One of the things that Jim Cramer has spent a lot of time thinking about is not necessarily the fundamentals of companies -- although he certainly wants to know them -- but how they will be interpreted in the stock market, he said on TheStreet.com TV's Wall Street Confidential
Web video Wednesday. A lot of people, particularly in the conventional media, are trying to pin him down on whether he'll be right in the next 48 hours or the next two weeks, Cramer said. "One of the things that I've tried to do is impart lessons from the mistakes that I've made, with the idea that the next people won't" make the same ones. Cramer said that in 1998 he found that the fundamentals before and after the Fed's emergency meeting remained unchanged. However, stocks went up dramatically "because the same pieces of data that were being reported before the Fed action were subsequently viewed quite differently after the Fed action. "What I'm urging people to do is understand the psychology of the market and not to fight it," he said. Although people are coming in from the sidelines, every day there are new subprime problems, Cramer said. "I'm ceding the notion that things aren't better," he said.
On Tuesday, retail stocks got an upgrade and went up. A lot of market players see a stock price and think the quarter must have been good, but in fact "the Saks ( SKS) quarter was not that good," he said. "There was no gross margin improvement and Saks is now annualizing some really hard compares." That stock, Cramer said, has gone from being a strong buy in his book to being a hold. " Lowe's ( LOW) had nothing good to say," he continued. "They did mention they were going to annualize easy comparisons, but a lot of that is because lumber costs have come down and some of that is also because the northeast had better weather than last year." The stock went up from $26 to $29 despite this because "the Fed has changed the psychology, and their downtick, which is basically what they predicted, is now considered to be better with a notion that there could be someone to rescue Lowe's," Cramer explained. Historically, retail has been "a fabulous place" to be when the Fed stops raising rates and starts cutting. "People need to think of that prism," he said. "They can't just look at the company," because otherwise they'd be shorting Lowe's. "What I'm emphasizing is use the lesson I've learned, which is that don't be so granular," Cramer advised. "Don't look at Lowe's and puzzle over why it is going up. Look at it and understand that we've flipped in the ways we look at things."
Lowe's and Toll Brothers ( TOL) are now situations that have stabilized and could get better, he said, telling people to not outthink this. "I hate to ever say this to people because it sounds so unrigorous, but if you didn't read the Lowe's conference call, you would do better than if you read it," Cramer said. "It's an oddity. I have found over and over again that homework is a positive, but not when it's viewed in a vacuum."