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My mission is simple: to help you make i, ka. Others want to make friends, and I'm just trying to save your money. My job is to entertain, but more importantly, to educate and provide knowledge. So call me at 1-800-703-CNBC or tweet me @JimCramer. How much should you worry? Nine business days ago, the legendary Warren Buffett spoke on CNBC about the greatness of America and the power of long-term investing.
He explained that stocks are still the best assets. He noted: even if you bought and held stocks during the 2008 financial crisis , at the worst time, you have now benefited significantly. But since Buffett made that statement 2 weeks ago, the S&P 500 index has fallen by about 10 %. This is part of another brutal session, with the Dow falling 970 points.
The S&P fell 3.39%, and the Nasdaq plunged 3.10 %. Buffett always says to be afraid when others are greedy and to be greedy when others are afraid. In October 2008, he published a now legendary article in the New York Times titled " Buy American. " That's what I do. As the Oracle explained, and I quote, "I have no idea whether stocks will be higher or lower in a month or a year." " However, it is likely that the market will move up, perhaps significantly, long before sentiment or the economy begins to recover." " So, if you wait for the robins to arrive, spring will already be over." End of quote.
Many believe that this was quite prophetic material. Incredibly prophetic. There is one problem. Buffett published this article on the morning of October 16, 2008, when the Dow Jones Industrial Average was at 8,577. And 5 months later it had fallen to 6,547. That was the real bottom. This is a 23% drop.
Some may criticize this as this drop is very similar to what we are seeing now since he spoke to Becky Quick last Monday. Maybe this is the process. Maybe we've even moved forward. But hold your horses, or bears, or whatever you have , and read Warren's words again. He didn't even try to guess the short-term bottom when he wrote that article.
The very idea of such a step makes him despair. Instead, he compared this moment to past market bottoms, such as in 1933 or April 1942, when it seemed we were losing World War II, noting that in each case stocks bottomed out before things really got better. He then lists a series of adversities that we eventually overcame.
There were oil crises, wars, Nixon's resignation, numerous recessions, and even a flu epidemic. This is a good starting point for today, as we stand on the brink of something akin to a flu epidemic, and experts say it is impossible to control. You hear it, you read about it, just like I do. I don't know if they are right, I have my own views on what should happen.
Say whatever you want about the authoritarians who rule the People's Republic of China . Their strict quarantine is working. Now is the time to close schools, stop foreign travel, maybe even pointless domestic travel, as far as I understand. And, of course, cruises. But ultimately, I'm not a public health expert.
I am a stock market expert. When the market takes a devastating hit, I like to remember what Buffett wrote in 2008, because then the solvency of our banks and the entire financial system was in question. At the time, prominent mainstream economists—I read them nonstop— were arguing that we might have to nationalize the banks to save them.
However , the government did not simply delay action. He was downright careless. Politicians, what did they do? Well, they were paralyzed. Nothing! They don't know anything! They don't know anything! It was argued that taking drastic measures was illegal or that the risk of moral hazard from bailing out the banks was too great.
It 's better to let the whole system collapse. Even after Congress weighed in and passed a $700 billion rescue plan, the situation looked bleak. Until it stopped. In March 2009, Fed Chairman Ben Bernanke took decisive action, declaring that he would not allow any more banks to fail. Something he should have done much sooner, but better late than never, right?
Now, thanks to strict regulation unmatched anywhere else in the world and prudence, our banking system is the envy of the world, able to withstand far more stress than it did then. I believe she will be fine now. This time, however, we have a double problem. This isn't exactly about the banks, although they are behaving horribly.
First, will travel and entertainment companies , or even some retailers whose stores are located in shopping malls, survive? Judging by today's situation, the market considers this an open question. The same goes for businesses that thrive when people gather in large groups. This will not happen during an epidemic.
More and more events are being canceled every day. The second problem is simpler. Will you survive? Should I just stay home to avoid getting sick? We only have statistics for this, and survival rates are quite good for most of the population, with the exception of immunocompromised people and the elderly, especially those who already have poor health.
And these numbers are bad. Okay, let's call a spade a spade . Overall, they are bad. When I was walking downtown today from the stock exchange to the office, what did I see? I saw carefree people walking around on a beautiful day, smiling and laughing, and I thought, "Don't they know what's coming?" Have n't they read about the state of Washington, where certain areas almost resemble Wuhan?
