Tuesday, February 17, 2009

An Ode To Jim Cramer

Market fell to the bottom and started digging
(New Russian joke).

Readers of my blog might have the impression that I am anti-Cramer. Nothing can be farther from truth. I started investing in 1998 because I learned from 2 sources: Motley Fool and Jim Cramer. His "Real Money: Sane Investing In Insane World" is literally my investing bible. I agree with Jim in most cases. The reason that there are articles in this blog which are critical of him and almost no articles praising him is simple: when I agree with Jim, I usually have nothing to say.

I have something to say today. Dow Jones closed at November 20 bottom. S&P is not far away. Jim raised alarm the only way he knows: instead of running his usual Mad Money show, he gathered CNBC people to try to analyze what's going on. I don't want to repeat what was said, because transcripts and reruns are available from several sources. But one fact was underscored by both Jim and Bob Pisani: there was no panic selling. Volume was somewhat elevated, but not 50-100% higher than average which is usual for panic. Bob Pisani said that market picture was like there are no buyers around. That's the scariest thing about today's trading. Panic selling usually creates bottom, at least a local bottom. Like it was on November 20. Today's picture is completely different. It doesn't look like bottom, it looks like we have a long ride down.

We are in Great Depression 2.0. Fundamentals are awful already. Technicals of this market just became equally awful. Where is the bottom? S&P 600? Or even lower?

I know that we can't get the real bottom until the fact of Great Depression 2.0 is accepted by majority. But discipline requires that I buy at least something during big drop. So I bought a small position in Evergreen Income Advantage Fund (EAD). I have a feeling that corporate bonds are way too underpriced now and want to build some position in them, and EAD looks like good fund to do that.

Full disclosure: at the time of publication author had a long position in EAD. Positions can change any time.

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