Cramer to the Market: Now Is the Time to Panic

This morning had all the makings of a bad market day. Markets in Europe and Asia dropped substantially overnight. The futures market was pointing to a significantly lower open. And on the Today show, CNBC analyst Jim Cramer told the world (or at least the small percentage of it that watches Today):

Whatever you may need for the next five years, please take it out of the stock market. Right now. This week. I do not believe that you should risk those assets in the stock market.

The Dow is down 700 points as I type. It looks as though investors are taking Cramer's advice -- and then some.

But is it sound advice?
Before we get to judging Cramer, let's acknowledge where his advice is coming from. First, this market is extraordinarily volatile -- the Chicago Board Options Exchange Volatility Index sits at an all-time high. Second, the near-term outlook for our economy is dim. Housing prices continue to drop, consumer confidence is in shambles, and the credit market -- with the three-month London Interbank Offered Rate at 4.29% -- is freezing up. It's unclear whether the $700 billion rescue package that Congress passed can have its desired affect. Third, as Ben Graham first noted, the stock market in the short-term is nothing more than a voting machine.

If people don't want to put their money at risk, a company's stock price will drop, regardless of the quality of the company's underlying fundamentals. For proof, note that more than 80% of all U.S.-listed stocks are down this year, including superior debt-free businesses such as Google (Nasdaq: GOOG  ) , Apple (Nasdaq: AAPL  ) , Microsoft (Nasdaq: MSFT  ) , and eBay (Nasdaq: EBAY  ) .

Put these facts together, and you see that Cramer is absolutely right that you should not be risking your rent money, tuition, or medical emergency funds speculating in stocks. There are too many unknowns, and as Cramer pointed out today, it could get worse before it gets better (though I pointed out the same facts last week on CBS's The Early Show). The money you need to live on for the next few years should be stashed safely in an FDIC-insured savings account or in a principal-protecting asset such as Treasury Inflation-Protected Securities (TIPS).

You never should have been doing that in the first place
But here's where I -- and The Motley Fool -- differ from Jim Cramer. We never believe that you should risk any money you need for the next three to five years in stocks, and we've never told investors to buy any stock without at least a willingness to hold that security forever. To do so puts your hard-earned savings in the hands of market psychology, quarterly earnings announcements, and a whole host of other unpredictable and uncontrollable variables.

The goal of this column is not to demean Cramer, but the fact is that he approaches the market from a very different perspective. For example, one of my Foolish colleagues has documented how frequently he would have you trading in and out of Intuitive Surgical (Nasdaq: ISRG  ) .

Such activity not only generates larger tax and trading bills, but it leaves you and your savings extremely vulnerable to sudden market downturns. Cramer's plea on NBC this morning is a welcome about-face.

That said …
Even investors who were roundly frightened by Cramer's sobering outlook should heed his recommendation that long-term money needs to stay in the market. Given the extreme downward pressure today, it seems that many investors are pulling all of their savings -- even if they won't need that cash for 10 or 20 years -- out of the market.

That is a shortsighted move. Yes, even the superior companies we mentioned above will suffer in a slowing economy (see eBay's announcement today that it's laying off 10% of its workforce), but each has a strong enough balance sheet and enough entrenched competitive advantages not only to weather the current crisis but also -- through market-share gains, smart acquisitions, and a shaking out of their competitors -- to come out stronger on the other side.

When that happens, you will want to be invested. You can even make big money if you have some long-term savings in cash today that you can use to buy shares of these oversold, yet superior businesses ... and here are five simple steps to go about doing just that. We're also recommending to members of our Motley Fool Global Gains service that now is a fabulous time to increase your exposure to foreign stocks -- again, provided you have some long-term cash. Not doing so is the biggest threat to your portfolio today.

The takeaway
We're not here to tell you that the U.S. economy is all puppy dogs and daffodils. It's not. But now is not the time to allow emotion to dictate your financial decision-making process.

If you have a sound asset-allocation plan that differentiates between short-term and long-term dollars, then you should have enough cash to see you through these lean times and be able to leave your long-term money in the market. If you don't have such a plan, then now is the time to put one in place for the next inevitable downturn.

