Forty years is a very long time. However, this is the amount of time that has passed since we have had an abomination like this first half of the year. Almost everything is gone. Your stocks are down. Your links are down. Down your home. Your encryption is down. The only thing that didn’t go down was the prices I paid for things, especially oil. This catastrophe did not happen in an instant. While the Fed has admitted it was slow to start the now legendary tightening, the focus on tough talk in November was hugely important. It’s fun that so many pundits have talked about Fed Chair Jay Powell being late – even too late. Who do I say, really? Was it really a failure? Things have gone down so fast that if he keeps tightening another 100 basis points – something I want – he could be done with this fight. And I only want another 100 because I’ve seen a lot of series where the villain seems to be dead, but it was a premature announcement. The survey was very substantial and comprehensive. The recent drop in the value of your home is significant because the Fed has suffered from a home price increase. We thought that because of the housing shortage, this decline could not happen. But the affordability of housing prices is an inescapable concept. You can raise prices enough and make home buying expensive. We were fooled by this because we spent so much time thinking about new home sales. Existing home sales were what mattered. They are declining quickly because, as Zillow will show you – don’t look if you can avoid it – your home has gone down in value. And just as you don’t like selling a stock when it goes down, you don’t want to sell a house when it goes down. I suspect the Fed won’t stop until homes return all of their 20% gains for the year ending in March, as these are the most outrageous costs it can control. The bonds were the full product of big hikes in interest rates causing the curve to rise a lot, but not as much as you would expect if the Fed were selling bonds as aggressively as we thought. This bond flight is likely to continue because prices have to rise further to cool housing but also to stop business formation and make people with capital less certain to expand to hire people. Remember that there are two ways to curb the demand for wages. You have a larger pool of employment, which comes from an easier immigration policy. or job growth crashes. We go for the latter because the former is not possible in this country. I don’t know if you’ve noticed, but getting a job is getting more and more difficult, especially in Silicon Valley. It will only get worse because engineers who work from home want to work where it is cheaper to do so. But if they did, they were unlikely to be able to jump into action. I don’t like long-term bonds because they give you the same yield as 3-year Treasury bonds. I’ve been buying for 3 years with extra personal money but that’s at my wife’s request. We are partners and want 50% cash to make up part of my salary which is Comcast Stock (CMCSA). I like the three years because if the Fed has to go up to 3%, I’m still not sure the long end is going to go up that much. But if it does, rolling for 3 years will allow us to go even longer. You might think it’s funny when a stockbroker recommends bonds, but I did it again – in 2000. And it pays to think about that period. It turned negative on March 15th because it was around that time that I realized that unless you own stock in a company that makes things or do things that sell at a profit, and you return capital during the sale at a reasonable price, you lose pretty much everything. The last time we turned around were the high school grades that got to us. There was a lot of money and not enough to buy them. This time it was a combination of new corporate and Federal Reserve losses. But I think it is important to understand the contradiction. Many of us thought this time would be different than 2000 because, unlike at the time, most of the 600 companies that went public this time – either through an initial public offering or a Special Purpose Acquisition Company (SPAC) – She has a chance to make money. That was wrong. Now there are about 350 companies that went public during 1998-2000, and in the next half-decade the number of companies reached only a few. Most of them went through the money quickly and their ideas needed high speed internet to succeed or a more prosperous or stupid consumer. However, many obtained secondary work. The combination of the two wiped out a generation of investors who chose to stay in cash for the rest of their lives. This time we had companies that came out to the public with actual business plans and real sales, which is a big plus since 2000. We also had SPACs, which turned out to be, in many ways, worse than 2000 because they are a persistent train wreck. And we had a lot of companies that were supposed to imitate or work with the best of them: the electronic vehicles and parts that went into the Tesla sorts, the companies that helped serve the existing Internet companies, or the high-speed computing and micro-tech hubs. Let’s group them all into the categories of needless generic companies that ended up being cash on fads or patterns. In other words it is not much different from the 2000. The SPACs? What can I say? I feel confident they will be exactly like 2000. They all have a lot of money but they have to run it, and they have or will do so in businesses that aren’t worth what they pay for. It is a farce that in many ways resulted from the authorities allowing anything if it went the SPAC route, as opposed to the IPO route; Not that the IPOs were much better. As someone who has to take a whirlwind ride five days a week, I can tell you that most of the companies I get into are now from the past two years. I’ve studied quite a few of these companies and, like in 2000, they shouldn’t have gone public. Many have used the generic process as a branding effort. Now they are quickly running out of money with no hope of raising more because the window is closed. Losing a lot of money. Technology IPOs were done the same way for 2000. I think enough time has passed that people have forgotten about it. I exposed TheStreet.com