Jim Cramer says investors are in uncharted territory right now. The market has never had interest rates stay low for so long, and it will be a shock once the Fed decides to tighten.
That is why he decided to provide Cramerica with a guide on what to expect once they go up, and how to both survive and thrive.
Why does it cause such turmoil when the Fed raises rates?
Because when the Fed decides to raise rates, it's all about reining in the economy. Thus, it can be harder to profit from a decline, though not impossible. It just means returning to the principles of how to make money in the long term, regardless of the Fed.
Looking back to the Great Recession, Cramer saw that Ben Bernanke misread the economy and thought it was stronger than it actually was. This was because he was looking at the housing market, which was way too hot, and raising rates repeatedly to cool off the market even though other parts of the economy were not that strong.
As a result, the Fed raised short-term rates 17 times between 2003 and 2006. By 2007 the Fed turned a blind eye to the impact on the housing market and it became very clear to Wall Street that things had gone wrong.
It took until last year for the Fed to get comfortable enough to raise rates again.
"It wasn't until oil prices were suddenly cut in half by a glut driven in part by U.S. production that had increased dramatically because of technology, that we got employment and some wage gains that made it so the Fed could declare victory," Cramer said