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NEW YORK (TheStreet) -- As a general rule, don't take your investment advice from the head of the Federal Reserve. That was Jim Cramer's advice for his Mad Money viewers Wednesday after Janet Yellen spooked the markets by calling stock valuations "potentially dangerous."
While the Fed does like to opine on stocks from time to time, Cramer noted its track record to date has been less than stellar. Everyone remembers Fed Chair Allen Greenspan's infamous "irrational exuberance" statement from 1996, the one that would have kept you out of one of the best bull markets in recent memory.
But even as late as last year, Yellen expressed worries over the biotechs and social media stocks, calling them "stretched." That call too has proven to be dead wrong, sans a handful of notable exceptions like Twitter (TWTR), a stock Cramer owns for his charitable trust, Action Alerts PLUS.
The fact is that nothing good comes from the Fed commenting on the markets. It only serves to scare people from making long-term investments on great, quality companies.
If the Fed is indeed worried about stock valuations, it has tools at its disposal to fix the problem, mainly its authority to regulate margin requirements. Margin rates, unlike interest rates, only affects those making risky bets in the markets using borrowed money.