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.

Historically, it’s when the mood is blackest that share prices often start to scratch out a bottom.

"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

Comments

[Raul X. Garcia]

Blah, blah, blah...

Let the chips fall as they may.

[Kim]

The bottom? Hell no. We've got another $700 billion of debt stacked on top of the $10 trillion we were already facing, with a ceiling re-authorized to $11.3 trillion.

It is a sad time to be a salaried middle-class American tax payer.

[David Marks]

No.

[Richard]

Maybe when the service on a conventional house loan again equals abut 28% of household income then we may be near the "bottom". Houses have a long way to fall before we're there!

[BOB]

it time to take it out and following the money go.

[anonymous]

Cramer calling a bottom? You're joking, right?

[Tom Petruno]

Anonymous: That's the point.

Tom Petruno

[Reno]

We've got 25 years worth of senseless spending and borrowing behind us and ... guess what? We're spent out, have no ability to repay our debt, and we've sucked the world dry in the process. And so is Europe, and so are the Brits and the Aussies. That's the backdrop, anyway.

I don't see any buying power on the sidelines. Not this time. Jim Cramer is right: sell into any rallies and steer clear. And make sure you've got your helmet on!

[The Turk]

If you're looking to Cramer for advice, you have bigger issues than the stock market.

[Richard Ward]

I think Cramer called a bottom about 1500 points on the Dow ago.

[gerrrg]

What the heck, here's my prognostication:

Wait until November, and the results of the election. No matter who wins, the stock market will go up...briefly.

But volatility remains because the holiday season is upon us, and consumers are tapped out on credit, and cannot get more. Post-Thanksgiving will be so bleak, the market will drop back to mid-9000 and stick there through December.

The market only really begins to truly recover in mid-January after the inauguration and the first State of the Union Address. At that point, the economy recovers, but at the sacrifice of jobs - as companies cut employees to move profit upwards.

We'll end up with 9-11% national unemployment around April. If it's closer to 9 in April, the job recovery starts. If it's 11 in April, the gloom and doom for workers stretches until around November, 2009.

The housing market flattens out at the bottom around April as well. At that point, values will be about 20% below their maximum highs, and will remain slow for another year or two.

In the end, we won't reach 6% unemployment until mid-2010.

Or we have a Depression.

I should get paid for that.

[Barney]

Cramer said to take what you need for the next 5 years.

Conversely, if you are fortunate enough to have what you need for the next 5 years, eveything is an incredible bargain right now. Those who survive (think Warren Buffett) will bounce back bigger and stronger. In 5 years we will be wondering why we didn't buy more. Buy quality only.

By the way, I'm just a little guy with no axe to grind, (only my own hopes).

[Gary]

Jim Cramer is paid to get people (i.e. suckers) excited about investing whether its a bull market or a bear market. I think you all should take his advice with a grain of salt.

The way I see it is that it would take a few days or more for the billions of dollars to transfer into the bank accounts of the Wall Street bigwigs. I figure these bigwigs will restart the credit market on Wednesday and then the stock market will begin a steady climb back up to 14000.

If I had money to invest I would get back into it tomorrow afternoon, say between 3-4pm.

[Stockwoman]

I also agree! The stock market hasn't even began to near it's bottom and what disgusts me the most is that the average American doesn't even know how or what is going to be affected in their life by this.

These average Americans are the ones who are voting for the next President of the US, whom right now I don't even feel even matters, but these people who don't feel that Wall St. has "anything to do with them" are going to vote on that basis and thus elect someone who is disqualified.

As a conservative American I am completely loosing all reguard for the US and what they are doing. I don't believe that ANYONE can fix this problem and I am ready to move out of the United States!!

[John]

Bottom?

Who's kidding who?

The Option ARM / Alt-A ARM markets are going to be resetting / failing in 2010/2011, so maybe by 2012 everything will have bottomed out.

Unless something impressive happens in the mean time, we've got a while to wait.

