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Jim Cramer: Top 5 Reasons Not to Sell It All

Let's change it up. Let me give you the top five reasons NOT to sell everything.

Just trying to be more constructive here.

  1. We are very, very oversold and people are getting very negative. We all accept that we are going down and many are taking action.
  2. Many stocks will be impacted when we go over the fiscal cliff. Notice I said "when" because unless politicians rise above, we are going over it. But other stocks, international stocks with bases here that sell soft goods that make them buyers of commodities, will do well and they need to be bought into the weakness.
  3. Everything in the end gets discounted, meaning that we can adjust to anything and when we get there any new negatives won't mean much. But a new positive or a deal will send us soaring.
  4. The new taxes and spending cuts, while draconian, will not be the end of the world for the big secular growth stories out there, including health and wellness, as well the desire for a bargain.
  5. Plenty of companies have the power to raise dividends to where even the after-tax the returns are far superior to bonds.

Am I being a Pollyanna about this with these five positives? History says that to be solely destructive is to miss an important move in the market, although we don't know where it might begin.

We also know that EVERY SINGLE TIME in every single downturn, no matter how big or small, we've had stocks that bottom before others, usually in thirds, depending upon the circumstances. Sometimes industrials bottom first because the shock that brought them down is one-time only. Sometimes it is the soft goods that hit bottom and begin to bounce because the proximate cause of the decline is a downturn in the economy. Other times it is the higher-yielding stocks that bottom because they are fixed-income alternatives.

These are givens.

In virtually no cases could you wait until the big, bad event occurred to do buying. Things always bottomed before that. In no cases did you not initially suffer losses if you stayed the course. In every case, when you blew out of everything you did poorly, especially after you look longer term. Remember that if you bought the ten most-actively-traded major-capitalization stocks the day before the 1987 crash, where we lost 508 points off a 2,260-point Dow Jones basis (arguably the dumbest day ever to buy stocks) you were up, in some cases up nicely, on all of them.

So being constructive is actually being rigorous.

But trying to time or game the cliff has become something that's somewhat hopeless. Unless you see the leaders together in a room, publicly or at a Camp David hideaway, you know they aren't feeling the pressure from their constituents to do a deal. So many don't pay much in income tax, so many don't own stocks, that the pain isn't visible for the majority of the voters. That can only change if the politicians come together out of good, which is unlikely, or out of panic because the stock market's fallen so dramatically. It is the latter that makes being constructive just so very difficult in these uncertain times.

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Chart of I:DJI
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