[colabot1]
Sometimes you hope others will pivot when you have new information that should change the minds of decision makers. We got our non-farm payroll numbers and they were predictable, but due to poor tabulation of the numbers, we may be getting the wrong reading. We’ve been waiting for the other shoe to drop, and it’s really starting to. We know this from an article published Friday by Bloomberg on how US bank loans contracted the most in the last two weeks of March. Commercial loans fell by nearly $105 billion in the last two weeks of March, with a huge share from smaller banks, which accounted for local loans to local businesses – the companies that would be hit the hardest by a credit crunch. . This includes commercial bank deposits of $64 billion, north of the $250,000 insurance threshold, or just money in treasury bills and money market funds. With money flying everywhere, it is difficult for a bank or its examiners to determine exactly how much they can lend. No bank that has seen a large outflow can be expected to grant new loans. Now we are not in the lending business. But we are in the business of the impact on the economy and you have to wonder if some of the more dogmatic members of the Federal Reserve are aware of this drastic change mid-month. But one thing is certain, if the Fed doesn’t change its mind about the pace of interest rate hikes, we know things could go very wrong. Now we have managed to increase our cash position ahead of next earnings season to over 8%, and as long as the market is overbought we will be looking for opportunities to reduce – but I think taking this cash position much higher could be a mistake. It is because we are at a strange crossroads. If the Fed doesn’t pivot, that won’t mean the entire stock market will go down. The stock market is certainly not a referendum on small business growth. I remain convinced that federal largesse will fall into the fold of Club Holding Caterpillar (CAT), and it is wrong to ignore what will be a spurt in American-made earth-moving equipment and steel. Stocks that will be much less affected will be big tech companies, many of which are deeply affected by the potential for an artificial intelligence revolution that plays directly into their hands. They might end up being like consultants were for digitization. Is it really possible to have two markets at the moment when the Fed risks missing out? I think so and here’s why. If we get a Fed that’s misguided and primed for tightening, we’re going to get a pretty harsh reaction, but it will bring money from the rest of the market into the tech. And if we get a pivot, where the Fed decides rates are too high, money will flow back into the S&P 500. Few people can be as nimble as you might need to weather the next two weeks, which is about the time it will take, I think, for many to realize that the imputed interest rate hike of 100 basis points is upon us. So stay tuned as we watch the Fed’s resolve against inflation turn into the central bank’s determination that beloved small and medium-sized businesses must be rescued. It’s an intriguing setup, one that could produce a quick decline – then a roar if the Fed listens to its data, not just its dogma. (See here for a full list of Jim Cramer’s Charitable Trust stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
WASHINGTON, MD – MARCH 07: Federal Reserve Board Chairman Jerome Powell testifies before the Senate Banking, Housing, and Urban Affairs Committee.
Kent Nishimura | Los Angeles Times | Getty Images
Sometimes you hope others will pivot when you have new information that should change the minds of decision makers. We got our non-farm payroll numbers and they were predictable, but due to poor tabulation of the numbers, we may be getting the wrong reading. We’ve been waiting for the other shoe to drop, and it’s really starting to.