GO
Loading...

Fed Warns of Big Economic Risks, Cramer Reacts

The Federal Reserve on Wednesday chose the word "significant" to describe the risks to the U.S. economy and that's worth noting, Cramer said on "Mad Money." After all, Fed Chairman Ben Bernanke has won his faith and trust. So if Bernanke is getting more downbeat on the economy, what hope is left for the everyday investor?

The market always seems to have a mood, Cramer explained. Sometimes the market's mood is "warm and fuzzy," where bad news from a company leaves investors thinking the problem has to do with the company alone. It causes them to assume other companies are doing good, then, and they want to buy their shares because they're simply being brought down by the negative news of the loser competitor.

The market can be skeptical, Cramer continued. In this environment, everyone takes a "wait-and-see" approach. Other times the market shoots first and asks questions later, Cramer said. Investors in this environment would sell all retailers because a major store chain posted negative news.

"And there are markets like this one," Cramer said. "Where, aided by a Fed chairman warning us of significant risks ahead, we fold, we spindle, we mutilate and we annihilate first, poleaxing and steamrolling anything remotely like a company that says something bad, and we don't even bother to ask questions later. It's just not worth it."

Cramer pointed out that both Walter Energy and Alpha Natural Resources said they are having trouble making their quarters. A close reading of their statements suggests demand is good, but nonetheless, investors sold coal companies across the board. The selling spread to other industrial names. Nobody bothered to ask questions, though, especially with the Fed adding the modifier "significant" to the downside.

"We got a significant dive after a significant mention of the word "significant" in the announcement," Cramer said. "The market's turned into a bad mood. What we've got to do is we gotta focus on yield. That's going to be our only refuge for a few days until the selling ends."

Symbol
Price
 
Change
%Change
WGOXX
---
WLT
---

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

Symbol
Price
 
Change
%Change
ANR
---
WLT
---

Featured

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.

Cramer's New Book