Stock Market Sell-Off Continues

The sell-off continues. Headlines around the world are screaming that markets are plunging because of bad corporate earnings news, or bad economic reports, or bad whatever. Sell, sell, sell.

Sorry, but I’m deaf and blind today, and believe me, I’m not handicapped.

I’m watching traders sell the Euro, sell oil, sell precious metals, sell the international equity markets, sell the US equity futures, sell, sell, sell… But what I see are the trillions of dollars of cash being built on the sidelines ready to come into the game in a flash.

Locked and loaded…

As you probably know, I like the work done by Adam Hewison of INO.com. He’s a trader and a blogger with a very good website. So, rather than tell you about the selling wave that is likely to come again this morning, I decided to give you Adam’s message. Basically, what he’s saying is that in order for the public to succeed in the market, they first have to stop following pied pipers and clowns.

Last week I wrote a blog on Jim Cramer’s recessionary stock picks. This blog posting showed the five stocks that he thought would be recession proof and ones that he would suggest you buy. This was on the 8th of January, 2009.

I just happened to tune into Mr. Cramer’s show on Thursday night. He basically announced that he was throwing in the towel and that it would be best to get out of these positions.

So let’s see how he did with his picks. All of his hypothetical stocks purchases were made on the 8th of January using the closing price.

Caterpillar: Purchased at $44.08 - Sold at $31.58
Home Depot: Purchased at $24.38 - Sold at $22.12
Johnson & Johnson: Purchased at $59.02 - Sold at $58.18
Hewlett - Packard Co.: Purchased at $37.61 - Sold at $36.13
Verizon Communications: Purchased at $32.42 - Sold at $30.45

Here’s what we are going to do… we’ll take the closing price last (1/08/09), and the opening of January 30th to see just how Mr. Cramer’s recessionary stock picks worked out. The good news is that Mr. Cramer was five for five. The bad news is, those five stock positions lost money.

I have often said that I am a fan of Mr.Cramer, as he is a very entertaining man. I’ve also have commented that he never places a stop loss on any position that I’ve seen. If you have other information to the contrary, please share it with me and the readers of this blog.

Here are the results:

Caterpillar (CAT) lost: $12.50 / 28.35%
Home Depot (HD) lost: $2.26 / 9.26%
Johnson & Johnson (JNJ) lost: $0.84 / 1.42%
Hewlett-Packard Co. (HPQ) lost: $1.48 / 3.93%
Verizon Communications (VZ) lost: $1.97 / 6.07%

So, Cramer is down on average -10% with the five best stock picks in the universe that he gave his followers three weeks ago. Hmm.

That’s pretty costly entertainment. Why do people watch?

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