Jim Cramer has come to only one conclusion about markets today: “No one knows what the heck he or she is doing.” Not hedge funders, not bankers… no one.
Things sure have changed over the years.
In the past week, he’s noted 6 weird happenings that show the market is totally out of whack.
- Europe is weak, but the price of oil is still climbing: He says maybe China is buying oil like mad — but still, there’s a ton of supply from the U.S., Brazil and Iraq even without Libya. He says something is manipulating the markets. “What might be happening, and the more likely case, is that financial firms are betting that China is going to stop tightening and that Europe isn’t going into recession so they are buying up ships of oil — because the day rates are so, so low — and storing them.”
- The Euro is stabilizing, but Greece and Italy are still falling like a knife: “We have seen the euro plummet before. It isn’t plummeting now. Another hedge fund bet gone wrong? Certainly a possibility. Two weeks ago we wanted stable governments in Europe. Now we want a change in governments? Can we be that fickle? How can that be justified?”
- European banks are unloading their sovereign bonds, and their stocks are staying high even as the dividend gets canceled: “Shouldn’t these banks be swooning as our American banks did in 2008, since this is surely their 2008 moment? Not happening, perhaps because they are taking action. Perhaps because you can’t short them because of rules that were put in place to avoid the rampant shorting that we saw in our country that contributed to the speed of the collapse of so many institutions?”
- Gold is still surging: “This should mean chaos, right? “Could it mean that gold’s going up because the Europeans are going to have to inflate? Maybe, but again, the euro isn’t going down, which is what would be happening if that were the case. Perhaps this is a signal that the Chinese are buying, which is something that the Hong Kong data showed Monday?”
- Copper has stabilised, yet China is weaker: “Monday night we got Chinese one-year bill yields lowered ever so slightly. Could that mean the Chinese are starting their easing because property rates are falling so fast? Could this be the signal of the soft landing, which is making so many industrial stocks act better? How can that counteract a European recession?”
- American companies in Europe are still doing fine: “I would lump in Eaton (EV -4.30%) and Parker-Hannifin (PH -2.93%) and Caterpillar (CAT -3.17%) as not seeing much weakness. Same with Honeywell (HON -2.87%) and Oracle (ORCL -3.99%). How in heck is that possible if Europe is already in or going into a recession? How can only a few — like IBM (IBM -1.74%), which saw a slight decline, and PPG Industries (PPG -3.37%), which saw a slowdown in its optical business courtesy an aggressive German competitor — be among those to see some softening in Europe? “
Here’s Cramer’s conclusion. He blames hedge funds for making huge bets that move the market into contrarion positions. What can you still count on when financial instruments are too small and the money moving markets in one direction is so big? Stock yields, perhaps.