Jim Cramer, host of Mad Money on CNBC, flips out about markets!

[specialkornflake]

Full version:
http://youtube.com/watch?v=rOVXh4xM-Ww

Version with commentary:
http://www.youtube.com/watch?v=Pd5zAbDKZEg

This is great news for Ron Paul style financial policy!

[Johnnybags]

The markets cannot (except temporarily) outpace monetary growth, Cramer wants the FED to continue to expand MS 13.7 percent forever, inflating all existing commodities and spilling into the stock market. Is the stock market worth paying more for if the dollar buying power of the profits depreciates? If I have 100 shares of company x at 100.00 in my acct.and it goes to 125.00 in 5 years did I really make money if prices go up a like amount? Nah, and I get taxed on the gain which is only inflation? Cramer and Wall st are addicted to MS growth and get upset when the FED turns off the spickets since it costs them jobs, but they could care less when the FED keeps the spickets on and drives costs for all higher.

[Bossobass]

He didn't call for expansion of money supply in that clip. He called for the Fed to lower rates so that the millions of people who took adjustable rate mortgages [teaser rates] can hang on to their houses.

I especially liked the comment that 'We'll spend billions to build houses in Iraq..." he seemed to have caught himself and didn't say anything more about it, but ain't it true?

Bernanke and Bush will let millions of Americans lose everything while they spend trillions of our money building permanent bases and rebuilding the infrastructure they bombed to dust in Iraq and gifting pipelines to Exxon and building missile defense systems to intimidate Russia, etc., etc.

They'll loot 2 trillion out of the SS trust fund instead of lending that money for mortgages to grow the fund. They're just looting the US Treasury. Americans be damned. Economy be damned.

Get ready for the Amero and the NAU.

How much longer are we gonna take this $hit?

Bosso

[Johnnybags]

to stop people from losing money, whether its homeowners or investors. The banks themselves can refinance loans anytime they want for those stuck. Massachusetts is taking out bonds for a program to lock people into a reasonable rate. The FED does not control the entire bond market, if they lowered FED funds to 3 percent, investors would sell treasuries, and drive rates back up creating a huge spread in longs term/short term rates which you and I could live on. Borrow at 3 short, invest at 7 long and have free money. Inflation city. If the dollar drops and world currency rises, its inflation city as well. World interest rates must drop so that any drop in the FED rate is not accompanied by a weaker dollar. In order for world rates to drop, world economies must slow and world stock prices abate. They are in a box.

[KingTheoden]

The markets cannot (except temporarily) outpace monetary growth, Cramer wants the FED to continue to expand MS 13.7 percent forever, inflating all existing commodities and spilling into the stock market. Is the stock market worth paying more for if the dollar buying power of the profits depreciates? If I have 100 shares of company x at 100.00 in my acct.and it goes to 125.00 in 5 years did I really make money if prices go up a like amount? Nah, and I get taxed on the gain which is only inflation? Cramer and Wall st are addicted to MS growth and get upset when the FED turns off the spickets since it costs them jobs, but they could care less when the FED keeps the spickets on and drives costs for all higher.

I was under the impression that M2 growth was somewhere between 5-6%, though I could of course be mistaken. You are right that those less financially sophisticated do not understand the difference between nominal and real returns, nor do they understand risk discounting (the return you 'should' get for investing in a firm that carries some level of risk).

In investing or trading, one has to be mindful of the tax consequence (short term gains are taxed at one's bracket rate, long term rates at 15%). I believe long term rates require a one year holding period. So, in your hypothetical example, a 25% increase over five years in a normal equity security turns out to offer a pre-tax annual rate of return of 4.564%. Take out capital gains and we are down to 3.87%. If we assume an average inflation rate...you get the point.

The present structure of monetary and fiscal policy ensures constant inflation, which in turn forces people to invest their money or else see their wealth eroded. Silver and gold are in my opinion excellent hedges against this, however the scenario that Cramer seems to fear, were it to manifest, would place in peril the precious metals safe harbor.

