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Paper vs. Rock

Cramer wants you to realize the bond market's power, even if it means using a children's game to illustrate his point.
Author:

Paper covers rock. Paper beats rock. I know, it seems a little ludicrous to bring up children's games when you are talking about bonds, but I am determined to do anything possible to get you -- especially you newbies -- to realize the power of the bond market. I like "paper vs. rock" because it's counterintuitive, but accepted. Stocks will rally if bonds stabilize and go higher. Even "bad" stocks.

A good bond market makes big money bullish. You put a couple of good bond-market days together and it flushes people from the sidelines into stocks. It has a magical effect, one that could even turn the Net! (Knew that would get your attention.)

Bond traders I speak to are beginning to think that bonds have overshot to the downside, given that the world has gotten less strong. As someone who has an underwater but unleveraged position on bonds (bought some more Friday), I believe that, but I buy bonds on a scale and I won't buy any more until the 30-year goes below 88.

Obviously it is too early to make a call on the bonds. We have to see that

CPI

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. But if we get a benign CPI, the last Big Bad Event will be past us. Then we will only have the

Fed

meeting, and if the Fed tightens, by this point, bonds will rally.

So, this long negative gauntlet will at last have run its course. How tempting it is to jump the gun and bet on a weak CPI. But I can't know what that number is, and I am not willing to bet that I am clairvoyant.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long the 30-year bond. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.