The bears’ warnings on global markets could lead you astray

Investing


Market pessimists love to rally around overseas market drops and squawk about how they’ll take down U.S. stocks, but often times, the other side of the trade ends up winning out, CNBC’s Jim Cramer said Wednesday.

“Whenever you see these contagion stories, unless there’s some direct connection to the U.S. banks — and there rarely is — you need to treat these pullbacks as buying opportunities,” the “Mad Money” host said.

Cramer began by reevaluating the recent turmoil in Turkey, during which President Tayyip Edrogan seemingly challenged the independent nature of Turkey’s central bank as it tried to stabilize the slide in the Turkish lira.

The lira’s initial decline was caused in part by U.S. President Donald Trump escalating tariffs on Turkey, which, combined with the central bank’s action, set the bears into a frenzy centered on how the currency crisis could affect U.S. securities.

But “the thing about Turkey is that it’s kind of been a slow motion train-wreck for ages,” Cramer said. “The iShares MSCI Turkey ETF plunged from $46 in January down to $26 coming into August, so it was hardly news that the sick man of Europe was in trouble.”

Even so, the bearish panic sent the Turkey ETF down from $26 to $19 in the second week of August. At the same time, the Dow Jones Industrial Average fell roughly 500 points.

I warned you here that it would be a buying opportunity,” the “Mad Money” host said. “Of course, this latest Turkish crisis turned out to be totally overblown, just like all the other recent crises. Instead of contagion from Turkey, you caught a beautiful bottom in the Turkish stock market, [with that] ETF rallying back to $23.”

Investors with conviction also managed to catch a recovery rally in the Dow, which has rallied over 1600 points since the Turkish market bottomed, he said.

But what frustrated Cramer most was the fact that the bears got out unscathed after starting all this panic. And, despite the fact that Turkey’s crisis is now worsening, they’ve moved on to warning about how Italy’s budget problems could hit U.S. markets.

“Sowing fear is just so easy to do. It’s always news when someone says the banks could be in danger, isn’t it?” Cramer said. “Beware the bears; their righteous indignation will almost always lead you astray — Turkey, Italy, who knows what’s next? No one ever calls them to account for being wrong.”

So the next time you hear about how some exogenous worry in a foreign market will directly affect your holdings in the U.S., think twice before you ring the register, the “Mad Money” host suggested.

“I say we quarantine these guys when they scream contagion. They don’t deserve the platform,” he said. “Unfortunately, many journalists love controversy, which is why they’ll never let these bogus bearish stories go to waste. The best you can do is prepare yourself so you know what to do the next time someone starts shouting ‘contagion’ in a crowded theater.”



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