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Op-Ed:
Jim Cramer Said What? |
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Investors,
feeling
exhausted yet? Last week sure could have done it - it was one of the
worst weeks ever for the market. As a result, it seems as if many
of you are getting out of the market - if you're not already out.
If that's you, can we have a moment?
 Perhaps
you followed notorious Jim Cramer's advice from a week ago...
"Whatever
money you may need for the next five years, please take it out of the stock
market right now, this week. I do not believe that you should risk those
assets in the stock market right now."
Since making
the statement once week ago on the TODAY Show, Cramer's suggestion has
spread feverishly, has been largely followed, and been equally argued.
Our question is, did he really mean it? We think perhaps not - at
least not in the way it came across.
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Gettin'
Down to Brass Tacks |
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To be clear,
the editorial staff of the Micro Cap Press has not spoken with Jim
Cramer (and probably never will), and we would never attempt to
put words in his mouth. However, since some - perhaps many - of
you are also exposed to the guy, we feel comfortable enough offering some
perspective on his thoughts.
 Did
he really mean for everyone to get out of the market if they needed that
money within five years? The thing you have to understand about Jim Cramer
is this - he's an entertainer first, and an advice-giver second. There's
nothing inherently wrong with that, but he's ultimately trying to garner
attention to sell media advertising. How do you garner attention?
By
saying things that will rattle people's cages, proverbially.
Was Cramer
over the top with his statement? We think so. However, anybody who
knows him also knows he's usually over the top - that's his job.
So no, we don't think what he said came across quite the right way. We
believe he was simply trying to explain how being conservative, cautious,
and defensive for the next five years was prudent. In other words, the
next five years isn't going to be the late 90's, nor is it going to be
2003 through 2007 again. But, is that a reason to entirely steer
clear of stocks? No, we don't think so.
In fact, in
the same segment of the TODAY Show, Cramer went on to say "I think what
you have to do, if you can withstand it, is just ride it out,"
That was in
reference to those investors who were thinking further out than five years,
but regardless of anybody's time frame, they're all investing in
the same stock market. So what? Cramer's not been one to sit tight
for too long with any stock that wasn't productive. His motto is "There's
a bull market out there somewhere, and I'm gonna help you find it." So,
for him to encourage patience for one group but an outright exodus for
the other....well, we think you have to take all of it with a grain
of salt.
With all of
that being said, if Jim Cramer really did happen to mean exactly
what he said (to get out if you need your investment money within five
years), we respectfully disagree.
As mentioned
above, being cautious and defensive, and being conservative or aggressive
in the right ways, is good advice for the next five years. You know
what though? That's also good advice for any and all times!
We believe the
market is much more resilient than Cramer made it seem. And, we believe
the economy will recover sooner than anybody gives it credit for - it
always does. Furthermore, we've historically observed how a market's
recovery can precede an economy's recovery. If this time around
is different, it will be a highly unusual exception to the norm.
Blind faith?
No - we're not going to be naive. Many stocks will fall by the wayside,
and the economy may not actually help many companies for a while. Plus,
volatility is still likely to be gut-wrenching at times. On the other hand,
we're not going to let panic and hysteria blind us to opportunities.
Our goal has
always been to search for facts and historical relevance, and then report
those odds to you....good or bad. So, here are the facts:
 As
it stands right now, the S&P 500's forward-looking price/earnings
ratio is about 9.0. The 'norm' is roughly 14.0. Corporations would
have to fall wildly short of already-low expectations to not
keep up with a forward-looking P/E of 9.0. Granted, the freezing of the
credit market coupled with the recession may not help when it comes to
earnings, but it looks like that reality is already priced in. Or
to say it another way, the time to sell isn't now - it was months
ago. (Isn't it nice how hindsight is 20/20?)
Even in looking
at today's action we can see confidence is starting to grow again, with
stocks up more than 5%. No, the day isn't over yet, and yes,
we may well see stocks sink even further in the near or distant
future - anything's possible. If things are sure to implode though,
then
who's buying today, and why?
Bottom line
-you don't need a crystal ball. You just need the discipline to not
fall into the traps of fear or greed. You just need the discipline
to draw the line between hype and reason... a line that's been blurred
the last couple of weeks.
Even as late
as last week we started to see some stocks perk up, despite the
fact that the market was taking record-breaking losses. Many of those stocks
were of companies that - quite frankly - were not likely to be affected
even
if the economy worsens. So, we think there are always opportunities
out there even if high-profile commentators don't agree. Keep reading
our newsletter, and we'll help you find those opportunities.
Ed-
P.S. We posted
several comments last week about alternative energy and its future.
You may want to check out the Micro
Cap Press blog (by clicking here) to hear the latest. A lot of things
have been happening that may have been buried by all the attention given
to the global equity market's bailout.
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Updated: 9:18 am PST (17:18 GMT), January 5, 2009