[Girl 2.0]

Stocks don't "loose" value. Conservative voters who don't know the difference between "lose" and "loose" are going to make losers out of the rest of us.

[asg]

17 or so recessions in the past since 1929. A few stock markets have dipped up to 40 to 55%. We're at a 25 to 30% dip so far.

With the Iraq/Afghan wars negative $; subprimes yet uncovered; the add'l cost of this bailout and more to come; over-inflated housing; and a weak presidency; the market will drop more, slowly, but more, to around 8300.

[Peter Basson]

The Dow at 8000? 9000? You've got to be kidding. This thing is just getting started. Read your history books. Think 1929. This is a generational catastrophe. The stock market is headed down, down, down and it will stay there for years, possibly a decade or more. My guess would be 4-5000 as a bottom, but I wouldn't be surprised to see it go lower. The only safe place (and even that's dubious) is precious metals. All other "hedges" foreign equity, bonds, commodities, US treasuries, will be wrecked by a combination of the credit collapse and inflation as the treasury prints money like the Weimar Republic on crack. Get your noses out of you know where, and your money out of town.

[Darth Baghead]

"Historically, it’s when the mood is blackest that share prices often start to scratch out a bottom."

How about 1929? Did stock prices scratch bottom in the blackest of moods in October of 1929, a mood so pitch black that many people jumped out of windows? Stock prices did not scratch bottom until 1932, and stayed depressed for quite some time. Jim Cramer is right. There is a tremendous financial tsunami approaching. Hunker down and get out of the way if you can!! It's going to get ugly, really ugly.

[Stu]

Greed....Greed...Greed..It's human nature to never be satisfied and want more. When will this country learn that are markets can't be free to do whatever they want and have less regulation. Yes, I am all for capitalism, but there has to be some control with regulation. Reagnomics trickle down theory does not work and this crisis proves it. We are back to 1929 (maybe not as bad). You think we would learn. The past administrations have been trying to nip away at FDR's New Deal and have finally succeeded to bring us back to where we started. People criticize the government programs to help the poor. Well, I think the
CEO' s have raped us from more money then social programs take. People need to wake up and stop voting for people who preach all their family values bull, but that is just a smoke screen for giving all the financial breaks to the rich. The markets stink right now, but I will ride out the storm and stand pat. I also have about 25 years till retirement, so I will hold on......

[James]

Bottom? Nope. Cramer inadvertently touched on it ... 5 years. It is going to take 5 years of steadily declining housing prices & declining asset values. Toss in a declining dollar, a little inflation, increasing fuel costs, increasing tax burden on the American middle class and PRESTO! Stagflation and the final death knoll for the middle class! We will have the poor and the very rich. Those of you from "south of de border" will recognize this social structure. That's right folks, America will look just like Mexico in 5 years ... especially if "conservatives" vote yet again against their own best interests and McBush winds up in the WH. Then the "conservatives" will finish their grand plan of raiding the Treasury and Social Security. Ever notice the party of "less government" does a smashingly bad job of running it? That's no accident. BE MORE CYNICAL!

[Tim Robertson]

Ron Paul was a better choice then the 2 left, oil is way down but OPEC will crush the world with a major record production cut, they need to eat and we need to drive count on it. Middle class Americans have not yet gotten the fact that the world revolves around wall street, the companies they work for will make major cuts and everything trickles down. Unions will help speed the demise of these companies with there unrealistic demands and governments will speed the demise by laying off there workforces in huge numbers and cutting back services.

Social programs will conflict with Working Americans pocketbooks when welfare programs clash with those struggling to survive.
Bottom? Not even close just wait till the 4th quarter 08 and first quarter 09 numbers come out those companies reports will be dismal.

To many people in this country don't contribute to society time to let them sink or swim, or they will drag us all further into this black hole.

