Fret all you want over the Fed's next moves
Of course Bernanke has a QE3 exit plan. I just don't think it will matter that much to the economy.
So the Federal Reserve does have a plan to stop buying bonds. You mean it isn't just going to go cold-turkey? You mean it isn't just going to wreck everything without any thought?
That's what I thought when I read The Wall Street Journal piece about how Chairman Ben Bernanke is all set with a plan for ending the third round of quantitative easing. The premise of the piece, in itself, implies that he hadn't even considered it and would never do so.
The article, to me, was a "duh." Still, I am sure plenty of people will say "Look, he had a plan. When there's a plan he must be ready to use it."
Now, it is true that there could be some reason to believe that, say, 3%-yielding stocks won't be as competitive with bonds if Bernanke decides to stop buying and start selling like a madman. But it is entirely possible that there will be actual buyers of bonds, given the widespread interest in fixed income all over the globe.
If you ask me, I believe the whole bond-buying theme, initially so important, is no longer as dicey or as dangerous or as germane as it had once been. That's because I simply do not believe rates are going to go up so much, given that government bonds worldwide have declined so much in yield. If anything, I think the worrisome investing place -- besides bonds that are well above par and the funds that own them -- might very well be the corporate market, where the returns have truly been pathetic.
You see, if I am right about the receipts of the government, you may not have as much supply out there as you think you might. There's demand for bonds away from Bernanke, and it's possible there isn't as much supply as there had once been.
In fact, I would rather pay for a stock with a 3% yield with upside than a 2% corporate bond with no upside whatsoever. It's the competition in bonds that is in trouble -- but, from what I can tell, there's been a tremendous issuance already, so it might not be as big a deal anyway.
One thing is certain, though. The banks will be the biggest winners if this happens. They have been saddled with terrible and declining net interest margins. If Bernanke were to walk away, I am sure that would change immediately. They would become the go-to group, for certain, and that's huge for this market -- because the financials are, arguably, as much as 20% of the entire market.
So worry. Fret. Sell off the market. I just don't think it will matter that much to the economy. If prospective home buyers believe rates are about to go up, that will force them into making a decision to buy a house when there are still houses left -- one more spur to the U.S. economy.
I know this Wall Street Journal article is going to spur some selling. I just urge you to think about what you are going to sell. Is it really going to get hurt? Is Clorox (CLX) immediately going to 3.5% because of the bond change? Is General Mills (GIS) going to 4%?
But I wouldn't bet a lot of money on it, because many already are.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.
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WAKE UP CRAMER
If you ask me, I believe the whole bond-buying theme, initially so important, is no longer as dicey or as dangerous or as germane as it had once been.
Pretty much Bernanke has to buy bonds as there is not enough disposable income in the world to buy US T-bills,state and local government bonds ,EU bonds,Japanese bonds and fill the void where 30,000,000 retired US workers and probably the same number in Japan and Europe giving a total of 100,000,000 retired people in these three counters taking $30,000 to $200,000 a year out of the stock and bond markets to pay for their retirement and the hit the market has with them not putting $5,000 a year into the stock and bond market.
Also those workers are being replaced by 1/2 of a new worker making only $14,000 a year ( correction $10,000 on a 29 hour work week so bosses can skip the Obama Care) who takes about $14,000 a year out of the economy in form of welfare ,paid health care and food stamps. So basically all the jobs we have created since 2009 have been costing the federal government at least $14,000 a person.
Pretty much the western economies have imploded and only insane amounts of monies being printed by the central banks are keeping things afloat.
Cramer if the Fed cut off the money tomorrow the US economy would collapse over night.
Barry, you come to Akron on the 22nd and I`ll show you my great portfolio that`s
up over 100% with Obama.I learned the market.What did you learn at all those
KKK meetings you went to?
I would think the Government/Congress will have to raise some taxation...?
But before that could/should happen there has to be severe spending cuts..
Downfunding Wars and Defense come to mind,along with bags of money for "so-called Foreign Aid."
And other "worthless pet projects."
To fund other "guaranteed job producers." then maybe we can crawl out of the crap.
After a comment like this, we must ask ourselves, who's more naive, Cramer or Obama?
A lot of tips can be picked up in the "right bars."
They also have to listen to a lot of blabbering..too.
Cabbies are what they are....Always listening, "when pretending" not to...
And then many have trouble understanding English also, except when coming to the tip.
IKE AND ME;I`m just stating facts when I say the market was down 37% with Bush.
Yes, I`ll blame Obama:the market is up over 85% with Obama and we`ve had 36 straight
months of job growth.Republicans hate facts.
Barry, you`re a regular Henry Wordsworth Longfellow as Archie Bunker would say.Did
you go to Harvard or Yale?
We have been waiting for this to happen, I'm sure or would have thought everyone else was on board too....Considering this "would NOT or couldn't " go on forever, why is anyone surprised..??
No doom & gloom here, like others might state; I'm just hoping to plan enough to keep our ship on an even keel...Or afloat.....These things happen..
Bernanke is not Greenspan....Greenjeans would have probably just pulled the rug or plug...And we would have turmoil for a few weeks or a Quarter so....??
Let's hope there has been a learning curve over the years, that has been put in place..?
And let's hope it is put to use wisely...
Lemme see, I know large Corps have been rat-holing and hoarding bucks...And a lot is being held in offshore or other type accounts....Waiting for "favorable" repatriating to change; At least that is my guess....I'm sure that's going to happen, just a matter of time with the mix we have on the Hill.
Kinda thought Banks were in that playing genre also...Waiting to pull some triggers on paybacks, along with some interest increases (end of Q3) and then releasing bits and pieces of "shadow inventory", so as not to spook the housing or other Markets...
Do we have a plan here or not, what am I missing...?? I know there is something ??
Jobs increasing is a "slow returning Given", so that's not it.
I would only hope that a 3% yield Company had more then a 2% growth upside....?
But I may have also mis-read his sentence..??
No doubt there are much better yields; But chasing rainbows, can sometimes get you wet.
But going across 10 Sectors trying to get a safe 5-7% is more relistic...
Such as what happened to REITS the past few days or week...Nice averages of over 10%+, but giving back 4-6% didn't make any sense...Being way past Ex-Div date...?
And I can't believe a little blabbering from the FED, could have this much effect this soon..?
Guess the numbers from 1 or 2, just shoots them all in the foot...Senseless bullshidt...?
But NOBODY, like Cramer is saying much, to peons like myself.??
There is a thin line between a Big Bank surviving or failing once the FEDS life support is withdrawn. Sooner or later, folks like Jimmy will realize that. Then they will say, oh but nobody knew. You knew, Jimmy, you just refuse to be anything other than a well paid puppet to Wall Street.
Barry, NY is heaven right?I know it`s a big state.Lots of cold weather and way too
many friendly people.You should go to Harlem and get jungle fever.Can you
do the Harlem Shake?I lived in a great area in Ohio.The weather was crap, unlike
you I was smart enough and rich enough to get away.
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