Either way, the takeaway is the same: Stay stoic with your money. The highs are never as high as they seem, and fortunately, the lows are never as low.

Tim Hanson does not own shares of any company mentioned. Google and Intuitive Surgical are Motley Fool Rule Breakers recommendations. Apple and eBay are Stock Advisor picks. Microsoft is an Inside Value selection. The Fool's disclosure policy believes that now is the time to start drinking scotch.


Read/Post Comments (45) | Recommend This Article (69)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 06, 2008, at 4:12 PM, JonHol wrote:

    Cramer is a tool anyway. Yesterday this, today that and tomorrow something else. What a clown.

  • Report this Comment On October 06, 2008, at 4:18 PM, andys2i wrote:

    Moron! Now that he is jumping off the bandwagon things must be bad. Here's how the fallout is going to play out for "main street" according to this article ( http://www.savingtoinvest.com/2008/10/and-you-thought-last-m... ): Banks worldwide, stung by $588 billion in write-downs related to toxic assets -- especially mortgage-related securities -- will further reduce the flow of credit, strangling growth. That will push house prices lower, forcing additional losses and making banks even more reluctant to lend. As the credit crisis worsens, businesses will find it almost impossible to raise prices. They will then be forced to close or start laying off employees, which will in turn reduce consumer demand and thus create a vicious downward economic spiral.

    My advice : Cash is king and perhaps it is time to invest in a cheap mattress for your moolah's. Keep your long term holdings in your 401K or IRA.

  • Report this Comment On October 06, 2008, at 4:23 PM, SloopsterJB wrote:

    NONE OF US have ever seen a market like this one. We HAVE Been in a recession for months and no the potential of Depression is VERY likely! Jim calls em as he see's them...And we saw this coming FOR THE LAST YEAR. DOW 8500 here we come..."TRADE" - "DON'T HOLD ANY STOCK LONG THESE DAYS. (EXCEPT AAPL!!!) TRADE in and out of the "QID" and "SDS" and you can do alright!!! I'm with you 150% Jimbo!

  • Report this Comment On October 06, 2008, at 6:43 PM, seniorbuyer wrote:

    Cover your heads the sky is falling!! Take a step back now take a deep breath and don't freak out. If everyone believes the gloom and doomers it will take much longer for the market to recover. Be strong little camper.

  • Report this Comment On October 06, 2008, at 6:43 PM, hsvhughes wrote:

    I am tired of hearing "investors sold tons of stock today". Investors do not buy and sell every other day like a herd of spooked cattle. TRADERS are the ones making the market crazy. The original intent of the stock market was NOT legalized gambling. It was to buy stock in a company or group of companies, thereby adding your capital to many others', and expecting a return on your investment. If this keeps up, my TRADER friends, you can look forward to increased SEC restrictions on STOCK TRADING. The investors are being hurt by the TRADERS.

  • Report this Comment On October 06, 2008, at 7:10 PM, 181736065 wrote:

    I think that Tim may have gotten it a little wrong when he stated that, due to the massive 700+ point drop, many "investors" were pulling out their cash today. Volume was low, and that indicates mostly "institutional" folks were moving the market today.

    Regardless, (like Sloopster implied above) you efficiently can "lighten up" by - instead of selling stock positions - acquiring some ProShares QID and SDS. Been using them effectively for a few months now, and they allow me to keep my interest in my stock positions, collect their dividends, and they are much more efficient than selling parts of each other individual position (which is a pain in the butt as well as commission inefficient!).

  • Report this Comment On October 06, 2008, at 7:19 PM, 102971 wrote:

    For the first time in two months ,today I have been a buyer. I realize that perhaps some of the stocks I bought (Microsoft, IBM, United Technologies, IGT and Gamestop) may go lower but when I look at the fundamental value of these stocks, to me, they are too cheap to NOT buy at their current prices. I am not necessarily taking a 3 to 5 year view, although I could hold them that long but I can even see making profits over the next three months.

