The Fed, The Fed, The Fed. There. I did it. I emphasized the Fed right at the top of the this piece. I did it.
Now let's get down to business.
In this piece, I want to write about the need to put the Fed in a box. No, not like the box that President Trump has put Jay Powell into. Nor the one that is driving rates down to the point that everyone, including the Fed might be freaking out about.
I don't want to talk about the Fed because it is my job to spot opportunity and give you the current zeitgeist that could produce profitable investments.
Don't get me wrong. I care about the Fed. When the Fed is tightening I tend to be wary of declines, thinking they might last longer and be harder to recover from.
But when the Fed's in easing mode, no matter how long it takes to cut rates, I get more bullish and feel like I did yesterday when the stock market opened way down: you had to put money to work into the collapse. It was just too juicy to ignore.
Now that we have rallied back, though, I want to go over the false fears that I heard invoked endlessly in the last few days and I know I will hear about them again. At one point earlier this week we actually had a FDR moment, where the only thing we had to fear was fear itself because many of the fears were groundless or actually positive.
The fears set up an emotional positive we haven't seen since the bottom of the Jay Powell bear market back in December. We got a level of negativity as recorded by a popular index that showed a dramatic drop in bullish sentiment - 38 down to 21 and a remarkable jump in bearish sentiment: 24 to 48. Those are extraordinary readings. Unimaginable. And a measure that I suggested the other day shows a need for restraint, a need to dial the emotions back, lest you panic and sell.
How can you not? When we have extreme readings like that they are usually based one something terribly wrong. At that point the decline was caused by the Fed. Jay Powell misread the economy's weakness and tightened right into it and promised more tightening pretty much regardless of the weakness.
You were fighting the Fed back then and when the Fed wants to tighten that quickly things are perilous and you will lose money.
We are not in that situation now. We are in the opposite situation with the Fed back on our side. It's really just a matter of how much Powell will cut next time.
At times like this it is so easy to scare people out of stocks. It is much harder to be constructive or to have ice water in your veins, something that you must have if you are going to profit while everyone else is panicking.
So, with that, let's go over the false fears so when you hear them come out of the mouths of the naïve commentators, the political biased money managers and the China appeasers, you can spot those who can't or won't help you and make better decisions yourself about your money.
First: Lower interests are bad. I cannot believe I even have to say that. When my father got back from the war in the Pacific he got a GI Bill loan of $25,000 for our house with a mortgage rate of 2%.
I remember that over and over again as rates soared from those levels, that he had gotten the greatest deal of all time and we would never see those rates again. I believe if he were alive today he would say, "what's with these people who are panicking because rates are so low." After years of lamenting such high rates - I have paid 10%, 9% and 8% at various times, I find it hard to believe that, with the economy this good, you could get such low rates. But there's no inflation and our bonds are being bid up by rich people and richer institutions from around the world that, amazingly, it doesn't matter that we have the best unemployment rate in 50 years. We shouldn't be panicking, we should be thanking our lucky stars. Watch mortgages and refis - they will be flying now that housing's becoming so much more affordable.
Second fear: the lowering of the Chinese yuan to offset the President's tariffs. I say, hallelujah! We are a consumption economy and it allows us to buy things more cheaply despite the tariffs. Have you noticed that, so far, despite all the jeremiads, almost nothing has gone up in price? Many things have actually come down in price during this period as Walmart (WMT) , Amazon (AMZN) , Target (TGT) , Costco (COST) and Home Depot (HD) beat each other over the head to lower prices for you. They are doing a great job of it.
Third fear: the big brouhaha over the currency manipulator charge leveled by the Treasury Department against China. I said that night we had to dial back the hysteria this caused because China's been manipulating its currency for decades. The amazing thing is that the rest of the world didn't' just join in. But we are lousy at coalition building against the Chinese because every country wants that gigantic market to themselves, except us because we accept that they aren't going to buy nearly as much from us anyway. That's called unfair competition and we are faced with it every day overseas including China. When everyone knows something when there is a captain obvious moment, and the stock market gets crushed anyway, you have to buy.
Fourth: a strong dollar is going to hurt us. Nope. We are a huge importer of goods. The strong dollar's terrific for all but the manufacturers who are forced to compete with cheaters all over the globe. If we were two-third manufacturing and one-third consumer, I would be hollering. But it is the opposite. Again, our so-called trading partners don't play fair with their currency, it's no reason to sell stocks.
Fifth, and final false fear: earnings are about to dramatically weaken and you have to sell stocks before it happens. It bothers me tremendously that the people who opine on these issues do not know individual stocks let alone individual companies.
Now there will be companies that will find their earnings crimped because of China. But they are few and far between. What I see is that expectations have been ratcheted back for companies because of fear but the companies refuse to roll over and play dead.
Three cases in point: Advanced Micro (AMD) , Booking Holdings (BKNG) and Roku (ROKU) .
For most of the last two weeks AMD's stock has been hammered largely because of fears about weakness in the data center. Then yesterday the redoubtable Lisa Su revealed some chips that blew away the competition and landed some very important new clients like Alphabet (GOOGL) in addition to existing clients Microsoft (MSFT) , DellEmc (DELL) Hewlett Packard (HPE) , VMware (VMW) and Lenovo (LNVGY) . Those used to be the kinds of accounts that were a given for Intel (INTC) . You could say that Su shouldn't be able to move the needle with the Fed, the dollar, China, etc. But if you owned AMD's stock it rallied 15% and you could sell it and take it to the bank, not that I would do that.
Second: Booking, the online travel company, should have seen its bookings plunge with all of this doom and gloom. Nope, the colossus of travel saw an acceleration in bookings with a particular emphasis on a better Europe.
Third: how about Roku? Here's a company that abets all cord cutters that is now in one out of every five houses, exhibiting the highest growth rate since coming public, snaring 3.5 hours of viewing per day. Wasn't Amazon supposed to destroy them? Apple (AAPL) ? Alphabet? Didn't happen, it's pulling away from these opponents. The stock's rallied almost 20%.
Now I could easily spread fear of a recession. I was willing to scream it back in 2007 and 2008 when I thought you had a chance to get out.
But we just don't have those circumstances now. Instead, I want you to be calm and collected and I will not scare you with false fears. That way you can calmly do some buying next time we have a false fear dip and I hope you will trust me the next time when I say the fears are overdone and it is time to do some buying.
(Amazon, Home Depot, Alphabet, Microsoft and Apple are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN, HD, GOOGL, MSFT or AAPL? Learn more now.)
