Rally had nothing to do with Bernanke

It wasn't ridiculously low mortgage rates. It was Spain avoiding a depression.

By Jim Cramer Jun 7, 2012 8:50AM

Updated at 11:45 a.m.

 

All day Wednesday I heard the same thing, that we were rallying because of Ben Bernanke. That's just wrong. We were rallying despite Bernanke, meaning despite his ability to do anything more than he has.

 

The people writing these stories either don't know what the Fed does or have never bought a mortgage or gone for a commercial loan, something that I do as a matter of course. Mortgage rates are now ridiculously low. They are not going to entice anyone else off the sidelines if they go lower. You have to be a total knucklehead if you haven’t refinanced already. Plus, the market's flight-to-safety trade has already done more to lower rates that Bernanke can do.

 

The stories are ridiculous. They made me angry because they presume Bernanke can do something.

  

The rally Wednesday was about a deal to save the Spanish banking system. While the Spanish government has steadfastly told us not to worry, it has to be worried, because it has a depression -- though not a Great Recession -- situation brewing with 25% unemployment and the total collapse of real estate.

  

I am hearing that there are 500 billion euros in bad loans and the Spanish bond market is on the verge of going to 7%. The issues are all Spain, especially because if Greece defaults and then gets kicked out, it will print drachmas and the hedge fund vigilantes will then operate on Spain, blasting out their bonds, betting that you are going to get a conversion into pesetas, which, frankly, would be the trade of a lifetime. You get a derivative that allows you to bet against the bonds that you sell in euros, and then you get to cover in pesetas. I am drooling to think about it.

  

But the Germans know this, too, and they know that once Spain goes, France and Italy are next, so they have to draw the line for their own self-interest. That means we have to believe there is a plan to preserve the depositors, even if it means cramming down the common stock and the preferreds and perhaps even the junior and senior debt of the banks.

 

It was the belief that there is a plan -- and not this Bernanke nonsense that everyone plied about -- that got this market rallying. The idea that it was Bernanke or a Journal story about Bernanke's next move is the most ethnocentric if not xenophobic commentary imaginable.

  

But it gets said because, well, it is something to say and it is a lot easier to say than that there might be a secret deal coming up to save Spanish banks. It's easier, but it's wrong.


 



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.



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26Comments
Jun 7, 2012 12:10PM
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 Got a real good memory here Jimbo! Remember when you said housing had bottomed in the summer of 2009? .How about 2010 when you said gold at $2000 in 2012?Sorry just gotta say it--- Boo to ya!
Jun 7, 2012 11:47AM
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A busted lawyer attempting to practice economics.  Unbelievable.
Jun 7, 2012 5:04PM
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Just which housing bottom is this one Jimmy? You have called one every 6 months for the past 2 years now!

Plesse spare me the secret deal in Europe crap too.

The socialists in Europe will never give up until Germany tells them -Too Bad for you-Starve.

If you think for a minute that Germany really doesn't just want to be rid of the rest of their European parasite partners, you are crazy. In the long run they will be better of without having to support the rest of europe where they just refuse to face the reality that they are utter failures.

Speaking of utter failues.......Never mind they will ban me again!!!!

Jun 7, 2012 4:01PM
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Thats right, thank Cramer for the rally, after all, he told us to invest in Bear Stearns! 
Jun 7, 2012 10:47AM
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this morning he glibly chuckled about his hero mcclendon at chesapeake...........remember he

got his followers in at 35 .....now 18..............loathsome that he chuckles while his cramericans

go broke............he also alluded to alcoa which he picked as the best dow stock of 2011

at 18 ...now at 9........BEWARE THE KNOW NOTHING NEWSLETTER HUCKSTER

Jun 7, 2012 2:21PM
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To add to the re-fi comment.    Why would I re-fi if 90% of my payment is going to principle already?

 People sit down and look at amortization table before you reset  your interest payout.  Lower payment means nothing if you are signing up for the same duration period as your original loan.
Jun 7, 2012 1:16PM
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I just cannot believe the Germans are going to get out the check book and start writing.

