RealMoney Silver - Retail's Not the Right Play Here

Retail's Not the Right Play Here
By Jim Cramer
RealMoney.com Columnist
1/22/2008 12:59 PM EST

People are really going by the old playbook: Buy retailers and banks when the Fed gets really aggressive. This is classic early-cycle behavior. It comes from thinking that things will be better by this time next year and institutions believing that they have to buy something early in the cycle.

I like some of the banks here, because if you can find names that are not dependent on a hefty dose of mortgage insurance of any form to make their years, you can buy them, because you can see the charge-offs taking place against the net interest margin gains and reach a bottom.

The retail, though? Harder. You have to believe that this is the Fed cut that triggers both hiring and spending and gets housing going. I just don't see that. I think any rally in retail will be short-lived, and I would bet that way.

Somone astutely asked me about the decline in the safety stocks. That's part of the textbook, too. The crowd that says we will avert a recession is out in full force today, selling safety and buying risk. Given that safety was priced so extremely high when we were all sure that a recession was coming, the selloff makes some sense.

But I would still buy these stocks on weakness, as the Fed is just as soon likely to say it is done cutting as it is saying it will keep cutting. A Procter & Gamble (PG) at $63 or $64 never really hurt anybody.

At the time of publication, Cramer had no position in the stocks mentioned.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.

Read our conflicts and disclosure policy.