Cavalry trade rides again

Anytime whispers of a European rescue boost markets, take the opportunity to sell out of economically sensitive stocks.

By Jim Cramer Dec 19, 2011 10:47AM

the streetWe just keep thinking that someone will come to the rescue. We keep thinking that everything "bad" that is happening is actually already "in" the market. We keep talking about opportunities from the selling of premium assets by Credit Agricole or Paribas. We keep thinking it is business as usual and we can just go buy anything that's down.


What's so amazing is that there is no evidence that this hopeful attitude is worth anything at all, except in sporadic moments when we get a takeover -- Novellus (NVLS) -- or we get a report that confounds the short sellers -- Federal Express (FDX) numbers being the best example last week.


In fact, the strategy that has worked so well is to use every one one of these cavalry whispers to blow out of anything economically sensitive and sell anything that needs accelerating world growth. Anything.


That makes sense to me.


Related Articles

Sometimes it helps to visualize the moment with an individual stock. Let's choose Dow stock Alcoa (AA). While our charitable trust owns Alcoa, we are reluctant to sell it down here, yet I expect it to report a horrible quarter. People will ask, how much risk is there down here?


I think AA is going to have a horrible quarter. Miserable. I wish I could sell it, short it, and cover it in a nanosecond, but the trust doesn't really allow for that so we tell people it is going lower.


But people will try to come up with a reason to own it. The only reason it was higher in pre-market trading Monday was because it is part of the "cavalry" trade, the stock futures rising because someone "knows something."


At the same time, when traders believe the cavalry is going to come, they sell McDonald's (MCD) and General Mills (GIS) (which reports Tuesday).


What I am saying is that you should do the exact opposite of this. People don't think of this because they are too gripped with the agitprop of risk-on/risk-off. But that's what is going to happen.


So, check it out. The cavalry trade rides again. And the market has no memory for what happens each time: The cavalry runs into a European bond auction, people realize that Alcoa may lose money -- the estimates are ridiculously high -- and we start the hopeless trade all over again.


Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long Alcoa.



Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.


24Comments
Dec 19, 2011 1:47PM
avatar
cnbc has changed from a financial show to a political hack,crony capitalist ,wallstreet shill infomercial. do your own homework and tune out the noise on cnbc. Buy American and support our Troops.
Dec 19, 2011 1:06PM
avatar

on your show at the beginning of 2011 you picked alcoa at $18 as the best

dow stock of the year..............now you MUST know you did this so now you say short it????

 

i think you do outlandish things like this to cause controversy and sell your books

and website.......you're like a minister who one day says eye for an eye and then the next sunday says turn the other cheek......WHAT A SCAM

Dec 19, 2011 3:54PM
avatar

In this market you need to be willing to dump stocks on a dime or better yet, short it when you get out.

 

Investing is dead!!!!!!  If you want to make money in the market, then you need to be a trader willing to get in and out as many times as necessary.  If you can't manage that, then you have no business in the market.

 

The real fools are the ones who buy and hold on Cramer's recommendations.  If you need to rely on advice and guidance, please stay out of stock market sandbox and save your money.

Dec 19, 2011 2:21PM
avatar

If Jim Cramer says to do something, and people do it, then it becomes a self-fulfilling prophecy - he caused it.  Why is he not required to register as an investment advisor?  If he says that it's going to rain and that everyone should go out and buy an umbrella, then many umbrellas will be sold even if it doesn't rain.  What he does is not just unbiased reporting, he is dispensing investment advice and he gets paid for it.

 

People need to understand that CNBC gets paid by advertisers who are selling financial products and that they sensationalize everything.  If someone cuts a fart, they will run a special report on the social benefits of farting and then every guy & his brother that sells gas masks will be advertising on their channel.

Dec 19, 2011 3:17PM
avatar
LIFE ISN'T FUN FOR THE MANY NOVICES WHO GET TAKEN IN BY HIS CRAP
Dec 19, 2011 12:10PM
avatar
Hot That's amazing Jim! Are you a trader or an investor.  You've said repeatedly that Alcoa's a well run company and a good investment. But now you're saying down here? Why not buy more down here to lower your average cost? It pays just as much as a 5 year US Treasury but has lots more appreciation potential.
Dec 19, 2011 4:06PM
avatar

I take this position with Cramer.  I listen to his advise and then immediately do the opposite.  He burned me for the last time when he recommended Chesapeake Energy at $33.  Now its down to $22.  He has other motives than to help the main street investor. 

 

  

Dec 19, 2011 1:57PM
avatar

CNBC, as ememplified by Mr. Cramer, is reall nothing more than The Tout Network.

