Mad Money

Cramer: Don’t Sell Into Panic


U.S. stocks recovered more than half their losses, but still closed in negative territory Tuesday as political uncertainty in Greece worried investors. What upset “Mad Money” host Jim Cramer, though, was how investors ran to the exits.

Jim Cramer

To Cramer, the widespread selling suggests “that people either simply don't know what they own, don't like what they own, or live in total fear of what they own.”

Some of the selling could be justified, Cramer said. Many companies have too much European exposure, for example. Companies that thrive on high commodity prices are struggling right now. Other companies have failed to find ways to grow amid a global economic slowdown. Not every company or even a majority of companies face these challenges, though, but Cramer said it didn’t seem to matter Tuesday.

“At one point the selling was indiscriminate with everything getting sent down at once,” Cramer complained. “People panicked everywhere. Everywhere. Think about the absurdity of that for a moment.”

As investors worried about Europe’s debt crisis, the market turned on oil. Crude has been in glut, so the price of oil fell for a fifth straight day. Many pundits said the plummeting in oil shows that things are terribly weak and frankly much worse than previously thought, but Cramer said that’s argument is so nuts he can hardly believe it.

“These geniuses are saying it's bad news that gasoline is going down,” Cramer exclaimed. “Is it possible that we need to worry about lower gasoline prices like we do higher gasoline prices? Is there anyone, anyone who is watching who really believes that we need to fear gasoline going down to $3.50 like we feared it going up to $4.50 or even $5 where we believed it was headed by Memorial Day?”

(RELATED: Cramer's Plays on $5 Gas)

Surprisingly, though, many retail stocks fell on account of falling oil prices. To Cramer, that doesn’t make any sense because, 1) retailers need lower oil prices, 2) a lower gas price means consumers can spending money on other things, like at retailers.

Companies that use a lot of energy, such as Clorox, Hershey and Kimberly-Clark, also saw shares fall Tuesday. Energy is the biggest input cost for these companies, so with commodity prices falling, each company should have seen their shares soar Tuesday. It didn’t matter, though.

Any company with European exposure could see its stock fall, Cramer said, but investors didn’t need to hurry up and sell today. They could have waited for a bounce, especially since most stocks bounced back significantly intraday. In other words, there was probably a much better time to sell. Either way, it definitely wasn’t time to panic.

“I'm not saying that things are hunky dory, not at all.  I'm not denying that there are storm clouds all over the place,” Cramer said. “But I am saying that when the market throws a sale, you can't be one of those panic stricken folks who are tossing out their good stuff with the bad, sticking it to themselves and getting the low price of the day. 

“You're never going to make money if you always sell into the panic, yet that's what virtually everyone does, which, by the way, is a big reason stocks are so hated.  You have to stand your ground in the face of the fear.”

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