'RealMoney' Radio Recap: Margins of Error
Jim Cramer saw some classic signs of a market bottom Thursday morning, but forced margin-selling came into play Thursday afternoon, wiping out chances for a bottom, he said on his "RealMoney" radio show.
"Too many people own too many hot stocks with margin debt," said Cramer. When that happens and stocks go down, borrowers must either send in more money to their brokers or the broker will sell the stock out from under them.
Most of the time, it's the latter that happens, he said. Forced margin selling usually begins around 2 o'clock, said Cramer, and sure enough, as the 2 o'clock hour approached, the market began to sell off.
Cramer said Thursday's action was reminiscent of what happened during the dramatic market declines of 2000, in the wake of the tech bubble. But, the difference this time, he said, is that most companies are real companies with real profits.Thus, Cramer expects to begin seeing analysts upgrade beaten-down stocks. He also believes analysts whose estimates for oil are too low may start to raise their price targets. And, companies seeing their stock prices fall precipitously are more likely to start buying back stock. For those who are on margin, though, said Cramer, "Get off margin right now. ... Margin is horrible." In response to a question about Seagate Technology (STX), Cramer said that the stock is a battleground and that there is a "lot of bad money in Seagate." It's "too hard," he said. In response to a question about recent IPOs that are trading below their offering prices, Cramer said Avalon Pharmaceuticals (AVRX) is "kind of interesting." Caribou Coffee (CBOU) "doesn't have great earnings momentum," but if you buy it around $10 to $11, "you'll be OK," he said. Cramer also mentioned Genomic Health (GHDX) but said that "none of these jumps out at me as if you must own them," adding that "things are rough out there right now."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV