During a recent downturn, Real Money's Jim Cramer discussed how to manage difficult markets undergoing declines.
No reason to worry, Cramer says – as long as we’re all focusing on the right issues and objectives.
This from Cramer.
"Why am I not more worried? I think it's because of my version of the Byrds' "Turn! Turn! Turn!", which in turn was from Ecclesiastes. To everything, turn, turn, turn; there is a season, turn, turn; a time to buy the industrials, a time to sell the banks; a time to bid for health cares, a time to dump the techs; turn, turn, turn. A trade for every market under heaven."
"Yes, people keep trading in and out, afraid to miss the next move. So a season that might have been acceptable two weeks ago, like buying the extremely high multiple to sales stocks, had been replaced with a season to buy the utilities, the consumer-packaged goods and the homebuilders."
"There is a tendency to ascribe magical powers to these rotations. The Nasdaq is going down, because the Fed is going to signal something this week, so, sell the semis. The utilities are up, because interest rates are down, because delta is going up, because vaccination rates are down, so go buy PepsiCo (PEP) - Get PepsiCo, Inc. Report or Procter & Gamble (PG) - Get Procter & Gamble Company Report or Duke Energy (DUK) - Get Duke Energy Corporation (DUK) Report ."
None of this is unreasonable, Cramer said. But let’s keep our eyes on the prize.
"The endless focus on the Fed is simply, again, lazy thinking. It's so easy to listen to Fed governors or presidents and then divine what they might say vs. the chief and then try to predict when Jay Powell will move and how much he will move. It's the perfect parlor game."
"There's only one problem."
"It makes you no money."
"It's like the game of 'Clue.' Mr. Powell in the library with duct taper tape?"
Instead, Cramer sticks to a seven-point list for investors to follow when making big trading decisions. Here are some of them:
1. "I care about how much Afghanistan actually matters. Did we abandon an ally who wanted our help? Or did we abandon a sinking ship? Will we abandon the only strategic place on Earth for tech, Taiwan, where a huge percentage of our semis are made? Will Taiwan Semi (TSM) - Get Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR Report start favoring Chinese car manufacturers who face the same nagging chip shortage that we do, rather than favoring the U.S. simply because they see the writing on the wall?"
2. "The stock market is saying that delta can run its course, like in the United Kingdom or even India, where you either get it or get vaccinated and that's all she wrote. I think that's wishful thinking -- way too many antivaxxers fighting for the freedom to get sick -- but market players are shrugging off any new restrictions on indoor activities, as if they will be short lived."
3. "Rates going down are good for the goose, the homebuyer and bad for the gander, the mortgage lender. So is a time to buy Lennar a time to sell JPMorgan? Maybe so, as a house is still cheap relative to rent and rates are so amazingly low that you should buy something, anything. I actually think a piece of property might be better than any stock right now. Mad land!"
4. "Low price-to-earnings multiples are in and higher price to earnings multiples are out. This is a very hard turn, turn, turn because it is out of synch with everything except with the idea that the market is tired of absorbing all of these money-losers and wants the safety of a dividend -- no matter how meager-and a buyback. We have seen this behavior before when there is too much supply but it tends, in the end, to defeat even these stocks."
For more of Cramer's list, please click here.