  • Report this Comment On October 06, 2008, at 7:36 PM, rollininclover wrote:

    One thing Cramer said has always stuck with me, and that is that you know a bottom is in in a Bear Market when the last Bull has thrown in the towel and admitted that it's a Bear Market. At that point, all there are out there are sellers, and it almost got there today (only 14 of the S&P 500 were up today). Cramer is, himself, a Bull, and it is not completely certain whether he has finally capitulated, but if and when he does, when he says don't buy anything, the Bull Market is over, it's all over, then I will begin buying. But not till then.

  • Report this Comment On October 06, 2008, at 8:02 PM, FOOLBEFREE wrote:

    Great advice. What distinguishes Warrent Buffet from the rest ? "Temperament.".

    I bought more AAPL today. My long term money is in good stocks and ETFs and I am not selling and panicking. The market bottom is near, probably within 3-6 months.

  • Report this Comment On October 06, 2008, at 8:48 PM, StocksBuyorSell wrote:

    For once, Cramer makes sense. Mostly he is hot air. http://directory.stocksbuyorsell.com

  • Report this Comment On October 06, 2008, at 10:30 PM, Investudent wrote:

    Context is key. I think the Fool's headline about Cramer insighting panic is a bit unfair, bordering on a foolish cheap shot.

    As a newbie with only several months of investing experience, even I can figure out how Cramer's advice applies to my situation.

    Rather than attempting to exploit the distorted position of Cramer, it would be more helpful for our Fools to amplify the nuances of Cramer's advice, which is essentially correct.

    Testosterone-laden chest thumping over who's "more right" don't impress me. Insight delivered in the spirit of my interests (not yours) go along way to building credibility.

  • Report this Comment On October 07, 2008, at 3:45 AM, bigbubba49 wrote:

    Who knows where the bottom is? Not me, not you, not Cramer. But, there is no doubt that a lot of quality companies are cheap.

    I've been patiently buying the recommendations and best buys from Stock Advisor, Hidden Gems and Global Gains all the way down, and will keep right on buying something every few days all along the bottom and all the way back up.

    The more fearful stuff I hear, the greedier I feel. I just wish I had better mastered the part about being fearful when others were greedy, so I had more spare cash to put in right now.

    I can't time the market very well, but I'm getting a heck of a deal right now from that good old cost-averaging.

  • Report this Comment On October 07, 2008, at 7:00 AM, rscfoolish wrote:

    Cramer is an egomaniacal clown! CNBC should get rid of him, he cheapens the network. I am so sick of his tirades, the guy is seriously unstable. His show is a joke, he called the July bottom, the bottom, then corrrected it to the bottom in financials, now he is telling everyone to get out of the market. I wonder how many people have been hurt by his vacuous recommendations?

  • Report this Comment On October 07, 2008, at 8:56 AM, Invest2or wrote:

    While Cramer appears on channels that investors watch, most of his shows are not for the long term investor. His diatribes are about trading. No one, in their right mind, should be taking this advice for long term investments.

    For many of us trading is recreation, investing is for long term security. In both cases we, hopefully, are not using funds that are needed for the short term.

  • Report this Comment On October 07, 2008, at 10:50 AM, ReillyDiefenbach wrote:

    Where is the upside in the market right now? Last November, I sold everything, and I hope you did too. It's all about capital preservation, folks. If and when we get ANY good news, then I'll think about getting back in.

  • Report this Comment On October 07, 2008, at 11:55 AM, garyc27 wrote:

    I saw yesterday’s Today Show episode with Jim Cramer. I thought his advice was at best irresponsible; the time to leave the market is long past. Apparently there was quite a number of less than wonderful emails delivered to the Today Show, since they did a follow up to “clarify” Mr. Cramer’s advice. On the bright side, one statement I heard yesterday delighted me, at dinner last evening my wife, who doesn’t follow stocks or read The Motley Fool, inquired “Shouldn’t we be looking at buying the good companies now?”

  • Report this Comment On October 07, 2008, at 2:33 PM, Tygered wrote:

    Buy low. Sell high. Now is the time to buy. At least that's what I'm doing, but I've always been contrarian. So all you Fools who dump stock, thanks.

