4 signs Wall Street is preparing for the worst

CNBC host Jim Cramer says there are clear tells that investors think the economy is going downhill.

By MSN Money Partner Aug 14, 2014 1:31PM
Caption: A trader works on the floor of the New York Stock Exchange
Credit: © Justin Lane /epa/CorbisBy Lee Brodie, CNBC

Pros such as Jim Cramer often look to the market for insights on broad sentiment. And certain things happened on Wednesday that suggest trouble is lurking.


The view may not be consistent with Cramer's personal outlook. "This isn't what I think should be happening," Cramer said. "My world view is somewhat at odds (with developments)." 


Nonetheless, Cramer doesn't think any investor can make money in the market without first understanding what he calls the "new view."


And according to the "new view," the Street thinks the economy is going downhill. 


Here are Cramer's market "tells":


The advance in high growth stocks 

Although Cramer conceded that some of the buying may be due to positive research calls, largely he believes it's a vote of no confidence in the economy. 


"Pros don't go buying high growth stocks like Facebook (FB) and Google (GOOG) unless they're convinced that the economy has downshifted. Yelp (YELP) wouldn't have moved up 8 percent if it weren't for the new slow growth thesis that has just taken hold."


In other words, if pros fear growth will be hard to find, they become more willing to pay high multiples for stocks that are most likely to grow.


And Cramer added, the advance in Celgene (CELG), Regeneron (REGN), Biogen Idec (BIIB) and Gilead (GILD) also reflect the view. "When pros think the economy is cooling, they buy these stocks because they have little economic sensitivity." 


Little patience for retail

Cramer said the decline in Macy's (M) reflects this phenomenon in the market, too. When the economy cools, people typically retrench. And although Macy's missed expectations, "It actually didn't report anything at all that negative. It's simply that expectations were too high." 


Yet, investors were unwilling to forgive Macy's. "For me it illustrates the new mindset," Cramer said.


Price drop in food commodities 

The decline in the price of grains, hogs, cattle, poultry and more also says to Cramer that pros don't believe demand matches supply. 


Of all the declines in commodities, the price drop in oil probably speaks loudest to the Street. "These declines are very visible," Cramer said. When the global economy percolates, oil advances. Although Cramer thinks the domestic energy renaissance may be, at least partly responsible for lower oil prices, the Street sees it as an economic issue.


Bonds

Because rates and price vary inversely, the stubbornly low rates are viewed on the Street as a sign that demand for bonds remains strong. And historically that happens when the global economy is challenged. Cramer, however, isn't so sure. 


He believes that Treasury yield is low because bond investors find U.S. bonds appealing as compared to other nations. Nonetheless, higher rates typically accompany economic growth, and rates are anything but higher.


All told, Cramer thinks these developments betray a changing sentiment on Wall Street. A strong demand for bonds, a drop in the price of oil, little patience for retail and and advance in high growth stocks suggest the prevailing wisdom has changed dramatically. "Pros who had thought the economy was accelerating are now looking for slower growth and lower inflation."


You don't have to agree. But if you want to make money in the market, you must, "respect the market, no matter how wild, crazy or stupid it may be," said Cramer.


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40Comments
Aug 14, 2014 2:09PM
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Jimmy, the Stock Markets don't reflect Reality, and they haven't for quite sometime. The top 1% control what happens in the Stock Markets. Everyone else just gets the crumbs. Eventually they won't even have that.
Aug 14, 2014 1:48PM
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Does anybody think Buffett has Cramer on his speed dial? Anyone? Please.
Aug 14, 2014 2:55PM
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"The decline in the price of grains, hogs, cattle, poultry and more also says to Cramer that pros don't believe demand matches supply

 

THERE IS NO DEMAND because everyone is broke.........more to come....film at 11 for those that can still afford TV

Aug 14, 2014 3:18PM
Aug 14, 2014 4:02PM
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Cramer is a market shill. Anyone who expects to use this kind of mumble jumbo to make money will surely lose. 

What the market really does is on a daily basis is to confuse all the little fellows who think they can profit from what ever mystical events they believe they can discern. 

The people who make money are those who work and think about the hard data that ever flows. What that means is ignoring all the fat little bald guys running around with some new cockimamie story every day!