to the public during this period, so I’m the rare person to have experienced it on the issuer side and the buy side. We started with a $5 million company. Then the venture capitalists rounded up $25 million and then $125 million – even when we were losing money and didn’t have much revenue growth. I went with the software because we have a first mover feature. The company went public for about $200 million and immediately went to $1 billion on opening day and then never got a penny on top of that. He stopped falling when he went through cash and started buybacks that stabilized him. We have escaped pride. I didn’t care what it cost even though losses have been so high in the past. But I think I will keep this book for the next. Many defended this current era because companies looked better. They weren’t. We were baffled and decided they were because they sounded so much better than their internal combustion or brick-and-mortar competitors. I don’t know how much more has to be said about SPACs here other than the concept that allowed people to get away with expectations that were insanely optimistic. It’s not worth spending a lot of time on them other than saying that they would have helped wipe out another generation of investors like they did in 2000. And I say a hand in that because when the book is really written about this era, it’s about losses in cryptocurrencies, not bonds. Or stocks or homes. So many people have gotten so involved in cryptocurrency that they are now experiencing huge losses. People got into cryptocurrencies for two reasons: to arrange speculation about something that might go up and an enormous interest rate on your holdings. Now the speculators have been destroyed and the high rates have proven fake. People want to withdraw their cryptocurrency and put it in a regular bank but no bank will take it. So they are just distracted. But there are not enough buyers, and cryptocurrency deposits – I hesitate to call them banks – are exploding. Other than Sam Bankman-Fried, founder of crypto exchange FTX, there don’t seem to be any buyers for these either. (Bankman-Fried recently signed deals to rescue two companies: BlockFi, a quasi-bank, and Voyager Digital, a digital asset brokerage.) Indeed, this era is filled with securities that, no matter how low, no one wants them. This is what tells you that we are not done with the pain. There are no buyers yet and the Department of Justice may not even allow their purchase. Issuers of cryptocurrencies and their NFTs (non-fungible tokens) are a shame because, apart from Bitcoin and Ethereum, there is often no other side of the trade. This is incredible and not enough talked about. I sometimes think that by the time we are done with this, all these excesses, all the IPOs, all the SPACs, all the cryptocurrencies and even all the crypto banks and their stablecoins have to pass. If that’s the case – and I think it might very well be – then we really should go back to the rules of the game for the year 2000. What happened next was simple, I bought a portion of the S&P 500 that has been profitable and has been profitable for a very long time. The criteria for success at the time were: Can you survive a severe recession? It turned out that there was no severe recession. I don’t think there will be a severe recession this time either. Remember that SPACs, IPOs, and even the crypto world have generated a huge number of jobs. They’re all exploding now and I think in three months we’ll see a huge drop in employment that’s going to start with the kids out of college who can’t find a job. As it stands, companies that have done well in the pandemic are being laid off quickly. Fear among most entrepreneurs who could start new entities or expand has now reached levels not seen since 2007. Many people feel the country is further off the right track than it has been in years. Maybe forty years ago. Which brings us to the present. We are starting to get all the excesses out of the system. I think it will take a few months and a recession may not be necessary until there is the kind of slowdown I would expect. During this period, many businesses will need money and many of them will be closed. I say it could happen in six months. We have to hope that the Fed does not exaggerate and say that companies should die and stay dead. If the war in Ukraine continues, we will still have oil price inflation. But even that will slow down because China and India will obviously take whatever Russia offers in the end, thus lowering the price where Russia can pump more if it wants to. The pessimism will get worse before it gets better. We will assume the market will drop the next day and the next until we hit minus 6 on the S&P Oscillator and then we’ll come back up again (for more information on the oscillator, read about my favorite market indicator and how we use it). Technology will not stabilize until many of the companies that are currently valued in the billions are valued in the millions. Then, and only then, will we be able to make money. But it is fair to say that if you are not in companies that make things and do things at a profit and sell at a reasonable price while giving back the capital, you could lose almost everything you have. (See here for a full list of stocks in Jim Cramer’s Charitable Trust.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable fund portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. The above investment club information is subject to our Terms and Conditions and Privacy Policy, along with our disclaimer. No fiduciary obligation or duty will be created, or be created, by virtue of your receipt of any information provided in connection with the Investment Club. There are no specific results or guaranteed profit.
Stock trader on the floor of the New York Stock Exchange.
Spencer Platt | Getty Images News | Getty Images
Forty years is a very long time. However, this is the amount of time that has passed since we have had an abomination like this first half of the year.
Almost everything is gone. Your stocks are down. Your links are down. Down your home. Your encryption is down.
The only thing that didn’t go down was the prices I paid for things, especially oil.