 

 

Dec 19, 2011 3:28PM
avatar
gas is still a 3.59 at my place in ct. dollar still holding good and the price of crude is still high, no wars in sight, but the speculators win again, right up your ****.  now they are talking about exporting oil i believe i read, why not keep it here and lower fuel prices so farmers and truckers can make a little money and food is cheaper in the store. can't do that, politicians will need to use savings . more money in the pockets of the few that does have jobs so they pay less at the pump, surely wrong idiot in the seat of the White House
Dec 19, 2011 1:54PM
avatar
This is the first time I've ever been interested in AA.
Dec 19, 2011 5:33PM
avatar
Following Jim Cramer's advice is dangerous to your financial health. Do your homework, make sure you have the right risk exposure and don't worry about the daily fluctuations. A good rule of thumb is 100 minus your age into equities, the rest in cash or bonds. It is OK to speculate or trade with a small percentage of your money, but unless you devote all of your time to it you are probably better off taking the first approach. This period is not so different from other difficult times and noone will be able to predict when things will turn. Stay patient and if you are older or need the money in less than two years, it might make sense to lighten up here as volatility is here to stay, until further notice. Whatever you do, don't listen to Cramer.
Dec 19, 2011 4:34PM
avatar

HE HAS ONLY ONE MOTIVE AND THAT IS TO PUMP UP WHAT HIS MASTERS

TELL HIM TO PUMP...........CHESAPEAKE IS JUST ONE AND HE HAS BEEN TOUTING IT FOR A LONG TIME.............YOU CAN MAKE BIG MONEY SHORTING HIS CRAP

Dec 19, 2011 12:27PM
avatar
Any investor with common sense and  general knowledge of history knows the Euro is dead.  You and your fellow TV actors as talking heads just say otherwise to sucker in the non-educated public who don't understand money from debt and how government have abused this power time and time again.

Oh give it up on the stock plugs, if you own it, I'm not going to buy it.
Dec 19, 2011 5:24PM
avatar

 

Not to worry.  European leaders and bankers will have a meeting.  Then they will make an announcement.  Then the markets will respond.         Embarrassed

Dec 19, 2011 3:49PM
avatar
Jim, FDX is the ticker symbol for FedEx Corp. NOT Federal Express.

In fact, the name Federal Express was dropped in January 2000 for FedEx Express.

See FedEx corporate history, specifically this part

In January 2000, FedEx unleashed the power of its global brand. In a move to further integrate the company's portfolio of services, FDX Corp. was renamed FedEx Corporation. In addition, Federal Express became FedEx Express, RPS became FedEx Ground, Roberts Express became FedEx Custom Critical, and Caliber Logistics and Caliber Technology were combined to make up FedEx Global Logistics. To centralize the sales, marketing, customer service and information technology support for FedEx Express and FedEx Ground, a new subsidiary named FedEx Corporate Services (FedEx Services) was formed and began operations in June 2000.  

Bruce D Ranger
Indianapolis IN

Dec 19, 2011 7:16PM
avatar
Once again I agree , it"s time to get out of the market for the llittle guy. It's too manipulated by day traders, speculators, and just plain crooks.  BOOMERS sell now , and sit back and watch the meltdown on the sidelines.
Dec 19, 2011 6:13PM
avatar
My rule of thumb when following Cramer's financial advice is that the guy is one letter away from Kramer...enough said.
Dec 19, 2011 7:59PM
avatar

Sell, sell

The prices go down, then buy, buy at a lower price.

it seems to be a game because it is a game,

but only the ones in the know win.

The rest of us just provide the black powder

for the whole charade to go up in smoke

with a louder  wham, my  dear suckers...

avatar
Okay. MY THOUGHTS:  What does it matter if we produce oil here in the USA?  The companies that produce the oil are going to charge whatever the market is charging no matter where they get the oil from.  They will make HUGE profits.  Does anyone think that they are going to charge less?  I am serious....who thinks the oil companies will charge less?  The really obscene thing is that the Republicans in Congress will continue to protect the oil companies and continue giving them the taxpayer's money in subsidies and then refuse to tax them no matter where the oil comes from or how many billions they make in profit.   If we vote in republicans come this election the GOP will offer that as "proof" that the American people want them to keep giving breaks to the wealthy and the corporations.  We are supposed to hope that they will provide us with jobs.  The jobs never materialized during the Bush administration when taxes were cut so why should anyone think it will happen this time?   The American people should rebel if Congress refuses to tax the rich.  Having a vibrant middle class is what makes our entire society healthy and productive.  Our middle class is shrinking.  We have too much wealth on one side and too much poverty on the other.   Even if all the right steps are taken it is going to take time to bring back the proper balance back to our society.  This cry of "too much government" is just the wealthy saying "don't take our money in taxes".  Bad things come from too many people having too little.  Fear, frustration, anger and inevitably violence.  Look at this Occupy Movement.  Those are the peaceable people in society trying to make a point.  Our government can improve the situation but they are making it worse.  The Democrats are not perfect but they are the ones who want to tax the wealthy and create jobs.  Will their method work?  I am not sure but it is time to give them the chance to try their methods.  Bush, Cheny and the Republicans had their chance and that brought on disaster in 2008 when our banking system and Wall Street almost destroyed our whole financial system.   This time out(2012) I am voting Democratic just to give them a chance.  If they fail then I will vote them against them in 2014.   I hope the dirty, unproductive, tactics of the republicans backfire on them.  The American people deserve better than what the GOP wants then to have which are the crumbs handed out by those corporations whose only concern is making, and keeping, profits.  Be successful, make a profit and when you do, be willing to give back to the system which enabled you to be successful.   
   
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122
122 rated 1
288
288 rated 2
472
472 rated 3
638
638 rated 4
628
628 rated 5
704
704 rated 6
609
609 rated 7
489
489 rated 8
275
275 rated 9
129
129 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.