  • Report this Comment On October 07, 2008, at 4:40 PM, happydayinsa wrote:

    Buy some Master Card (as recommended last July by Cramer). How about Wachovia? Well, he apologized for that one. Honestly, I think he is an entertainer of some sort, but he's lost all credibility with me when it comes to the stock market. Fool On!

  • Report this Comment On October 07, 2008, at 5:45 PM, richardrollo wrote:

    Jim Cramer is good for laughs or maybe if you own a stock he recommends, you might think about selling it. I'll never forget him yelling at the top of the real estate binge, "They're not making any more land out there." Maybe not but it sure is worth a lot less than it was a couple of years ago.

  • Report this Comment On October 07, 2008, at 10:58 PM, Ozcutty wrote:

    Cramer is an idiot. He said tech is going to fall 90% (from current levels!) what a tool

  • Report this Comment On October 08, 2008, at 12:40 AM, awallejr wrote:

    He hurts people, despite his intentions. He had the CEO of WB on his show who was saying everything was hunky dorry, no problems with assets, yada yada. A week later it is being dismantled. He puts the CEO, rightfully, on the wall of shame, and then REMOVES him because WB might get $7 per share from WFC, DESPITE the fact that he was touting his stock when it was over $10.

    Cramer has flip flopped time and time again. He loves showing his little anti financial tirade last yet, yet In April when the market was moving he was getting people in commodity stocks, ag stocks, energy stocks, his "new tech" stocks, and any stock that sold in europe. People buy in and then 3 months later all those stocks literally tank hard. After these stocks tank hard THEN he says sell.

    If his show didn't involve people actually losing money listening to him, then it has entertainment value. But there really is nothing funny about people losing their shirts off his flip-flopping churner.

  • Report this Comment On October 08, 2008, at 7:27 AM, KWT8011 wrote:

    Cramer said on Monday: Anyone who sees a market change as dramatically as this one, and then continues to recommend the same gameplan is stupid for doing so.

    Cramer hasn't said anything EVERY financial advisor worth his time has said before. His show are suggestions for your spare money; he suggests you save retirement money in a 401k. Suze Orman was on CNN telling people to get out of the market if they cant stand it weeks ago. Where's the article bashing her for saying she only invests in municipal bonds?

    Cramer isn't perfect, but I enjoy his commentary and take it for what its worth along with TMF and other sources of financial education. Anyone who takes pundits opinions as market gospel, quite frankly, deserves to lose money.

  • Report this Comment On October 08, 2008, at 8:01 AM, KWT8011 wrote:

    Here's a video of Cramer on Monday

    http://www.cnbc.com/id/27056590

    watch from the 6 min mark to about 8:30 to get his response

  • Report this Comment On October 08, 2008, at 10:18 AM, dak18 wrote:

    I swear Cramer does this type of thing on purpose so that his wall street buddies will make tons of money by shorting stocks and then Jim comes on TV to scare the "average joe investor" into selling to bring the market down!!!

    If he really wanted to help people, he would have been telling them to stay out of the market with the money they need in the next five years back last October when the market was up NOT when it is near the bottom!!!

  • Report this Comment On October 08, 2008, at 11:33 AM, valari25 wrote:

    dak18, Cramer has always said that. He has always stated that people should never invest money they will need within 5 years.

  • Report this Comment On October 08, 2008, at 12:48 PM, specularii wrote:

