You'll have to lose money to make it

Unless we have a severe recession, many of the stocks you see in free fall will be higher a year from now.

By Jim Cramer Aug 9, 2011 8:03AM

the streetthe streetIn the past 24 hours in stock futures we have had a 2% rally and a 2% decline all within the time it takes to drink a can of Coca-Cola.

 

The speed is breathtaking. No human can keep up.

 

While we were able to rally, the rally seemed like a terrific opportunity to sell if only because you can buy it back at the conclusion of the last gulp -- if you would like to, that is.

 

Markets all seem to want to be down 20% for the year, and anything less seems, at this time, to be a gift.


As our Dow is down only 6% and is about the best-performing market in the world, you can figure that if it keeps pace with the others, it is a straight shot to 9,200. That's no support for anything, but it is a reasonable target if you think we are part of this wave flowing over the world.

 

My disaster target has been about 8,500, so 9,200 could be reasonable if we just keep pace -- and there is no particular reason that should not happen. So many are pinning their hopes on the Fed that it is a little unsettling. Last I looked, the Fed doesn't set stock prices.

 

So let's play it out.

 

Can you sell right here and then buy it back at 9,200? Not at this pace. I think only the most nimble can execute that trade.

 

Can you protect yourself?

 

Believe it or not, I still think that if you are choosing an undiversified portfolio, you still can sell banks, techs, government-paying health care and defense stocks.

 

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It was obviously a great trade to sell industrials and oils. I did not participate in that. I just felt that the other sectors were very vulnerable and that oil could go down to the mid-$80s if the margin buying -- not demand destruction but margin buying -- got crushed.

 

Investors who think it is demand destruction do not understand that unless the world stands still, you can't have oil go down from $96 to $75 in a couple of days, especially when Chinese inflation is heating up, as we learned last night, perhaps the worst new bit of data out there.

 

Doesn't matter. Some moron will espouse it Tuesday. We will have to listen.  

 

Anyway, this is a serious assault on the integrity of how markets work.

 

It is 1987-like in its breathtaking breakage of the pricing structure. In some ways it is a combination of the flash crash of 2009, the Great Recession crash of 2008-09 and the market crash of 1987 all rolled up into a couple of days.

 

I am presuming that, because I do not see a severe recession coming, the extremes should not play out. Do I think we will drop 42% peak to trough intraday Tuesday to Tuesday in 1987? No. Do I think we can plummet 22% in a day? No.

 

Do I think that most of the banks are insolvent in this country and the equivalent of Lehman/AIG (AIG)/Fannie Mae/Freddie Mac/Washington Mutual/Wachovia/Merrill Lynch awaits us? No.

 

Do I think that the machines have taken over like in 2010 with the flash crash? Totally.

 

Do I think that precipitates margin calls and dysfunctional, unpredictable markets? Absolutely.

 

Do I think that anything makes sense? Not in the next 24 to 48 hours.

 

But in the next year? Unless we have a severe recession, many of the stocks you see on your screen in free fall will be higher a year from now. Unfortunately, you have to be willing to lose it to make it, as you did in 1987, 2008-09 and in the flash crash.

 

That's why deep-in-the-money calls might be the way to go for almost all but low-dollar stocks. That's the only game plan that might work right now.


At the time of publication, Cramer was long Bank of America, the parent company of Merrill Lynch.


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network’s sites.

 

Follow Cramer's trades for his Charitable Trust.

16Comments
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Let's get rid of the computer trading and go back to the man on the floor.  This will slow down the market enough to have it make sense.   This micro second trading will do us in.  Computers are not the wherewithal to our future.   It is probably the downfall.
Aug 9, 2011 9:24AM
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Smile Sell offs are a normal part of the market. Yesterday was 6th worse of 50 very large selloffs. Oh, well if you use it as an opportunity to buy and average down you holding price then you'll make more when it goes back up. If it never goes back up then that won't be your worst problem.

 

Aug 9, 2011 11:18AM
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Do a search on Cramer and his predictions. He is a joke. He recommended Bank of America at the beginning of the year and now its lost 50% of its value. Its people like this on the news that sell the B.S. to the unknowing public.

 

My advice is to stay away from Cramer and his advice.

 

Aug 9, 2011 11:16AM
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Great piece of journalism...I think I can get more info out of the comic section of the newspaper than this lame article.
Aug 9, 2011 11:32AM
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Cramer?  Bwa ha ha ha. "Experts" like him are part of the problem, not the solution. This country has never had more fools masquerading as experts and "consultants".
Aug 9, 2011 12:02PM
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WTF  People actually listen to this guy? Time for a new clown to watch.
Aug 9, 2011 9:36AM
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What is deep in the money mean?????
Aug 9, 2011 12:34PM
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"Unless we have a severe recession, many of the stocks you see in free fall will be higher a year from now."
Brilliant Cramer... because your advice is always "spot on". 
The markets are the lowest in how may years and your nugget of  "expert" knowledge is that it will be higher in a year.   I am running right now to my brokerage account  based on your advice..... NOT.................​..........

Aug 9, 2011 1:32PM
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Hot Rick Santelli called it like "Riding on a rooler coaster with buckets of water" yesterday Smile
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When will we outsource to a third world country all the expert financial advice?  It would be much cheaper and as reliable as the cable geniuses spewing.
Aug 9, 2011 12:06PM
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WOW.  This man is brilliant.!

 

Of course, I could have said all that crap too and I am no Financial Advisor.

Aug 10, 2011 12:27AM
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Didn't Cramer tell us to buy about 2 weeks ago?  I wonder how many did, and now have to wait and hope things go up just to break even.  There is no logic to the Casino Market, so how do you make a educated decision?  Throwing darts would work just as well.
Aug 9, 2011 12:20PM
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Great strategy,  the position of Treasury Chief should be available for Cramer as soon as Obama's ready to shove Geithner under the bus.

 

There's no doubt our financial woes and debt will be quickly solved with his logic and reasoning.

 

Upon his appointment, our credit rating should instantly dive to F-  for total failure

 

 

Aug 9, 2011 8:32PM
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Hmmmm, my father-in-law and I will probably pull 250k out of the markets this week. The dead cat bounce today may be over tomarrow(it was a light cat). The Fed announcement today does not change the long term problem. I would rather sit on the sidelines for a while and watch it play out. There is a reason corporations are sitting on billions of dollars in cash.  Remember the 6 trillion lost in the last bottom bounce 08/09. Did your broker tell you to get out???

 

So you don't agree with Kramer? Fine. Please list all the positive economic news you have heard lately.

Aug 10, 2011 9:08AM
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If the people running around with their smart phones in their hands constantly would turn them off along with their TV and personal computer the world would be a better place.  People can no longer think on their own. They listen to analysts like Cramer and other advisors who have done no real research and just give you their opinion. Don't think this doesn't  effect the markets. Use your own brain, if you have one. Wise up America!
Aug 9, 2011 11:44AM
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Jimmy Baby, I f you are going to continue making the big bucks you have to come up with your own analysis.I told everyone here YESTERDAY the very things you say TODAY.You're getting

a little ahead of yourself ,8500 really? Far be it from me to say it ain't so not being a learned goldman man..but let's deal with the near term .All you playaz out there notice

the 11,000 thing going on here this morning?pay attention, it counts and there is a pop quiz manana .My clx trade has been blowing your kmb trade doors in this morning..JAMES !booooooooooooooooya !!Have you been reading my vanity cards?sell,sell,sell NO

buy,buy,buy !Check out Newsweek..she knows just what it takes to make a pro blush,

she got Charlie Manson eyes.........

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