So, How Bad Is It?

Cramer's rant struck a chord across the blogging community this weekend.

--- Barry expects it to become "required viewing for market historians and technicians alike", and Barry's cultural sensibilities are matched only by his flare for philanthropy. He honored this pop-finance watermark with a commission for a new musical work.

--- Howard Lindzon thinks Cramer should do a movie ("I hear dead home owners"), and makes the interesting observation that perhaps his craziness is genetic.

--- Adam observes that market conditions are at least ugly enough "for a grown pundit to kick and scream and beg in front of a hot woman on TV, and all he wants is a rate cut."

--- Roger brings up the interesting point that if Bernanke lowers rates, he faces the taunt gauntlet of "Cramer-made-me-do-it". I'm sure Bernanke remembers when he let the martini's do the talking with Maria.

--- For author Michael Panzner, Cramer blathering, "we have Armageddon" is like manna from heaven -- and a natch quote for the next edition's book jacket.

--- The gonzo, potty-mouthed (and often hilarious) Broker A is on Lindzon's wavelength and thinks we should "give this man an Oscar".

So, is Cramer on to something?

Fellow CNBC bretheren Larry Kudlow and Ron Insana think so, as do UBS economist Maury Harris and Lou Crandall, economist with ICAP, the world's largest inter-dealer broker. Also, in a sure sign that hell is freezing over, respected blogger Babak agrees with Cramer that the bond market is facing a liquidity crunch that requires action from the FOMC.

The problem with Cramer's plea is its profound myopia: the broader conditions required for FOMC action simply aren't in place. Said another way, from a data-dependent, Fed policy perspective, the damage remains contained -- for now anyway.

Cynics have another way of putting it: it isn't in the scope of Fed policy to keep the stock market heading higher.

The very thoughtful David Merkel at The Aleph Blog points out that the epic crisis Cramer alludes to doesn't ring true. The problem is "in the exotic stuff" -- subprime ABS and ABS derivatives, CDO's, LBO debt, loans-in-progress, and LCDX/CMBX derivatives. Merkel adds that for "the vanilla structured securities, the market is functioning." Bear Stearns is freaking out because they're heavily-exposed in these areas. Wall Street as a whole isn't -- at least for now.

Also, the ever-rational Dr. Brett points out that this continues to look like a bull market correction and not the beginning of a new bear market (my thoughts exactly). While some sectors are clearly being shredded, others are holding their value. "This is not a monolithic bear market".

If you want to handicap a rate cut, track the clue that the Fed has so carefully included in every FOMC statement in recent memory: resource utilization. If unemployment starts climbing, the FOMC will alter its stance. Short of that -- with the stock market not even in a correction yet and the global economy expanding -- the Fed will stay put and its stance will remain fundamentally unchanged.

The irony is that Cramer's Howard Beale imitation may actually backfire on him. This is now the most widely-anticipated FOMC statement in at least a year, partially due to Cramer's diatribe.

If the FOMC statement isn't sympathetic enough, the market could see a fresh round of selling.

best

dk