I'll keep this one brief. The big news this morning is that the Fed is stepping into the commercial paper (short-term unsecured corporate debt) market for the very first time. It appears that the Fed will be buying this short-term paper in a move to get credit investors back into the short-term lending business. For the past week or two even the highly liquid, generally high quality, money market had begun to freeze up. Now get ready for the media to bill this as "more tax payer money at risk". And yes that's true, but it is at risk in the 'money market' and my suspicion is that the tax payer will make out just fine on this one, in the near term. For today, we won't get into the longer-term concerns over the government stepping so directly into the private sector.
Those of you who have watched CNBC or the Today Show the past couple of days may have caught 'Mad Money' host Jim Cramer, advising investors to get their money out of the market, at least money with a five year time horizon. Which, at first blush simply sounds like general financial planning advice - which in the aftermath of his comments (apparently a lot of folks were listening) is what he seems to be claiming this morning. But make no mistake, based on how he couched his recommendation initially, Mr. Cramer was indeed making a market timing call.
Having been in the investment business for a quarter century, and believing in my heart of hearts that the near-term ups and downs of the market are virtually impossible to time, I Googled Mr. Cramer's comments over the past several years and made an interesting discovery. According to the Coax Advisory Group, who provides a service where they grade the gurus, Cramer made the following comment to his readers on March 24, 2003:
"Stocks, all stocks, are now equally dangerous. The bear market, which began in technology, has now extended to every single sector. In short, the risk of owning stocks are as high as I've ever seen them, and the rewards, the least certain. The wounds, self inflicted or otherwise, are too deep to fix, even with a successfully prosecuted war. If you want safety, go buy a bond."*
In case you weren't aware, the last bear market literally bottomed in March of 2003, the Dow hitting a low of somewhere around 7,500. If you had followed Cramer's sentiment on that day, you'd have missed a very nice extended bull market.
So then I thought I'd take a look at what he was saying last October, when the last bull market hit its peak. Here is one of his comments from October 1, 2007.
"I'm now confident that, what would have been a given in 2008, a brutal recession, will now be avoided and prosperity assured.