No more paralysis by Fed analysis

We've been wasting our time with fretting about the central bank's policies, as this monster rate decline confirms.

By Jim Cramer Jan 24, 2014 1:06PM

Federal Reserve Building, Washington, DC © Fuse/Getty ImagesThe amount of fretting that's been done about the Federal Reserve and stimulus tapering over the past two years is astounding to me, as it should be to you, after this continuing monster decline in U.S. interest rates.


It's like the whole stock debate got hijacked by people who report on the Fed's every move, when it turns out that bonds are actually taking a natural ebb and flow right now, unmoored by actions of the central bank.


Think about what happened Thursday while 10-year interest rates went back to 2.777 percent. First we got existing-home sales that showed tremendous growth -- much more than what most people thought, despite attempts by some observers to call the numbers anemic. Those attempts have been made on every piece of data, pretty much from the bottom. It's another shameful distortion, but let's save that for another day.


Second, we got still one more bank, this time KeyCorp (KEY), saying loan demand has picked up. This dovetails the vast majority of the banks out there.


Third, we had a new high in the Dow Jones Transportation Average, the index most sensitive to commerce. That's right, this is an index that's meant to be a harbinger. Tell me that's not the definition of business strength.


We had a very strong jobless claims number, again indicative of underlying strength. The Street on MSN Money


We had a spike in the fuel that heats your home and a bump-up in gasoline prices.


Every one of these should have sent yields ever higher. But they didn't because -- are you ready, skidaddy? -- U.S. bonds represent real value versus the bonds of a lot of countries that are doing far less well than we are, including many, many politically troubled ones. It's a better economy and low inflation against higher inflation and worse economies.


That's what is determining interest rates -- not the Fed or the endless commentating on the Fed's various moves. You can call it a "flight to quality." I call it a "return to rationality." It makes sense to invest in the strength of a country's bonds at a time when all rates really aren't that far apart from each other, even though some weaker countries' interest rates should most certainly be so.


Now, with the equity averages giving back some of those gains, I look back and I am just plain steamed that the discourse was so hijacked by people who know nothing about stocks. These people, nevertheless, managed to keep people out of stocks for thousands upon thousands of points with their worry-mongering. They did us -- you and me -- a real disservice.


The next time we see fretting over a Fed meeting or the Fed minutes or a Fed head speech, you need to remember this non-Fed-derived bond move. Fed news is not irrelevant, but it just isn't nearly as important to the future of interest rates or, more important, the stock market, as so many think. That paralysis by Fed analysis must, at last, end in 2014.


But I know I am going to be drowned out once again by people saying the weaknesses in the currencies of Argentina, South Africa and Turkey are being caused by the Fed's tapering policies. I have heard that already this morning multiple times. Made me sick. 




I think this will be the year when American strengths, not weaknesses, will play out. The American political system -- laughed about for years but now looking a lot better -- and the American industrial strength and American technological superiority will all constitute long-term themes that will distinguish us from others. All this will take center stage as the Fed's ability -- or, more important, need -- to orchestrate things fades into the background.


This will be the year of case-by-case. The Argentinian government has been teetering the way of Venezuela for some time now. A secular Turkey has been giving way to a regime in which economic growth is losing relevance. Investors who are in these markets have stupidly reached for yield, and now they are paying the price. But to link it to the Fed? It will be done. The Fed-centralizers -- meaning those who think that the Fed is central to everything and anything -- will control the mic again.


They will be as wrong now as they were last year and the year before.


It will take a Fed debt-ceiling-derived default to change my mind on this issue. Some "leaders" want us to go there, but try as they might, I still don't think it will happen. Otherwise 2014 will be the year of "more rationality" in the discourse of bonds and therefore, hopefully, more in the discourse of stocks, too.


There, I said it.


I feel better already.


Jim Cramer on MSN Money

Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners. At the time of publication, the portfolio was long KEY.


More from TheStreet

Jan 24, 2014 1:52PM
Funny trying to explain this off with some sort of fundamental mumbo jumbo.  The market reached a peak and couldn't attract any more money so in order to continue to feed the beast they need to roll it over and make money on the downside.   Amazing people still vote R and D which is really no choice and they still believe something other than greed makes these markets change direction.  What an effen con of a society we live in. 
Jan 24, 2014 4:50PM
I wonder where the twin Brents are posting? 
Jan 24, 2014 2:36PM
Jan 24, 2014 3:58PM
cramer didn't predict this selloff so we should listen to his predictions why?
Jan 24, 2014 2:14PM
"Every one of these should have sent yields ever higher. But they didn't because -- are you ready, skidaddy? -- U.S. bonds represent real value versus the bonds of a lot of countries that are doing far less well than we are"

First of all Jimmy, you are talking about the Perception of doing better. That's always a dangerous thing when it comes to money and stocks since Perceptions can literally change on a Dime.