    I have to disagree on the buying now recommendation. I have been following the markets for 25 years, and we haven't seen anything like this in our lifetimes. Don't get me wrong. My philosophy has become, over that time period, buy in times like these. I am a value investor by long years of experience. However, for any investor, the real question is your psychological and emotional makeup. If you can't handle watching your stocks drop in value another 40-70%, even when now their valuations are ridiculously low, you need to be out of the market and building cash. Take your favorite value measure and build a list of 100 stocks that you feel are cheapest, and have the strength to weather this downturn. Then watch them (I already have been) over days or weeks. When stocks whose forward P/E's are heavily discounted, PEG's are .25 and below, P/S are below 1, are trading at a discount to book, EV/Ebitda, are under 2.0, market positions are strong etc, etc and they continue to drop 5-10% per DAY, it is not a very good time to buy. What is my moivation to buy now when that stock could be 50% cheaper in a month or two? Even Warren Buffett has said that many of his decisions to buy in the last few months to year could prove to be very wrong. As a for instance he bought PKX (Posco) about a year ago at around $110 per share. This is a stock I love for the long term. However, it trades around $60 today, and is down another 10% today as I write this. It looks like his margin of safety isn't very safe at all, and he has broken his number one and two rules: never lose money. Sure you can say that he'll continue to hold, but isn't it a better play to buy it now at $60, or even in a few months to a year at $35-40? This is a 5 star stock! Does that make me a better value investor than Warren if I'm buying stocks at 25% of what he paid for them, or does it mean that some people are getting ahead of themselves and going to the party early?

  • Report this Comment On October 08, 2008, at 1:45 PM, imbroglio52 wrote:

    To quote this article: "...we've never told investors to buy any stock without at least a willingness to hold that security FOREVER." (capitals are mine). Now that's some seriously metaphysical investment advice. Talk about being in the market for the long term! Oh well, see you at the next Big Bang.

  • Report this Comment On October 08, 2008, at 3:26 PM, ScottTheBull wrote:

    Jim Cramer has a tendency to be reactive and somewhat over the top. He was a bit irresponsible in his opening diatribe about the market....but then settled down and explained what he really meant: Don't tie up short term money in long-term investments. That is sound fiscal policy. It's just a shame he gets too frisky with the 'sell sell sell' button sometimes - too many of his fans are prone to also being reactionary and don't get that much of his behavior is more theater than thoughtful. And for those who defend him fully - I'll remind you, he's the one who told everyone to never sell Bear Stearns. Everyone is wrong somtimes...Jim has been perhaps more than most who still have shows.

  • Report this Comment On October 08, 2008, at 8:47 PM, awallejr wrote:

    Listen, his type of show should not be on simply to entertain. There is nothing entertaining about advising people to buy and sell stocks and causing them to lose money with his churning advice.

    If he was just suggesting things for "spare" change investors then say that at the top of every show. It was HIS advice that people should spend at least one hour per week of homework on every stock they own. Yet he brazenly throws out "buy, sell" signals on hundreds of stocks per week. Cut the crap. He isn't spending a 100 hours per week on these reckless signals. Only he is arrogant enough to pretend to know everything on almost every stock. There's a reason why most serious investment houses have analysts SPECIALIZE in sectors or industries.

    He churns. He flip flops. He loves his little Sarbanes-Oxley snippet. Yet it was him telling people to buy into financials during the summer (Aresfinancial has an excellent video of that one). He also started spouting his 'fortress of four" banks. BOA at 34 then, now 21. Great call. Where was Sarbanes-Oxley on that one?

    He's a trader. I am sure he was an excellent trader. So call it the Jim Cramer TRADER show.

  • Report this Comment On October 09, 2008, at 4:01 PM, breathless9 wrote:

    I believe the subject is "Buy Low, Sell High". This is the time for it, not to focus on some joker with a TV show.

  • Report this Comment On October 09, 2008, at 5:25 PM, sb101cu wrote:

    " The rich rules over the poor, and the borrower becomes the lender's slave". Proverb. 7:22.

    Guess who is the slave and who is the lender

  • Report this Comment On October 09, 2008, at 6:30 PM, aussiewatcher wrote:

    Is this the fall of the American Empire (ooh that should rattle some cages).

    What amazes me watching from afar, is one person, who has some qualifacations, makes one comment, and the market goes to crap.

    The media takes his overall message entirely out of context, and tens of millions depend upon that fractured quote.

    If you invest, or don't - know what you are investing in. The market is collapsing because too many people were seeking the Silver Bullet, quick fix, get rich dam fast scheme.

    And now they are running like scared chickens from the fox.

  • Report this Comment On October 09, 2008, at 9:55 PM, Weitzhuis wrote:

    What!?!?! Don't Panic !?!?!?!

    Jeez! I thought this was going to be a fun market crash! I've been training for months to run amock !

