- Analysts are at fault for today’s 200-point mid-day decline in the Dow.
- Many analysts at years end are forced to downgrade stocks to right their wrongs earlier in the year.
- In a practice Cramer described as “analyst gone wild,” many analysts are downgrading names they’ve been wrong on for months.
- Today, analysts at JPMorgan Chase downgraded the stocks of a Cramer favorite, Nordic American Tanker, along with General Maritime and Eaton.
- All of these downgrades are useless, as these stocks have already taken huge tumbles.
- Likewise, UBS analysts downgraded the gold stocks, long after the commodity and the stocks have both posted sizable losses.
- Similar downgrades are happening at every firm, he said, and for the most part, they are wrong.
- With Nordic American Tanker, JPM’s reason for selling the stock was mainly the decline in the spot price of oil.
- This the exact reason to buy the stock.
- With oil so low, oil producers are scrambling for tankers to store oil so they can fill them now, and sell at higher prices later.
- The analysts, said Cramer, are using this last opportunity to downgrade everything they can before year end.
- This practice however, creates some great buying opportunities just in time for Christmas.
- With mortgage rates falling and the price of gas steadily dropping, a viewer asks “why are the markets not doing better?”
- Cramer explores “the dark side” of the markets to explain what’s keeping the stocks down.
- Cramer explains that despite billions in aid packages, the credit markets are still far from fixed.
- In the last quarter alone, the news on the health of the credit markets has gone from bad to grim.
- In the past 90 days, the value of investment grade bonds has fallen to a rate where one in five are expected to default.
- Recent reports have commercial paper valued for a 60% default rate.
- With such bearish sentiment, Cramer says banks are simply holding onto all of the cash they can and are lending to no one.
- This trend will destroy the banking system if not reversed.
- Cramer said, “Banks don’t lend if they don’t think they’ll get their money back”.
- Even if mortgage rates do fall to record low levels, no one will be able to qualify for them.
- And Cramer says the trend will only get worse as consumer credit follows the same trend and also dries up.
- Especially as banks begin to worry more as people lose their jobs in increasing numbers.
- Cramer warns that even the huge Obama stimulus program might not be enough.
- It must stem unemployment and stop banks from only loaning at “loan shark interest rates”.
- The only answer is for government to do more, guaranteeing more debt, bringing bond buyer and sellers together, and pumping even more liquidity into the system.
Here’s the list of stocks from Cramer’s Mad Money Show for Monday, December 22, 2008.
Note: Dow stocks mentioned tonight: None tonight!
*A CHARITABLE TRUST STOCK.