Mad Money

Stop Trading!: Expect More Rate Cuts

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The yield curve is showing that the Fed should cut another 50 or 75 basis points – “maybe even 100,” Cramer said on Stop Trading! Wednesday.

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Cramer on the Markets

One of the best ways to play the end of that curve? Annaly Capital. CEO Mike Farrell has the necessary portfolio in place and he has a plan to buy up distressed subprime mortgages, Cramer said. JMP Securities initiated coverage on the stock Sept. 18 with a “strong buy.”

According to Cramer, the bears have massive positions to cover in Downey Savings & Loan and FirstFed Financial, two stocks he said were “the most dangerous shorts in the world.” Ten million of Downey’s 21 million shares outstanding are short, and 7 million of FirstFed’s 13 million shares outstanding are short.

“Are the shorts expecting Bill Poole to put through a tightening?" Cramer asked.

Cramer remembered October 1998 when the Fed signaled a cut and stocks like DSL and FED made “100% moves.” He recommended buying before the shorts race to cover.

Questions for Cramer?

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