 grand mark, people barely blink when jobless claims are disappointing. But above that level, Cramer said, “We go into full panic mode. We think everything must be awful.”

You could apply the same kind of logic to investors’ views of commodities, earnings or the potential for a double-dip recession, too. And it’s not that Cramer meant to dismiss the fear, especially in the face of what seems like an anti-business Washington. But again, he said, these canned worries are all the same. And the market’s reaction to them will change depending on where we are at any given moment.

So, “Don't lose your head over them,” Cramer said. “And remember, other than in extraordinary circumstances, that we do not have right now, stocks actually discount a lot of the problems. They get baked in as the market goes lower, something that's only shocking to those who don't understand the game.”

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