Tuning Out the Ticker
Stocks may have closed modestly higher Thursday, but not before a big sell off this morning that left some investors with a lighter wallet. And that morning plunge should have never happened, Cramer said. In fact, stocks should have gone up right from the start.
The “Mad Money” host believes the Street should have responded positively to news that commodities are down, the Federal Reserve is no longer under pressure to raise interest rates, and the Chinese might be able to stop raising rates.
So what happened? Cramer said people were not tuned into what was happening, and were instead focused on things like the crisis in Europe and hedge funds that have been dumping stocks because of its bad bets. And like lemmings, they followed one another off the cliff.
“If you avert your eyes from what stocks are doing and instead focus on what stocks should be doing and how companies will be doing, you will make—not lose—money,” he said.
In other words, if you ignored the action, you would have been buying, not selling and you would have had a leg up on those who dumped stocks this morning.
It’s a concept that Cramer said was quite obvious. Companies have been hit by rising commodity costs, which held back stocks that should have been flying. Now that commodity increases have rolled back, those stocks should have taken off. Instead, they got hammered at the opening. But once rationality returned, stocks shot higher and companies like Procter & Gamble and Pepsi hit 52 week highs.
“The decline in commodities is an unmitigated positive for maybe 85 percent of all the companies,” Cramer said, “yet almost 100 percent of stocks were down from the opening.”
It may have been pure "idiocy," but it was also a fantastic buying opportunity. Cramer believes stocks are a terrific asset as long as corporate profits are rising and there is no inflation scare. With this latest news, corporate profits can continue to grow.
“When you moderate the big bad worry for profits — skyrocketing commodity prices — and you stay the ugly hand of inflation that threatens the value of growth stocks, then you’ve got exactly, exactly the situation we want,” Cramer said.
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