Cramer: Blame wishful thinking for Friday's market swoon — not Fed chief Jerome Powell

Published Fri, Aug 26 20222:10 PM EDT

Federal Reserve Chairman Jerome Powell's tough talk in his address to the central bank's conference in Jackson Hole, Wyoming on Friday slammed stocks. However, the problem really started with the wishful thinking that led to Thursday's market rally. I so often wonder who could be so stupid to pay up for stocks on the day before a Fed chief speaks, especially when there's been no appreciable decline in inflation since his last 75-basis-point interest rate hike, the second in a row of that magnitude by the way. I always want to ask these buyers — like Sonny does to Michael in "The Godfather Part II" — "Did you go to college to get stupid?" We've been raising cash of the Investing Club portfolio because Powell has said in no uncertain terms, he will tighten monetary policy until prices stop going up more than 2%. If that means prices have to go down more than that, so be it. Now he made a statement not long ago, at his last press conference , that he didn't think that he would need to do more big ones because he didn't want to overshoot. We know there were members of the Fed who argued that position. But, in retrospect, it was a silly thing to say. I believe he is coming closer to reality when he says, as he did Friday to his colleagues and the investing world, that he would do whatever it takes to control inflation. The Fed makes huge trouble for itself all of the time. As someone who has been in the public eye for more years than I care to count, I know when you can talk and when you can't and when you shouldn't. This is a terrific time not to give interviews. It is a terrific time not to give press conferences. It is a terrific time to keep your mouth shut unless you are the Fed chairman. Now, I know you may say I feel that way because I want the stock market to go up. That's right in a sense. I want the stock market to have value down the road — and if we don't get inflation under control, the results will not matter. That game plan will get us to a very good result ultimately but not with so many cross signals. The buyers Thursday no doubt thought there could be some sort of surprise. Memo to them: You are the surprise. You are the ones who doubt Powell's resolve. You are the losers. You went to college to get stupid. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Jerome Powell, chairman of the U.S. Federal Reserve, leaves the reception dinner at the Jackson Hole economic symposium in Moran, Wyoming, on Thursday, Aug. 25, 2022.

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