NEW YORK (Real Money) -- How high are rates going to go? How much of a desire to raise rates will the Fed show at its Wednesday meeting? If you own Treasuries going into Janet Yellen's den, you have to be a little daunted by the action in the real estate investment trusts and the banks, because they are telling you the same story: rates are headed higher this week -- maybe much higher.
Whether it be the sudden animal spirits of Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report) or the strength in regionals like First Horizon (FHN - Get Report) and KeyBanc (KEY - Get Report) , the signs are clear: we are about to get some net interest margin going here, and it is happening at the exact right time: the last month in the quarter. It's practically universal, big and small banks, so it's not just a gigantic SPDR Financial Sector (XLF - Get Report) trade that's making things happen. We have seen these fake outs before, but this is the most pronounced move of the year.
But it is nowhere near as bullish as the action in real estate investment trusts is bearish. I am seeing moves that are simply hideous, a 15.5 million share secondary for Health Care REIT (HCN) priced at $63.75 didn't hold, with the stock going out at $63.25, now with a 5% yield. A huge amount of pressure being put on AvalonBay (AVB - Get Report) . A hammering of shopping center chain Equity One (EQY) . A horrendous week for Simon Property Group (SPG - Get Report) , the regional mall chain. No wonder the iShares S&P 500 (IYR - Get Report) fell from $75 to $71.
But you don't just see the rate rise happening from watching the real estate investment trusts. You also see it from the fading yield support that a 3% yield gives you if your stock's in the oil and gas or mining businesses. Chevron (CVX - Get Report) and Conoco (COP - Get Report) would normally be buys here, with a 3.5% and a 3.7% yield, respectively. But the pronounced decline in oil, as well as the possibility of a quick jump to 2.75%, have made these stocks too hard to own.
Now I think that anything from the Fed that signals we are going to have more than just a gentle removal of the "considerable" language from the Fed's statement -- as in, we need to wait a considerable amount of time before short rates rise -- seems misguided to me, given that the rest of the world has suddenly taken a real turn for the worse. This whole Ukraine drama has truly turned into a debacle for Western Europe with even peaceful signals from Russia being met with tighter sanctions. Recession's brewing there.
The Chinese data, after stabilizing for a bit, are now signaling a slinking back to slower growth. That makes sense when you think about how about a quarter of its exports go to Europe.
And while we had a strong retail sales number last Friday, how do we know that the last monthly employment number, which showed weakness, isn't indicative of some sort of slowdown, especially when we know housing seems to be rolling over? The latter is self-evident from any of the housing stocks, all of which look like shorts to me.
But you can't have this many stocks signaling one way and still believe that the breakout above 2.6% on the 10-year isn't signaling that all rates, including those in the subdued mortgage market, aren't headed higher. Fortunately, the financials loom large in the S&P 500. Unfortunately, lots of stocks will quickly lose their bond equivalent status and the giant spur of cheap money might be seeing its waning days.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long GS.Editor's Note: This article was originally published at 5:42 a.m. EDT on Real Money on Sept. 15.