Saturday, October 25, 2008

Cramer: we won't hit bottom on the markets until we get to the people who never sell! How low can it go?

Jim Cramer has indeed offered a somewhat pessimistic view of how close we are to the bottom.

He offers a cogent explanation of the end-of-session volatility recently, where the Dow can swing by 400 points, usually down. He says that hedge funds have to prepare for the next day’s redemptions in the last hour, resulting in destructive selling. He says that “fund-to-fund” managers who communicate between funds and regular investors, feel the pressure to demand margin calls that will pay them commissions.

He also says that another round of selling can come next week as people get their mutual fund statements (as in the last blog).

He says we only know what the bottom is when we work through all this and get to the people who “never sell” – often much younger people in for the very long haul. And antidote to this view is that younger people will start buying what they perceive as bargains to hold for years and get rich off the current depressed eccomony.

The story “Forced Selling Continues” appears on “Seeking Alpha” here.

Patti Domm gives a second opinion on this matter with a CNBC story “The Week Ahead: Hunt for the Bottom”. Call it the hunt for black October. How low can it go? (ING, which got a “booster shot” from the Netherlands government, is down to 8.90, a record low.) Here is her CNBC link.

Energy stocks have taken the dive because of slumping crude prices (a situation that will not last – remember CNN’s show “We Were Warned”). ExxonMobil (XOM) reports earnings on Thursday Oct. 30 at 11 AM EDT, link here.

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