Grim Reaper spooks market gurus

The stock trading we're seeing these days would probably cause concerns for legendary money managers.

By Jim Cramer Jul 6, 2010 8:52AM

jim cramerBy Jim Cramer, TheStreet

 

I'm down in Mexico, and wouldn't you know it, I bumped into a group of old-timers, including Benjamin Graham and David Dodd.

 

OK, not really. These investing gurus passed away more than two decades ago. But let's try to imagine such a scenario.


In my mind, we would play a round a golf. They would talk about the looming Death Cross -- the intersection formed by the 50-day moving average falling below the 200-day moving average, traditionally thought to signal a bear market -- in the S&P 500 ($INX) and how it was spooking them out of their growth positions.

 

Over on the 19th hole, while having a couple of cold Tecates, the two wise men would lament that they had to sell stocks they had bought for 50 cents that were now worth a dollar. Dodd would say "the lines had crossed -- it's all over."

 

Of course, the ramifications of this Mexican discussion would waft north to Omaha. We might see Coca-Cola (KO) and Washington Post (WPO) and what's left of Kraft (KFT) booted from Berkshire Hathaway's (BRK.B) holdings. I mean, Warren Buffett doesn't care much about Kraft since Rosenfeld overpaid for Cadbury anyway. I know Buffett has been playing Johnson & Johnson (JNJ) for the Sanofi (SNY) takeover -- lots of rumblings there -- but it can't survive the Death Cross.

Unfortunately, being out of the country, I haven't been able to track down Peter Lynch, the godfather of fundamental mutual fund investing. I am sure, though, that he is calling in from his golf game in Ireland to remind the top fund managers that they have no choice but to go to all cash because of the Coroner's Crossing, and that he is revising his "One Up On Wall Street" (almost as classic a tome as "Security Analysis" by Graham and Dodd) to add the preface: "All bets are off if we spot the Death Cross." A well-needed caveat.


I imagine Robert Gibbs, speaking for the president, saying "It's really a Golden Cross, but everyone in the country is holding the chart upside down." Gibbs would blame the Goldman Sachs (GS) technicians for the misinformation and point out again that it was Goldman that bankrupted the sainted institution that was AIG (AIG).

 

I picture Nancy Pelosi issuing a statement saying that a Death Cross is good for the country because it will send stock prices lower and teach rich people a lesson.


All I can say is, "Hope you had a great holiday, and don't forget why we celebrate!"

 

At the time of publication, Cramer had no positions in the stocks mentioned.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

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