Shot Confidence Cuts Into Credit Markets

Is the stock market wrong or the credit markets wrong? Are stocks signaling more health than the bonds are?

I believe stocks are forecasting something better for certain -- too good frankly -- but the credit markets are too dubious because the confidence there has been shot due to Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take) and Lehman and AIG (AIG - commentary - Cramer's Take). Both are overreacting, which is why I have said to sell into this move.

We need a rate cut or two to make things better. We need rates down to 1%. We don't have that; we had it in 2003. We aren't going to free up the fixed-income markets without it. The banks need it, and they need it bad.

We need to have more than just these stupid facilities. That's that nonsense from Tim Geithner, the much revered New York Federal Reserve president, which isn't doing anything except hurt us.

There is simply no reason for the bond market to unfreeze yet. What's the point? What's the opportunity? No reason at all.

Remember, we are betting on the consumer faring better and housing bottoming. The lending market is petrified on the capital demands being placed on it by credit drawdowns and the massive lack of confidence inspired by the confiscation of capital post-Lehman.

I believe the T-bill rate will show some give in a few weeks as we lose the mental captivity from Lehman. Right now making $10 on $100,000 is too strange, and can't last.

We will know more after the denouement of Washington Mutual (WM - commentary - Cramer's Take), which may be causing the problem. It's too early to be aggressive on stocks, too late to be too negative on credit.

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

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