  • Report this Comment On October 10, 2008, at 2:17 AM, DemoPublican wrote:

    According to Cramer the noitall "Bear Stearns is Gold" don't sell.

    OK he is the Guy I want to listen when he shouts garbage.

    The smart rich player will once again pick up the pieces and the little will be scared sh**tless.

    That is the way it supposed to happen.

    God Bless.

  • Report this Comment On October 10, 2008, at 8:21 AM, noahchilly wrote:

    widgets still have value

  • Report this Comment On October 10, 2008, at 12:53 PM, gmanwtfbbq wrote:

    "we've never told investors to buy any stock without at least a willingness to hold that security FOREVER"

    Tell that to the people who bought GM stock 50, 60, 70 years ago. No stock goes up forever. None. Whats the point of pumping money into a stock thats going down? Tell me. Id rather put it into a 3% savings account untill I think its safe to get back in. No matter what the dividend. Like a few posts above said - Capital Preservation. We are not here to finance these companies. Were here to make our own money.

  • Report this Comment On October 10, 2008, at 4:05 PM, kkgoh wrote:

    gmanwtfbbq,

    Totally with you on that one. I applaud the "long-term" mentality and I can appreciate the perspective that the Motley Fool offers, but I'm starting to believe (my opinion) that this is just the easy way out of investing.

    Not pull out when your stocks are totally moving against you, 50, 60% or more? That's pretty ridiculous. If you work with your "long term" perspective and believe in that company, that is fine. But when its moving against you, get out, then come back in again at the low and when the trend has reversed. Telling your subscribers to keep holding on and that everything will be alright > 5 years from now is IRRESPONSIBLE. And the funny thing is that that's exactly what the Fools said years ago during the dot.com bubble (the amazing thing about the internet is to record all historical activities, remember the "Foolish Four" theory?).

    I'll take the first part of Tim's statement: "We never believe that you should risk any money you need for the next three to five years in stocks".

    I don't think risking money, meant for short term or long term, is the point at all. The point is that if you're even losing money and will likely be losing more money in the next several months, STOP RECOMMENDING stocks every month.

    Just fyi, I have not been burned by Motley Fool nor am I emotional in this market. I only bought one stock from the Fools recommendation (AAPL) purchased at $130, and got out at $118 when I saw all the indicators moving against me. Now its at $90+. I've also been involved in shorting oil and other reverse trading techniques and did well on those trades. My frustration here stems from the fact that I've seen so many comments about people trying to double-down on recommended stocks (especially after the Fools "Best Buys" now list) that I feel its about time someone spoke out.

  • Report this Comment On October 10, 2008, at 8:51 PM, USAeconomist wrote:

    In the near future, there is going to be a time where we all are standing here at the bottom, looking up, looking at where we have been and be in relief it is all over. Sites like these will no longer be impacting economic news http://www.buymyhousebeforethebanktakesit.com . The dust will settle and there will be great deals to be made, great opportunities to invest in and we will all move on. It will be a time for rebuilding, working together hand in hand, and lending a helping hand. Our actions will have become a part of history. You will be able to tell your grandkids you made it through the crash of 2008 and tell them your part. Your character will be determined, did you believe on not, did you hold on or not, did you panic or not, did you ride the course or not, did you contribute or take. What was your role, what did you do to help others, what did you do to help America in it’s time of need? Your decisions and actions today are what are building tomorrow. Make sure they are the right decisions.

  • Report this Comment On October 10, 2008, at 10:47 PM, muromachi wrote:

    Of course, it seems to make sense that buying something the whole world loved when it cost $100 ought to be a real bargain when it's on sale for $15, other things being equal.

    But the cynical inner voice I hear on occasion is saying, "When you've a friendly opinion about a stock you advise investing when the price is high, when it's medium and when it's low. You have to fill your column with something every day, don't you?"

