Cramer’s Video And Paulson’s Words Of Wisdom

First, have to post the video of the Cramer capitulation:

It is amazing he is still recognized as credible after being so wrong, so often. He may be right here, but his timing is atrocious.

Gary Kaultbaum, a saner and more consistent voice, agrees with me that we have a good chance for a rally. Here is Monday’s radio show in case you are trading on Tuesday, or thinking about listening to Cramer’s advice.

I’m thinking of picking off a little bit here, knowing that if I bought maybe 10, 20 percent in the market, and I lost 5%, I’m going to lose a half of 1% if I’m wrong. But if I can catch one of those big bear market rallies, which sometimes are really nice, I’m going to make some cheese.

Speaking of being wrong, Gary’s October 3 column gives us Hank Paulson’s verbal track record on the crisis.

So… what does Hank Paulson’s past performance look like? Why does he get the benefit of the doubt and the keys to the kingdom? The following:

March 13th, 2007 - Henry Paulson: “the fallout in subprime mortgages is going to be painful to some lenders, but it is largely contained.”

April 20th, 2007 - Paulson: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained.” , “All the signs I look at” show “the housing market is at or near the bottom,”

July 12th, 2007 - Paulson: “This is far and away the strongest global economy I’ve seen in my business lifetime.”

August 1st, 2007 - Paulson: “I see the underlying economy as being very healthy,”

February 14th, 2008 - Paulson: The economy “is fundamentally strong, diverse and resilient.”

February 28th, 2008 - Paulson: “I’m seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street.”

March 16th, 2008 - Paulson: “We’ve got strong financial institutions… Our markets are the envy of the world. They’re resilient, they’re… innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”

Mar 18th, 2008 - Bear Stearns Bailout Announced

May 7, 2008 - Paulson: ‘The worst is likely to be behind us,”

May 16th, 2008 - Paulson: “In my judgment, we are closer to the end of the market turmoil than the beginning,” he said.

July 20th, 2008 - Paulson: “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

August 10th, 2008 - Paulson: “We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

Sept 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated $1 trillion - $1.5 trillion dollars. Over $5 trillion is added to the nation’s balance sheet.

September 16th, 2008 - $85 Billion AIG Bailout “Loan”
September 19th, 2008 - $700 Billion Bailout Plan Announced

September 19th, 2008 - Paulson: “We’re talking hundreds of billions of dollars - this needs to be big enough to make a real difference and get at the heart of the problem,” he said. “This is the way we stabilize the system.”

September 21st, 2008 - Paulson: “The credit markets are still very fragile right now and frozen”, “We need to deal with this and deal with it quickly.” “The financial security of all Americans… depends on our ability to restore our financial institutions to a sound footing.”

September 23rd, 2008 - Paulson: “We must (enact a program quickly) in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,”

I ask again… Why are we trusting this man’s judgement? The markets get it. I wish the politicians did.

Indeed.

Dave Fry sees the government’s hand in Monday’s late day rally. Dave regularly does a great overview of index and sector ETF charts.

No doubt some talking heads will be describing today’s action as capitulation. Cramer was his consistently confusing self as his reverse course sell refrain hit the airwaves and his viewers’ wallets today. He said stocks could fall 20% and to get out. Being that they’ve fallen more than that already he must have meant another 20% from here. Either way, he’ll make it up as he goes along. It’s show business folks!

Stocks fell sharply early down over 700 points on the DJIA (^DJI) but made a furious comeback late in the afternoon to close down by half that amount. Who was buying? That squeeze may have been the opening act of your tax dollars at work. Nothing would surprise me and generating short squeezes has been the government’s primary objective. Reverse Repo’s from the Fed have been running around $25 billion per day as the Fed “drains” reserves from the system.

Looking through charts, I am not seeing much that interest me beyond the few I posted earlier. In the event of a rally, I am likely to be trading off of the intraday charts anyway, and using the criteria mentioned in my last post. I doubt my relative bullishness will last long, however, as this did not seem like true capitulation. Too many people are seeing value here, despite the ominous signs.

Posted in Categories: Contributor, External Research, Stocks, USA.

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Comment by Buck

2008-10-07 16:20:55

Wishful thinking and jawboning won’t make you any richer. Mad Jim was better late than never. Thankfully, he appears to have a conscience and knows that lots of folks rely on his experience. Most 30 something bull-market geniuses don’t have any of that, nor do they bother to study history.
The Crash of 29 took fifty years to recover from (after adjusting for inflation). Trees don’t grow to the sky and only the bosses always make it on Walll St.

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