Yuk yuk!
Aug 14, 2014 4:09PM
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If the market undergoes the worst that just means an excellent buying opportunity.  Every Bear market sets the foundation for a Bull.
Aug 14, 2014 2:48PM
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"The decline in the price of grains, hogs, cattle, poultry and more also says to Cramer that pros don't believe demand matches supply.   Of all the declines in commodities, the price drop in  probably speaks loudest to the Street. "These declines are very visible," Cramer said. When the global economy percolates, oil advances. Although Cramer thinks the domestic energy renaissance may be, at least partly responsible for lower oil prices, the Street sees it as an economic issue."

 

Where?  Not on the street.  A 4 cent reduction in the price of gasoline is nothing.  What a joke article!


Aug 14, 2014 6:03PM
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"CNBC host Jim Cramer says there are clear tells that investors think the economy is going downhill."

OF COURSE they are Jim!!! You know WHY?

BECUASE THE ECONOMY SUX, AND HAS FOR YEARS!!!

Stop listening to the propaganda from DC and their bought and paid for economists, and take a look at the REAL WORLD. You know, where people DO NOT make $150,000, or more per year.



Aug 14, 2014 4:06PM
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Duh, the only reason why the stock market is so artificially high is because of QE I, QE II, & QE III.  All these trillions went to the Banks and Big Business and not to main street and that is why "we" on main street see a mega bubble as big as the last several bubbles we have witnessed.  There has been no real recovery it has simply been papered over with phony greenbacks.  Precisely why Wall street reacts to every word uttered by the Feds, just hoping they won't stop pumping all these mega billions into the banks and wall street.  Imagine what will happen when the Fed suddenly pulls the plug on all of it? And those on wall street keep asking, bubble, what bubble?  Just wait.
Aug 14, 2014 4:57PM
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"The view may not be consistent with Cramer's personal outlook. "This isn't what I think should be happening," Cramer said. "My world view is somewhat at odds (with developments)."

In other words, every other day I tell You what You want to hear...
Then, every other day I reverse myself and tell Them what They want to hear.

Yep, cant go wrong with that policy.


What I cant fathom is....why is he not running for some political office?
Aug 14, 2014 6:08PM
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You said it dave1230, I wonder where the stock market would be today, if the fed hadn't been stupid enough to pump TRILLIONS of dollars into it. Sure we would have had a crash, but THAT was coming anyway. But if the fed hadn't interfered, chances are REAL good that the economy would be back on its feet by now and EVERYBODY would be better off. NOT JUST THE GOVERNMENT- AND WALL STREET CONNECTED RICH!!!
Aug 14, 2014 2:38PM
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The 'Market' has not even an inkling of what 'the worse' will be. All the phony 'wealth effect' will....POOF....vaporize back into the thin air from which it was conjured. As it has been said: In the end there will those with a lot of money that isn't worth anything and those with no money.

Who is going to buy your 'portfolio' toilet paper then, weed hopper?

Aug 14, 2014 3:45PM
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Keep on talking Jimmy! I like your negativism. Keeps the little guy away.
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Because rates and price very inversely, should read "prices vary inversely"
Aug 14, 2014 6:24PM
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Neon 

Spot on with both posts. 

They think that WALL STREET IS THE BAROMETER FOR THE COUNTRY

MAIN STREET IS THE TRUE PULSE OF THE NATION. 
Aug 14, 2014 3:46PM
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The Street is not always right and the Street responds and reacts emotionally just as all the other people on Main Street do.   Lame story.
Aug 14, 2014 5:35PM
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Alright, Jimbo. Call me a naïve, short-sighted noob , but if the economy is going down the toilet, and the price of oil is falling, then can you explain why gas prices are still obnoxiously high? Average logic would suggest if the economy is in fact as crappy as you like to say, then maybe the oil companies would lower their prices to guarantee some sort of income,especially if crude is getting cheaper like this article is suggesting. Law of supply and demand, right? (Really, though. no one has to answer this--I already know the answer. Supply and demand has nothing to do with it anymore--just corporate greed.)
Aug 14, 2014 6:52PM
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Borrow, print and spend 11 trillion to grow it by 3 trillion.  That's Obamanomics.  Nice job, Barry.
Aug 14, 2014 4:07PM
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"4 Signs Wall Street is preparing for the worst..."

- Increase in yellow journalism articles about bogus stock and company data...
- Continuous rise in the exchanges from fake Fed money...
- Massive layoffs of the competent so the corrupt can steal everything...
- The smell of BBQ grills heating the charcoal we will roast grubbers on.

There is no greater crime than to have the ability and power to do right and well, and instead let it all go to Hell for Greed. Where do you run to once you've screwed the whole world? Buy a hand basket.
Aug 14, 2014 3:02PM
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Jim Cramer.. you are always such a pessimist ...
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