 

"Bernanke nonsense."  Couldn't have said it better myself!

 

Jun 7, 2012 11:36AM
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 Two scenarios by the 4th of July. Dow has a huge rally to 13,500 when Greece stays in the EU and Spain signs on the bottom line for a German bailout
 Scenario 2 - neither of those things happens and the Dow quickly tanks to 10000 as the banking dominoes start to fall. Stay tuned! I'm betting on the huge rally because the fat Cats will do what is necessry to save their skins and kick the can down the road yet again
 It's ALL about whether the Greeks and Spaniards want to swallow their pride and just accept a lower standard of living and long term indebtedness to foreign banks. Personally,I would go with going it alone. Business bankruptcies happen by the millions with little stigma but a temporary drop in credit rating-- and Spain has declared bankruptcy many many times in the past. .It won't take much to bring the old European anomisties bubbling back up to the surface

Jun 7, 2012 4:25PM
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What is also interesting is that all of the 30 replies are commenting on Cramer's ineptness and yet there are quite a few negative thumbs down being tallied? Why would there be negative thumbs down placed on each remark when nearly all of the 30 listed comments are saying the same thing? Interesting, that's all.

 

One would wonder if MSN or Crammer is marking them as negative???!!!

Jun 7, 2012 12:15PM
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 And then out of the blue  at Jackson Hole. Uncle Ben and Little Timmy announced TARP 2 for Europe and our contaminated banks. Why not. The FIRST one worked so well!
Jun 7, 2012 10:57AM
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They have to write something I guess other than the market is bouncing off a price point.
Jun 7, 2012 10:47AM
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If the US decides on QE3 Spain gets bailed out. Of course, that bails out US private money that's in up to their eye balls.
Jun 7, 2012 5:48PM
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Spain hasn't avoided anything. It's just a dead cat bounce.
Jun 7, 2012 4:11PM
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Cramer... thank you for your paragraph on mortgage rates. If the rate on ALL credit was fixed at 12% and the same diligence requirement mandated regardless of the size or purpose... the number of requests would be the same (historically verifiable). For those fainting over the prospect of a 12% mortgage, most of us life-experience people had rates like that in the 1980s. A 10%-20% down payment too. Rates like that validate the borrower's TRUE ability to repay. the down payment puts a stake in the deal that prevents walkaways. Qualified people with a stake buying homes is what stabilizes and right-prices the values. The rate provides the lender with enough yield to service the deal and thus make a profit. Profits mean banks don't need to go to the Fed window as often. When that is the norm... we make small business credit and lift the neighborhoods those homes are in and that makes for prosperity because we can live, work and play in a positive capital environment. You are correct, sir... if your credit experience doesn't go back before 1992... you really know nothing about lending and even less about finance. There is no degree offered in a common sense grasp of risk (as all Wall Street activity since 2008 validates). You learn by getting burned and then not hiring alumni buddies when seasoned portfolio managers are out there and available. 
Jun 7, 2012 9:56AM
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Jim your own staff at The Street are saying that the market is responding to what they think Bernanke is going to do and China cutting its interest rates. Do you call them all idiots? Perhaps you guys should confer with each other before writing your articles? You are saying it is due to trying to save Spain's banking. Goodness, it is difficult to know who is on target and who is shooting blanks!
Jun 7, 2012 11:46AM
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genuis..........the market will go up or down.........another cramer?
Jun 7, 2012 10:51AM
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i sense an unsaid underlying resentment for germany........ hmmmmm
Jun 7, 2012 4:27PM
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Can I ask a really dumb question?  Mr. Cramer I love your attitude very pro small business.  Do you think the current tax system is a help or detriment to this country?   Thanks John G
Jun 7, 2012 12:55PM
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MSN is about as competent as Cramer in reporting unbiased news...It makes one wonder if there is any credibility at all out there in the real world? But then, who wants to live in the real world?
Jun 7, 2012 2:35PM
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you can't refi without 20% equity..........most people with higher rates don't have 20%

equity so would increase their payment because they would be charged PMI

 

as usual the hack knows nothing except how to prey off the naive by selling his newsletter

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