[martscan]

Watching Fuld, of Lehman, respond to Waxman's simple, direct questions regarding Fuld's compensation of $480M in 7 years...and Fuld's broken field running ending with his 'touchdown', of citing the tragedy of his 10M shares that were worthless... brought tears to my eyes. Oh God, why couldn't that have been MY tragedy....?

[martscan]

All these posters that write these grand scenarios, these pro formas going out for years, must all be short the Dow index at 14,000 or long an inverse ETF, right? Does it not stand to reason that these prognosticators that are so certain of the mkt's performance for months to come, surely knew what today's situation was as little as 3 months ago? Goodness, one poster thinks he should be paid for his insight, er, ah, nonsense. The fact of the matter is that NO one can KNOW what the mkt will do TOMORROW! Anyone who is not a pro that doesn't dollar cost average is deluding him/herself. And pros don't think beyond what the mkt gives them...like a good quarterback who doesn't force the ball into double coverage. The mkt is what it is... today...and as long as its moving there are tons of money to be made.

[Duke Lacroix]

Every time I've followed Cramer's advice, I've lost money. He said buy the four horsemen---Apple, Research in Motion etc. I did and they went down.

He said that the energy run up was not a bubble so I bought coal. It was a bubble. It imploded. I lost money.

I think Cramer means well, but he is a counter-indicator.

[Economics]

If you have a portfolio, you have to be diversified. Most losses are caused by panic, but if you are smart, you don’t panic. I had a diverse portfolio I was tracking at the time of stock market crash of 9/11. Stocks were dropping and my portfolio was down by 30 percent. I choose not to act because if I sold I would have been at a loss and I just hung in there. Within a year, my portfolio was finally at break even and I had actually had gains by from the dividends. The market continued to grow and my portfolio followed suit.

The lesson was not to panic and to be smart about the companies you are invested in. If you have an economy that is faltering, look for indicators like http://www.buymyhousebeforethebanktakesit.com sites like these tell me that banks are in trouble and not to have stock portfolios in my portfolio but maybe have companies that deal with foreclosures in the portfolio. Look at companies that do well in hard economic times.

[MATT-B]

Great I will Short Sell for the next few years..easy money...

[Eric S]

I'm amazed by the comments. Tom didn't call a bottom, nor did he say that Cramer did. In fact, with regard to Cramer, it was the opposite. Cramer said to run for the hills, which Tom asked if we should interpret as a contrarian bottom.

Darth, the mood is panicky in the early stages of decline in period when the initial decline is sharp (1929, 2000), but it is not at its darkest. I can't speak to 1929. Wasn't around. But in 2000, there was panic in the early declines, but a general confidence that things would come back strongly. By mid-late 2002 following 9/11 and the Enron/Worldcom scandals the despair that characterizes the "blackest mood".

[MATTHEW_BEDNAR]

Many Correlated & Cointegrated relationships are out of whack right now. The only way to be a longterm bullish investor right now is with Call Options so you dont get margin called out/your position destroyed. The whipsaws are nuts right now. Cramer appears to be a really lagging momentum chaser on alot of things. The momentum is in a downward direction and Cramer could be late to the party on this one.

[martscan]

Next stop 8,000? I'd love it.

[Lisa]

Don't beat Cramer up on calling the bottom, he didn't. This is the authors interpretation of his advise to sell now, to raise cash for short term needs, because Cramer believes the market is continuing a downward trend towards 8000.. Cramer has been saying that it is headed for 8000 in his opinion for the last two weeks. He suggested that if you are a long term investor, prepare a shopping list to buy when it does hit bottom but don't buy now. And make sure you have raised enough cash selling on rallies to buy when this market finally hits bottom. That seems like good advise to me.

[Jenny]

I have no problem with Cramer, or any other TV personality stepping forward with their opinion....on one condition, when they mouth off on things "suggesting" to people to sell, and some will follow his "advice", then if and when he is wrong, or wrongly adds to the panic - he loses his job. When we're calling for the heads of the debacled Wall St. companies we can't be hypocrites and let these people go. If you are responsible then own it!!