Friday, September 18, 2009

Cramer: Calling For A Top In Bonds

Jim Cramer is at it again. This time he is calling for a top in US Treasury Bonds. Mama mia, I am heading for the hills. Cramer is calling for higher interest rates, therefore it must be so.

In this video clip taken from "Mad Money", Cramer gives his reasons, and essentially, his premise is built around an economic recovery, higher growth, and inflation. He does acknowledge the roll that the Treasury and Fed may play as they continue to issue supply and expand the debt. There is no mention of the feedback that higher interest rates may have on an economic recovery or inflation.

As usual Cramer is almost certain in his convictions, but I have to tell you, I feel there is very little rigor to the analysis. He states all the usual suspects as to why we should see higher rates, but truth be told and as we have been writing about for the last 6 weeks, interest rates are heading lower while the stock market, which we are told is forecasting a better economy, is heading higher. This is a very noticeable divergence.

I would agree with Cramer that we are on the cusp of a secular trend change that should lead to increasing yield pressures, but I don't see that happening in the near term.

Lastly, in light of my recent look at investor sentiment in the bond market, I guess I should be cheering. Now everyone knows that Treasury bonds are topping (i.e., yields bottoming) because Cramer said so. Cramer calling for a top or a bottom is a frequent occurrence. I suspect if you make enough of them than you will get a few right.


Anonymous said...

Cramer will bottom in Q4 09. That's my bold prediction. How many times can you be totally wrong before people realize how stupid you are? Ask Dennis Knealelelane or whatever his name is -- his canceled show proving that even CNBC has standards.

Guy M. Lerner said...

Nobody gets 'em all right but I understand the sentiment towards Cramer - he does seem to make a lot of noise