This is the bottom?
The stock rallied 420+ point again this week. Last Tuesday the Dow rose 415 points, the most in five years. By Friday, Bear Stearns was almost bankrupt. So after jumping 420 points today, why would investors think this time will be any different?
Jim Cramer of mad money said he has 10 reasons, actually, that this could be the bottom we need. Here’s a summary, David Letterman style.
1. Treasury Secretary Henry Paulson woke up. Big Hank’s no longer touting President Bush’s “the fundamentals are sound†message. Finally, he’s will to do whatever it takes to keep the system from breaking down.
2. Mortgages bonds actually traded up today, in part, Cramer said, because there’s talk of a Washington allowing Fannie Mae
Federal National Mortgage Association (Fannie Mae)
FNM to buy back its own bonds. This would mean lower mortgage rates, and the chance for homeowners to refinance.3. Lehman Brothers and Goldman Sachs reported strong quarters despite the odds.
4. Stocks outside the bank sector, such a Nucor
Nucor Corp
NUECSX Corp are actually hitting 52-week highs. This “real economy,†as Cramer calls it, seems to be in decent shape.
5. The Federal Reserve bailout of Bear Stearns
Bear Stearns Co Inc
BSC proved there’s virtually no risk of losing any money you might have in an investment firm. That wasn’t always the case.6. That Bear Stearns bail out solidified a plan for bailing out a failing bank should a similar event surface in the future.
7. Momentum names like Apple
Google Inc GOOG Intuitive Surgical Inc
ISRG and First Solar First Solar Inc are showing signs of life again.8. Brokers want investors back in the game, so Cramer expects them to low-ball Wednesday’s Visa IPO to entice potential buyers. Can’t get your hands on any? Buy Mastercard instead.
9. The biggest bull on Wall Street, Abby Joseph Cohen, who stayed bullish through this, the worst bear market in years, retired yesterday. “I always love a good irony trade,†Cramer said.
10. The market rallied despite Ben Bernanke’s best efforts to hold us back. He talked about inflation in his statement, only cut rates by 75 basis points instead of 100 and it still didn’t matter.
Be cautions with your trade. I dont believe this is a real bottom until I see some more signs of confidence in the market. This could be another one of the suckers rally for you to short more position.
To your continual success!
Andy Huang
