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[Ulisses Pereira]

"Trichet's Blunder Shows Just How Much Trouble We're In"

By Jim Cramer
RealMoney Columnist
11/6/2008 10:09 AM EST


"ECB President Trichet, when asked if we are in a recession, says, "We shall see." He tells us there is no credit crunch.




There. That's about all you need to know about how bad things are going to get. Much of the big thesis about why stocks have already bottomed is a deep abiding theory that once we are in a recession you have to start buying because stocks reflect it. I call this the Buffett view, augmented by the conversion of bear to bull of other respected people like Jeremy Grantham, whom I regard as being bearish from about 5000 and has missed 9,000 points but is still somehow respected. I hope I can be that wrong and still be that respected. It is also the camp of "newfound" bull Steve Leuthold who claims he just joined the bullish party but has taken a gigantic pasting when he was supposed to be a bear.

I was always skeptical of the Buffett view, because it is too rosy. It is too rosy because of the Trichet view that we don't know yet if we are in recession. If the policymakers don't know we are in a recession, how can people claim that we are already right in investing (as distinguished from trading)?

My view was short-term bullish, longer-term bearish. I have been playing the wave because U.S. stocks have gotten so low, or at least so low at Dow 8100, that it didn't seem worth it to sell 'em anymore. But I do think from now on, after the election where there are tremendous uncertainties, you have to sell the Buffett/Grantham/Leuthold rallies. They aren't worth the risk until we get to SPX 800 and Dow 8100.

Anytime you can catch 1,000 Dow points it is worth doing, even if you gave back 500 to do so. If I told you you could go long here and make 12%, you would take it in a heartbeat. So if you could make 17% and give back 5%, why is that a disaster? It is only a disaster if you have never run money professionally, which often seems to be the dichotomy among people who read and write for the site.

Now that the Europeans have spoken and don't recognize we are in a recession, we are pretty much sunk, as the fundamentals are the worst I have ever seen in my 29 years of trading. If you have to own stocks, then accidentally high yielders, recession-resistant -- which got hosed by the S&P futures with everything else -- and stocks selling near cash represent the only safe places to try not to lose much money. I do believe that stocks reflected nearly the worst fundamentals two weeks ago, but that required a belief that the Trichets of the world knew we were in deep trouble.

They don't.

Therefore we are in deeper trouble than the Buffetts/Granthams/Leutholds think, no matter how much we love and respect them. "

(in www.realmoney.com)