Investment Moats

Jim Cramer’s Call: Ultimate Bear Bottom Indicator?

by Leave a Comment

The VIX hit 56 this morning in US and the stock market dropped an average of 4.5% in a day. Since the start of these, the market have dropped 30%. A good time to start bottom calling?

Jim Cramer seems to think not. But in a way, he might be indirecting calling for one:

Bullish investors should turn into shrinking violets as the stock market continues its shocking downward spiral, CNBC’s “Mad Money” host Jim Cramer told Ann Curry on TODAY Monday.

In what Curry called a “dramatic statement,” Cramer emphatically urged any investor who has money they may need in the next five years tied to stocks to pull their dough out.

“I thought about this all weekend,” Cramer told Curry. “I do not want to say these things on TV.

“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.”

While the animated Cramer is known for telling investors the best prospects for earning money on the stock market, he’s now saying retreat is the best position in the face of some of the worst financial news in decades. The bank lending default crisis that put financial firms around the country on the brink of collapse could bring “as much as a 20 percent decrease in the stock market,” Cramer predicted.

He noted that the world’s markets are nosing downward in the face of the U.S. fiscal trauma.

“One thing is certain — they are, in Europe, behind us,” Cramer told Curry. “We’ve experienced more pain than they have, we are surprised at their pain, we didn’t know how bad off they were.”

He called the U.S. government’s $700 billion bailout plan, which includes raising the insured rate on bank deposits from $100,000 to $250,000, as a “good one,” assuring bank depositors: “Your money is safe.”

But he warned that the same may not be true for stock market investors.

“I don’t care where stocks have been, I care where they’re going, and I don’t want people to get hurt in the market,” Cramer told Curry. “I’m worried about unemployment, I’m worried about purchases that you may need. I can’t have you at risk in the stock market.”

Still, those with the assets — and the stomach — to ride out the stock market’s ups and down over a five-year period might be best served by holding their nose and holding onto their stocks.

“I think what you have to do, if you can withstand it, is just ride it out,” Cramer said.

Cramer’s gloomy scenario came from calculating individual Dow stocks and estimating how far they might yet fall, he told Curry. And companies’ third-quarter earning reports, due this week, aren’t going to be music to investors’ ears.

“I think the previous quarter, the one we’re now hearing from, was a terrible quarter — but it will look good versus the coming quarter,” Cramer warned.

I thought its a very responsible call to be honest, but these kind of personal finance advice should not be given now. Its not Cramer’s fault. he ain’t so much big on personal finance. The individual must realise this before even watching his show!

Money meant for investing should not mix with what u set aside as daily expenses. Having said that, the headline does not mix well with his actual message, which is to stay vested if you can ride it out.

It is the timing of this article that makes us wonder if we have reach a certain stage of extreme pessimism.

Gulf States May End Dollar Pegs

by Leave a Comment

By Fiona MacDonald and Matthew Brown

May 1 (Bloomberg) — Gulf states are considering dropping their pegs to the dollar after the U.S. currency’s decline stoked inflation across the region, Kuwaiti Finance Minister Mustafa al- Shimali said.

“Yes, there are some” Gulf Cooperation Council states considering dropping their pegs to the dollar, which has fallen 13 percent against the euro in the last 12 months, al-Shimali said in an interview in Kuwait late yesterday. “Some countries will do what we are doing.”

Al-Shimali didn’t say which countries might end their pegs. Speculation of a change in Middle East currency systems eased this month after the United Arab Emirates and Qatar ruled out a revaluation or dropping the dollar peg. Inflation is running close to 10 percent in Saudi Arabia and the U.A.E., while Qatar’s consumer prices rose 14 percent in the fourth quarter.

The Kuwaiti dinar has appreciated 7.9 percent against the dollar since the nation dropped its peg to the U.S. currency in May last year. The link to the dollar meant that imports in euros and other currencies that have strengthened against the dollar became more expensive.

Gulf states have been struggling for the past year with whether to end their dollar pegs.

Newspaper reports

“This news has already been in newspapers,” al-Shimali told reporters at a meeting of the Fourth World Economic Forum in Kuwait today.

Reuters reported today that al-Shimali said he was citing newspaper reports and not expressing his own opinion when commenting to Bloomberg on the future of the Gulf dollar pegs.

When asked at the forum about Gulf states considering dropping their pegs, al-Shimali told reporters that he would not comment on behalf of Gulf states.

Officials at the Qatari, Omani and U.A.E. central banks were not immediately available. The Bahraini and Saudi central banks were closed today.

“Inflation is rising in the Gulf to a great extent because of loose monetary policy,” said Marios Maratheftis, head of research for Standard Chartered Plc in the Middle East in a telephone interview from Dubai. “Tightening monetary policy can only happen if they drop their currency pegs or strengthen the currency, preferably both.”

Rate Cuts

The U.A.E. and Qatar lowered their benchmark interest rates today by a quarter point, matching a cut by the U.S. Federal Reserve a day earlier. The move is needed to maintain the dollar pegs.

“The case for currency reform is strong,” Simon Williams, chief Middle East economist at HSBC Holdings Plc, said in a telephone interview from Dubai. “The inflationary pressures the Gulf faces not only demand a stronger currency, they also require an independent monetary policy. The issue is not going to go away, but I don’t believe that change is close.”

The idea of dropping the peg “has been started by other Gulf countries and they are partially going this way because the dollar has been going down for some time,” al-Shimali said.