wants what Goldilocks wants, an economy that's not too hot and not too cold, said Jim Cramer on his
"RealMoney" radio show Tuesday.
It's too hot right now, in part because there's still speculation in a handful of areas, Cramer said; and Ben Bernanke, chairman of the central bank, recently made statements at a conference that lead
watchers to believe that another interest rate hike is coming on June 29.
The Fed has only one blunt instrument to quell speculation in a sector, and that is to raise interest rates, Cramer said. While this makes it more expensive for speculators, it also makes it more expensive for everyone, and it kills all sectors just to cool off one, he added.
Prior to Bernanke's statements, some economists had speculated that the Fed would not raise rates at the end of the month -- but not Cramer.
Cramer said that the central bank has a track record of calling it wrong and taking rates too high and that he had no reason to believe that things will be different this time.
In 1998, the Fed said economy was way too hot and that it had to tighten rates, but soon after that it had to cut rates, Cramer said.
And in March of 2000, with the economy rolling over and dot-coms falling apart, the bank took short-term rates to 6.5% and caused a recession, he added.
They were wrong then, and they can be wrong again, Cramer said.
"It is not a Federal Reserve blind to what is happening. ... I think that what might be going on is that the Fed chairman is trying to cool speculation with talk rather than by raising rates and hurting the economy," Cramer said.
Either way, he said that it's a fool's game to wait for a clear signal from the Fed. It has never given an all-clear signal, he said, so it's no good to try and anticipate when it will stop raising rates.
Instead, he said now is the time to understand that this bad market is taking down even the good sectors such as aerospace, oil and gold, and that this panic is like a falling knife.
Don't try to catch the knife, he said. Wait for things to fall and then buy a little of the good stuff that got taken down, he said.
But Cramer warned listeners to buy only a little bit at a time, which is what he's doing for his charitable trust
Action Alerts PLUS.
He also said that only a diversified portfolio will get you through these tough times.
If Democrats win control of the House of Representatives, is it time for investors to panic? asked Cramer.
There's been all the usual hand-wringing over the prospects of a Democrat-controlled Congress, he said, thanks to the assumption that Republicans are supposed to be more fiscally prudent.
But when it comes to runaway spending, an unbalanced budget and too much borrowing, "we already have that for heaven's sake," he said.
This government has done nothing good for the dollar, and the stock market is suffering, he said. Cramer also reminded listeners that there is nothing to fear from a two-party government and that the best gains he's seen in stocks happened when Congress was controlled by Republicans and Democrats were in the White House.
Government gridlock is good for the market because then the politicians stay out of our way, he said.
Techs are getting hit especially hard in this environment, Cramer said, because people worry that more Federal Reserve rate hikes will result in less spending on consumer electronics.
This happened in 2000, so it could happen again. However, Cramer said that this doesn't mean that all technology plays are worth dumping.
He said to go after stocks on the basis of product cycles and specific company stories. For example, he said that business at
Cramer believes this is because the companies are not just levered to the U.S. economy. A lot of their growth is coming from overseas, he said, adding that expanding your scope overseas will allow people to avoid some of these Fed-related problems.
Sometimes good news happens, and a stock refuses to move higher. Cramer said that this is often because the market has "discounted" the news before it happens.
This is not the discount you get at the supermarket, he said. The term is used when good news is known about well in advance of the event.
For example, the drug Tysabri was withdrawn last year because it was linked to a rare but fatal brain disease. This hurt
, which make the treatment.
But both companies have long been telling the market that approval for Tysabri was coming, so when it got permission Monday to resume sales, no one was surprised.
The good news was there, but the stocks slid lower.
The time to own these stocks was when people had given up on Tysabri, Cramer said; the time to sell was when everyone realized that the drug would hit the market again.
is in a sickening slide, Jim Cramer told the first caller to his
"RealMoney" radio show Tuesday, but he still likes the stock.
Cramer, who owns it for his charitable trust
Action Alerts PLUS, said that he just told Action Alerts subscribers that he is buying a little more at these levels.
It's a good stock, said Cramer, but he is just picking at it now because there's no way to know when this market will bottom.
Cramer said that
is a great story and that there is also room for Palm and
Research In Motion
He added that if you overlay Palm's chart for the first four months of 2006 over that of almost every winning
stock over the same time period, they look very similar.
You could be looking at the charts of Palm or of
or even Ameritrade, he said. But because they're on the Nasdaq and involve technology and consumers, these stocks are now getting annihilated.
However, Cramer likes them and wouldn't back away. He acknowledged that it's painful to watch the decline and that he is not going to give up on a stock like Palm. It's not good over the next 18 minutes, but he believes that it will be great over the next 18 months.
Cramer said that
had a great quarter but is getting hammered because it's a bad market that is being especially hard on the Nasdaq.
He's not sure whether it has bottomed, but he likes the stock.
Likewise, he said that he likes
, which is up 40% year on year, but he can't say whether it's done going down.
The stock is cheap, but Cramer said that
is even less expensive. And while he said that management at both investment banks is good, he prefers management at Goldman.
He said that
is in a terrible slide, even though the aerospace cycle is terrific.
But in this environment, Boeing has yet to fall as much as many stocks, and Cramer said that it could still fall even further.
Because he believes that it's a high-quality company, Cramer said he would hold on to it if he owned it but that he would not buy more.
Cramer said that
is one of the best drug companies around, but that it's not doing anything exciting right now.
Cramer said he would be careful in this environment. The drug stock he likes enough to own for
Action Alerts PLUS is
While it may not have much reward potential as Wyeth, he said it probably is less risky, too.
When a caller asked about
, which he owns for his charitable trust,
Action Alerts PLUS, Cramer said he believes that it's a buy.
"But I'm in the house of pain," he said. "Japan has been bad, but it bounces." But Cramer isn't sure if "it will bounce ahead of the U.S."
So why did Cramer buy it? He's taking a longer-term view, he said. It's cheap right now.
Next, a caller asked Cramer his opinion on
Bernanke, the Federal Reserve chairman, has been targeting these stocks, Cramer said. He wants the demand for copper and for wood to go down, Cramer said.
"He's killing the homebuilders, so I can't recommend them," Cramer said. "It's too soon, and a rally that starts too soon, fails."
At the time of publication, Cramer was long TD Ameritrade, Mitsubishi UFJ Financial and Schering-Plough.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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