 How many countries have a National Debt Load of $17Trillion and Growing. How many countries have a Fed sitting on $4Trilion in Fake Money. How many countries have a $4Trillion in Commercial Paper coming Due over the next four Years. This without mentioning all the tie ins to Europe, China, and Japan.

Jimmy wants everyone to ignore the Real Problems in hopes that once again they will go away. If he is wrong, he will use the usually excuse, nobody saw it coming when in FACT everyone saw it coming.
Jan 24, 2014 4:27PM
I'm spooked, so I think it's nap time....zzzzzzz
Jan 24, 2014 5:18PM
Jan 24, 2014 3:41PM
So what are you saying Cramer? ...... that "Don't fight the Fed" is not a rule anymore. You're like a man falling off a cliff and trying to convince yourself that gravity has no meaning anymore.
Jan 24, 2014 3:24PM
Bobo is soothing like fingernails raking a chalkboard.
Jan 24, 2014 4:30PM
Cramer is writing a new book dedicated to Double V........ Who Moved My Black Pudding?
Jan 24, 2014 5:03PM
Jan 24, 2014 4:02PM

Bobo thinks he can fly....

And now along with Mirhaydari, Blaine has come out writing also...The World must be ending..??

Jan 24, 2014 4:18PM
Late day observations... first, the losses are accelerating, so it should be clear that the Fed isn't in the bailing mood. Dimon's pay doubles-- $1.5 million salary, the rest in stock shares. The bank is spending $400 million A DAY in legal defense. Tip of the lawsuits, so far, all the settlements have impacted in some way. That's a Death Contract for Dimon. The GOP pressures Obama on the Keystone Pipeline deal but it won't vote on any relevant matters Congress should be working out. Anybody stupid enough to NOT see the GOP's mortality flashing before their ancient eyes? China history. Anybody grasp why it's called the Sleeping Bear? It tends to piss off the world, then go into hibernation for a century or two or three. What... US worry? We don't have: the factories, machinery, skill sets or workforce to regenerate our own core necessities now. 
If you aren't selling, you are dreaming. With the level of corruption we endure now, we may have a few plateaus but generally the markets and bonds are both on the Down Escalator. Don't like it? Hire, baby... hire... and at family-sustaining wages with benefits. Give them YOURS if you have to. 
Jan 24, 2014 3:26PM

Yes it may be a good day for dying, and maybe a better day for buying...??

edited*** because it looked stupid after I wrote it...

And I'm not drinking; Yet.

Jan 24, 2014 3:17PM


I agree with Retired Joe.



Jan 24, 2014 3:35PM

yeah!  nice drop in time for pay day! 


i expect the 401K mutual funds folk to blow it all by next tuesday!

Jan 24, 2014 2:48PM
people are hoping for a market crash because everyday investors see no opportunity to buy into this over inflated market. it's the high volume high worth traders that have a manipulative strangle hold and are making the gap evermore out of reach. when your average msn troll apologist rips welfare recipients on articles that talk about the ever increasing disparity between the rich and the poor, what they don't realize is that they are the sheep who really being duped. You can't grow your retirement fast enough to outpace inflation because you're too blind to see the tools needed to curb an out of reach stock market (ie sane market regulations),  but yet you'll repeat your hypnotic faux news chants about how lazy the poor the are. news flash idiots, you are the poor!
Jan 24, 2014 4:34PM
Ok late lunch and early happy hour time ....

Barry if you are visiting jonathan "the traitor" pollard this weekend please take him a big dildo and tell him to go f*ck himself ...same to you as well.

Cheers ;)   
Jan 24, 2014 4:25PM
Wow abs the likkudi party spokesman and zionist in chief for msn blogs has woken up from his slumbers ...

Can you tell your masters to f*ck off and leave us out of it ...if you all want to fight everyone in the ME --- do it yourself and leave us the f*ck out if it ....

One of the best things President O. has dine has been to keep us out of new wars in syria and iran which pisses scumbag zionist/neocons like Jabba the Barry here !! 
Jan 24, 2014 4:27PM

Do u forget barry how you criticised the President for not going into syria "to defend israel and the US" .....

As for the muslim bro'hood they are the same as you scummy zionist neocons and you should all just go take each other out and leave us alone !! 
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