  • Report this Comment On October 11, 2008, at 11:18 AM, bomont wrote:

    Someone (I really don't know who) was on TV commenting on everyone's take on the latest carnage on both Wall and Main Streets. It was the usual regurgitation until he said something very profound and what I believe to be true....and I'm paraphrasing... "What we are witnessing is merely the symptoms of the real disease. We don't produce anything anymore (here in North America). Our capacity and potential for wealth creation has been greatly diminished to the point that we've lost control of our own destiny." This is the crux of the problem that has to be fixed...everything else is window dressing in my opinion. Every year we graduate more lawyers than engineers, more social workers than doctors, more service workers than production/technical workers. Our priorities need to be realigned and the sooner the better.

  • Report this Comment On October 11, 2008, at 2:31 PM, John60Jay wrote:

    Forget the credit crunch for a moment and consider these fundamentals. Due to an (unnecessary) budget deficit, we've been importing at least 3% of GDP per year to hand to taxpayers to spend. Thus simply 'returning' to a long-overdue balance means cutting back spending by 3%. Then there's the problem of paying back that 3%, so we have to cut back 6%. Then there's the problem of the interest on past deficit spending, also about 3% of GDP. Thus we would have to cut back consumption 9% just to correct the mistakes of the Reagan-Bush-Bush2 policies that led to massive deficits.

    Now, given that many companies and most consumers have high fixed expenses, that 9% cut in total spending requires a MASSIVE cut in discretionary spending. And there's the rub.

    Borrowing money from foreign investors to return to America's taxpayers has created asset bubbles unsupported by market fundamentals. And we're still stuck with the debt. Deficit spending is a horrible idea.

    So ... let's think back to the last time we have a surplus, namely 8 years ago. What party engineered this gradual return to solvency,and what policies were in effect?

    I'm a fiscal conservative and I'm voting Democratic - again - because I'm compelled by the evidence of the past 28 years.

  • Report this Comment On October 12, 2008, at 4:30 PM, Pscottparker1 wrote:

    The bearishness of this discussion, coupled with Cramer's proclamation, would seem to me to be a very bullish, contrarian signal to buy buy buy. Buy when things look bleakist, when their is blood on the street, and when people are wide-eyed fearful. Fortunes are made during times like these, but only by those who have the gonads to go against the trend. Me, I have the cash and the gonads, and some time. Plus, my job at a medical psychologist working with geriatric patients, is a lock unless Medicare goes bust, at which point we are all toast, anyway. Tumultuous times probably do lay ahead, but the current level of fear that people are experiencing seems way out of scope with reality. For me, I am now starting to pick up some ridiculously low stocks, but will do so slowly, very slowly, and with much caution.

  • Report this Comment On October 13, 2008, at 7:12 AM, ramzib wrote:

    5 years ago this website told us to keep our money for 5 years, now the years have passed and again they're telling us wait another 5 years just to break even so we lost 10 years of our time but I am not blaming you am just saying to quit giving bad advice to investors coz noone knows ... all Fools please read "The Black Swan" before making another investment.

  • Report this Comment On October 13, 2008, at 11:38 AM, LazyFare wrote:

    I'm not sure why so many people get worked up about Cramer. His show is entertaining and keeps people interested - fans and haters alike. If you haven't learnt to take the advice he gives with a Texas sized grain of salt then you probably shouldn't be investing in the stock market. That being said I would like to second what ReillyDiefenbach said - the game at the moment is about capital preservation. With the big boys moving all our 401k money to safer positions you dont want to be the little guy left holding the bag when all is said and done. In the meantime smart investors will realize that there is alot of money to be made out their, even if *hint hint*, it isn't being made in long positions.

    Remember, never gamb .. I mean invest with money you can't afford to lose. And keep your eyes on your 401k.

  • Report this Comment On October 15, 2008, at 10:56 AM, golfamatic wrote:

    I max my IRA and 457; then I take 10% of my take home and put in a Total US Stock Market Index in my taxable account. The exception is when for that year the Index is down 10% or more. Then I add 20% of my take home.

    The market is on sale...I LOVE IT!!!!

    By the way, this purging is going to get rid of a lot of dead weight that has been dragging the SP500. Plenty of brilliantly run companies in SP Completion Index with balance sheets flush with cash and no debt ready to step up and take the place of some of these losers about to disappear from the SP500.

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