Could that have been the bottom? Cramer says, 'Get out'
Did CNBC’s Jim Cramer call the stock market bottom -- by telling investors to get out today?
The Dow Jones industrial average was off as much as 800 points at its low just before noon PDT, then staged a powerful rally that cut the day’s loss to 369.88 points, or 3.6%, to 9,955.50. The broader market also rebounded from the worst levels of the day.
The massive sell-off for much of the session had everyone on Wall Street looking for signs of capitulation -- the moment, or moments, when the market feels utterly hopeless.
"The emotion issue is the element that everyone’s trying to come to grips with," said Todd Clark, director of trading at Nollenberger Capital Partners in San Francisco. "Everyone’s looking to stand up and wave the flag and say, ‘That was it.’ "
But was "it" today, with the Dow, at its lowest point, off nearly 33% from its record closing high reached a year ago this month?
Cramer, the host of CNBC’s "Mad Money" and someone usually regarded as a cheerleader for the market, helped stoke the sense of capitulation with his extremely bearish comments on NBC’s "Today" show this morning.
Warning that the global credit crunch could drive the market down another 20%, Cramer advised: "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."
"I thought about this all weekend," he said. "I do not want to say these things on TV."
Another sign of abject panic: The so-called VIX index, a closely watched gauge of investor fear levels, closed at a record high of 52.05, after reaching 58.24 intraday.
Even at the gloomiest points of the last bear market, which ended in 2002, the VIX -- which measures investors’ expectations of market volatility by tracking activity in stock index put and call options -- never closed above 46.
Still, there’s a big difference between 2002 and now: The global credit markets weren’t imploding then, as they are today.
Without credit, the economy can’t function. The stock market, at these depths, clearly is discounting a recession stemming from the credit crisis. The question is, if we’ve never seen a credit catastrophe on this scale in the modern global economy, how can the stock market know how much discounting it needs to do?
Photo: Jim Cramer, in happier times. Jennifer S. Altman / Los Angeles Times