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Cramer Predicts 2,000-Point Dow Drop if Bailout Not Passed
Jeff Poor
Business & Media Institute
Friday, Sept 26, 2008
A 20 percent drop in the Dow could happen, according to CNBC’s “Mad Money” host Jim Cramer, unless the government passes this bailout plan.
The Dow Jones Industrial Average (DJIA) closed at 10,825 on Sept. 24, but Cramer warned it could reach a low point not seen in over five years – when it closed at 8,141 on March 17, 2003 – if legislators stall approval of a taxpayer-funded bailout.
“I’m going to spot the bears 2,000 Dow points if this plan fails,” Cramer said. “You know, a fifth of the S&P 500 (S&P) could decline precipitously if this plan fails. But in terms of real people understanding this, the world revolves around credit and confidence. Both of these things disappeared last week because of the foreclosures. Why? Because so much of the money the banks have is tied up in failing mortgages and they don’t have the capital to lend to you.”
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Cramer has been a vocal proponent of Treasury Secretary Henry Paulson’s plan – estimated to be cost as much as $700 billion. Cramer has supported the plan on previous shows. But on Sept. 24, Cramer told his viewers that both Paulson and Federal Reserve Chairman Ben Bernanke are doing are terrible job of selling the plan to the public.
“I think in the end – Stone Age coming, Stone Age coming,” Cramer said earlier in the day on the “Stop Trading” segment on CNBC’s “Street Signs” with Erin Burnett. “I want to be on board against the Stone Age – against a financial Pearl Harbor. You know, after Pearl Harbor, everyone got on the case and vote against – voted to go to war.”
Cramer proposed the Treasury Secretary should dumb the issue down to a level “Main Street” can understand.
“When it comes to Hank Paulson’s bailout plan, we got a serious situation on our hands,” Cramer said. “We got a case of genuine Wall Street jibberish overwhelming Main Street English. Unless Paulson takes a 24-hour Berlitz and Dale Carnegie course on how to win friends and influence people in the vernacular of the people, his much needed rescue plan will die in Congress. And we are going to have ‘The Great Depression, Part 2’ on our hands.”
Cramer gave a similar warning about a potential depression on Sept. 16 leading up to the eventual federal government bailout of American International Group (NYSE:AIG). He warned if the U.S. government – and other governments of the world – didn’t act, the global banking system might collapse.
“Frankly again, I don’t really care if my community bank is doing well,” Cramer said on the Sept.16 “Stop Trading” segment of CNBC’s “Street Signs.” “I care about AIG and the fate of the western banks, all of which have relied on AIG for one or another kind of risk transference.”
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9 Responses to “Cramer Predicts 2,000-Point Dow Drop if Bailout Not Passed”
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September 26th, 2008 at 6:18 am
man I really hate that jew cramer..a few yrs. ago I had some extra money.I saw cramer on tv..yea I got caught up in the hype…but got caught in his pump and dump scam…so I thought Id beat him at his own game…I programed my computer to buy when he went into his great stock speil….could never get in fast enough…I later found out the stocks he would talk about had made a major move about 8 hrs before they hit the air…that tells me he and his cronies or staff betted heavely…then we buy in and they just go down and down and down…I ended up losing about 10.000 but I learned..the stock market is for insiders not for real people…
September 26th, 2008 at 6:50 am
He has NO credibility… Bear Stearns, Jesus how transparently STUPID can you be? This fool is a BAD liar.
September 26th, 2008 at 9:41 am
That’s right!! this is the same clown who told the sheeple not to sell Bear Stearns.
He’s a lying conman and needs to be hung along with the rest of the Neocons
September 26th, 2008 at 11:57 am
If stock market goes to zero, even better for investment of new money, I could afford stocks that are under a dollar.
September 26th, 2008 at 4:31 pm
I hope he loses every penny now. Jim Crammer your the typical sellout. I hope they have room for you too in a death camp.
September 26th, 2008 at 7:28 pm
A 2,000 point drop might be a little low; perhaps 3,500 to 4,000 is more likely
September 26th, 2008 at 9:10 pm
Lookout! The sky is falling!
Well that is what every talking head that can get that all important 5 second video grad out over the airwaves is saying.
For about 15 years now I have been saying that the world’s stock markets have been about 30% over priced. The markets rise and fall not on the underlying fundamentals but on sentiment and trendy fashion. Rumors are rife and these influence market movements.
All the “experts” quote artificial yield figures when they quote a yield of a particular stock as being so and so a figure when you look at the stock to discover that it only paid a dividend worth only a fraction of one percent. The yield they quote is if you were to buy the stock collect the dividend then sell after holding it for a year.
If the Dow Jones Industrial Average was to drop the just above 8,000 points well maybe that is the true value of the markets.
I was always taught that investment in stocks was a long term investment. A typical term of tenure was 5 years or longer. Not this concept of today of buying on the opening bell and sell by lunchtime. The brokers have promoted this concept as this is how they get their revenue. Just think of how much they can make on a day where the same block of shares is traded several time a day.
All the talk I have heard is about the availability of credit. This credit has been reported to be for the smooth operations of business. Even things like paying salaries. I would have though that any company that has to borrow extra money to pay its salaries is in deep trouble.
The overlying theme seems to be to get out of debt is to get more debt. On a personal level that is the same as using one credit card to pay off another card. Eventually you run out of credit on the second supporting card. What do you do then; get another card to pay of the other two?
Nobody has mentioned what would happen to the value of the Dollar if the National debt was to be increased but this addition $700 billion of National borrowing. One effect I can see is the dropping of the US Dollar as the Reserve Currency for global trading. This is the only thing that has kept the value of the dollar where it is currently. A weaker dollar means dearer imports as well as domestic inflation where the domestic buying power of the dollar is reduced.
Would it not be a better idea if there is a true need to borrow this extra money to spend it on those who really need it? Use it to readjust those mortgages that are not in foreclosure but at risk of being there. Buy up some of the foreclosed houses and then rent them to the homeless (possibly the former homeowners) and use the balance if any to upgrade the national infrastructure which has been neglected for many years. Thus, giving employment to the unemployed.
At the same time force the financial institutions to be more responsible to their shareholders. I also believe that transparent governance at executive level is non existent today. I am a believer in the concept of the Board of Directors and the Executive Officers must be held responsible for their actions and liable to prosecution if they break any law. Not just the Corporation.
September 26th, 2008 at 10:28 pm
Scare tactics do not work with me. Printing up 700billion makes it 700billion more we need to recover from. The inevitable is going to happen anyways. I would rather bite the bullet now than prolong it and create greater liabilities when we try to recover. 700 billion is very hard to put in check when inflation devalues the dollar . It is much more than 700billion we would be liable for…our kids and grandkids would be liable for it and I find that criminal.