The Fed's onto something
People may fail to realize that the Fed tightens when it's pretty sure of job growth.
By Jim Cramer, TheStreet
If you step back from the emotion of a Fed gone from soft to not-so-soft and ask what it really means, you come back to a simple concept: Are the banks strong enough to borrow from the private markets?
The answer, I think, is yes, except the ones that were goners anyway, including the several the Federal Deposit Insurance Corp. will seize this weekend as part of its Friday-night seizure policy.
That's really the only "real world" implication. That and the relentless decline of the euro becomes a little more relentless.
Where I think this all gets so interesting is that there are already about 65% bears or correction-callers, and I would like to know if any of them will use this decline to change sides or will their ranks continue to grow?
I think it will be the latter. I think that this market is quite despised and will get even more so as people think that any tightening is bad. People will not look at history and realize that when the Fed tightens it is because it is pretty certain that there will be employment growth. And if there is employment growth, so many of our problems go away that you will never have a good opportunity to buy the very stocks that you might be tempted to sell today.
Of course, I like to look for stocks that are pulled down by the broad futures drag: Schlumberger (SLB) talking to Smith International (SII)? That means lots more consolidation ahead and that the BJ Services (BJS) deal wasn't a one-off. SLB wants to be more of a one-stop shop for the world's drilling boom.
Dell (DELL) screws up? Buy Intel (INTC), which will probably be down because of Dell even though the Dell conference call talked about the strength of the Intel product line in ways I have never heard before. Or Hewlett-Packard (HPQ), which had much better margins than Dell because it is run so much better than Dell.
By the way, Intel's Nehalem is driving a lot of the next leg of PCs and tech does among the best in tightening scenarios. So do industrials during the early tightening phases.
I hope that some of these natural gas stocks come down with the new anti-inflation bent of the Fed knowing that some unimportant Devon (DVN) Asian play is going for at least $3 billion, about 10% of a company that will soon be the No. 1 play on domestic natural gas.
Or maybe scoop up some Procter & Gamble (PG) after their accelerated growth statement at the conference Thursday.
Many stocks out there are at lower prices thanks to the Fed.
That's my take.
It is the minority take. We know what the market wants to do: It wants to go down.
And the bears? They are only good at one thing: telling us they told us so.
Random musings: Can't say I like the Fed's timing -- after the close, with options expiration. I'm surprised by the tone-deaf nature of it.
At the time of publication, Cramer was long Procter & Gamble and Intel.
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The idea of US crude being a shelter from turmoil abroad may not be as far fetched as it seems.
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