Two reports, Johnson Controls (JCI) - Get Report and Dana (DCN) , two very solid makers of equipment for the real economy, are now feeling the Fed's tightening, a tightening that is only aimed at the dot-com world.
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Message Boards. What a joke. We have 2% inflation but a runaway IPO market, and the solution for this is to crush the real economy with higher rates, while we do nothing to quell the overheated portion.
At first, I was just joking about the Fed's desire to get the market down. Now I realize that many of my cyclical companies, companies that look a lot like JCI and Dana, are going to get scalded by the Fed's insistence on monitoring stock prices. Because, of course, the Fed isn't monitoring the stock prices of the real economy. If they were, they would be monitoring the list of 52-week lows. They are monitoring the "going public" economy.
The tragedy here is that the Fed has a better way to regulate that economy than the short-term rates. Rather than wrecking the yield curve and causing disruption for everything from banks to car companies, why not just raise the margin rates to some level that would discourage overheating in the IPOs? I know that IPOs are supposed to be paid for with cash, but I also know that the abuses in that market are legion and could be stopped cold by a big raise in margin rates.
The Fed shouldn't wreck the real economy. It should just turn the dot-com economy to simmer from high. The Fed should stop using the blunt instrument when it can use the stiletto. That would make for a healthier economy and a healthier stock market.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. 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