A liquidity crunch would plunge prices for most investments, metals included. Cash could become the best thing to hold, however in such a situation, the dollar could significantly decline against other currencies such as the Swiss Franc. For a time, holding foreign cash could become the most profitable strategy.

It is yet unclear how acute is the sub-prime lending collapse. Cramer seems to fear that its effects are greater than what most seem to think. To prevent the nightmare I described above, the response would be to calmly offer the market liquidity in the form of lower rates (he was suggesting a discount rate cut, others might either prefer or also wish for a Fed Funds rate decrease). The idea is that lower rates would prevent a rash of foreclosures and defaults.

We do not know if this is necessary. But many on this board have been fearing a credit/liquidity crunch for some time on a scale even greater than Cramer's fears. Such people should be sympathetic to Cramer's suggestion. Yes, there are legitimate fears about inflation rising, however those potential negatives are likely outweighed by a reprise of the drastic credit crunch in 1929.

None of this is perfect or inline with free market economy. In my view, the Fed's policy of dropping rates to 1% four years ago is largely to blame for people signing themselves to home loans that were out of their reach. If the markets determined money and interest rates, we probably would not be dealing with this. But we are, and it is the Federal Reserve's job to do its best to prevent a very, very unpleasant situation.

[romelll]

The best thing about that video is the lady.

Cramer is an act. It had the feel of Mean Gene Orkerland interviewing Macho Man Randy Savage!

[ghemminger]

Housing Bubble (May)
http://www.youtube.com/watch?v=-rLYph0J7vc&NR=1

Zombie Media
http://www.youtube.com/watch?v=rlQ--3juteM

[ghemminger]

The best thing about that video is the lady.

Cramer is an act. It had the feel of Mean Gene Orkerland interviewing Macho Man Randy Savage!

Hey should keep her...it makes him look even crazier!!!:D

[slantedview]

It's time to pay the piper. What does he expect?

[njandrewg]

maybe tell Cramer about Ron Paul, and see if he can endorse him?

[michaelwise]

I've been bolgging on the housing bubble blogs, since they started popping up about four years ago. Honestly, I don't know how most people don't recognize bubbles in our economy when they pop up. The internet bloggers do a great job in explaining the economic issues to a wider audience. Lord knows the MSM has no interest in explaining to the masses what is going on in our economy. The shit is really going to start hitting the fan soon.

[MozoVote]

I've been bolgging on the housing bubble blogs, since they started popping up about four years ago. Honestly, I don't know how most people don't recognize bubbles in our economy when they pop up.

I also find that fascinating. The Internet stock bubble was obvious by late 1997, for example. The housing bubble was obvious in Califiornia by mid 2002.

But, people enjoy the euphoria of rising prices. They forget SO QUICKLY what normal times are like.

[Wyurm]

I also find that fascinating. The Internet stock bubble was obvious by late 1997, for example. The housing bubble was obvious in Califiornia by mid 2002.

But, people enjoy the euphoria of rising prices. They forget SO QUICKLY what normal times are like.

That song, "Tiny bubbles" comes to mind.

Have you ever seen a kid blow bubbles with one of those magic bubble wands? They find it fascinating, and love watching them burst, but then they want to blow more and create as many bubbles as possible. Our economy is being managed by a bunch of kids with magic bubble wands. It doesn't matter to them that tons of lives are ruined every time a bubble bursts. What matters is that the magic bubble solution doesn't run out so they can continue to blow as many bubbles as possible.

[Gee]

None of this is perfect or inline with free market economy. In my view, the Fed's policy of dropping rates to 1% four years ago is largely to blame for people signing themselves to home loans that were out of their reach. If the markets determined money and interest rates, we probably would not be dealing with this. But we are, and it is the Federal Reserve's job to do its best to prevent a very, very unpleasant situation.
1%... The day I read that was the day I gave Dr. Paul $2,300. Really, that was just insane. What the hell was Greenspan thinking, exactly?

Even if one rejects Austrian Business Cycle Theory outright, one cannot argue that predicting what the Fed will do should be required for sound investing. But that seems to be the case...