I mean, don't they know about the 10- year Treasury yield hitting record lows? Have n't they heard of the transportation sector? Transportation, for heaven's sake. Will they ever be foolish enough to go on a cruise again? That's what I'm getting at. First, there may be no way to contain this plague, at least in a democracy.
Secondly, some of us will get sick. I hope it wo n't be you. I hope it wo n't be me. And a small percentage will pay the ultimate price for shaking hands with the wrong person. But thirdly, the idea that there is no hope for a cure, that nothing will stop the most severe cases, seems to me to be false.
By betting on this, you are going against the smartest people in the world. In my opinion, this is a losing bet. Even though I'm worried about myself, my family, my friends, I'm not ready to bet against American scientists . I have too much respect for the people who develop medicines in this country and regularly save lives when we have been told over and over again that they cannot be saved.
For example, during the lifetime of most of you, when AIDS was rampant, it turned from a sentence into a chronic illness. Miracle? No. Thews. Including the mental abilities of the most important person leading the fight against this virus, Dr. Tony Fauci. Respect him. Which brings me back to Buffett's words.
Where are we in the market now? Well, we're down a little over 10% from the highs. Actually, it's not that big of a drop. It's painful, I know, especially if you bought at the peak, but this is a much bigger downturn than the one we've already experienced. When Buffett advised you to buy American assets in October 2008.
If you want to sell some of your shares during the next rebound, which is bound to happen, as it did yesterday , you have my blessing. Buffett was in a hurry last time, probably, and he's in a hurry this time. Eh, there's nothing wrong with keeping more cash aside. Cash is king now, of course, until it becomes a pawn again.
I realize the precariousness of this moment for those choosing individual stocks. This is the time to own assets. What did I recommend? Gold, some solid consumer staples, mostly food, definitely pharmaceuticals, some utilities like American Electric Power, which is on our program today. But I also think that guessing the bottom right now is extremely difficult.
While I don't think we're that close to it, if things get worse, I also don't want to wait too long to put the cash into the business. I never like to mix real life and money , but from a financial perspective, the system is much stronger than it was in 2008. So if you sell everything, I'm not sure you'll be nimble enough to come back at a lower level.
I bet you'll feel great for a few days. I'll say this: if you're worried about yourself, about your health, you shouldn't worry about your money either. Of course, if owning stocks makes you more anxious in real life, then lock in profits on some positions for a period of time, even if you have to pay taxes.
It's not worth the hassle. But the main conclusion: I trust Warren Buffett. He was right in 2008, even if his timing, let's say , wasn't exactly good, perhaps leaving a lot to be desired . I think he will be right this time too. That is, we don't know the time, we don't know the level. The chaos is palpable.
But, as the "Oracle of Omaha" always says, be greedy when others are fearful. Just please, if you are going to buy, do it gradually during the fall. Consider those nice people who are walking in the sun today and don't even know what to be afraid of. And tens of millions of people just like them. Corey from Rhode Island, Corey.
Hi Jim, quick question about Microsoft. Hmm, if the price continues to fall, do you think it's worth buying on the dip? I think when you buy a company like Microsoft, led by Satya Nadella, and let's say the price is 166, let's say you want to buy 100 shares. You buy 25 shares tomorrow and buy gradually, as the price decreases.
I think in a couple of years you'll look back and say, "Wow, I took advantage of one of the few really deep dips." Ravi from Pennsylvania, Ravi. Hi Jim, I love your show. Thank you for taking my call. Oh, thank you. What is happening? I'm looking at your Booking deals, Jim . I know it will be a big hit due to coronavirus fears, the stock is near its 52- week low, and I have a significant position .
Well, you know, things like that. Which one exactly? Uh, BKNG? No, I mean, look, I'm a big believer in buying something that I think has fallen a lot but is not in the hit zone, and you buy the so-called hit zone, and there's no need for that. Why, why choose the most difficult one when there are many very profitable stocks that, I think, will allow you to sleep more peacefully.
Okay, as the Oracle of Omaha says, be greedy when others are fearful. And it's worth repeating, especially on a day like today. So, in today's "Mad Money," I'm talking about retail in the time of coronavirus. What determines the trajectory of a sector? I'll tell you why it all comes down to two words.
Next, the market experienced another dramatic sell-off today, but I'm looking at one stock that managed to end the day in the green . Don't miss my exclusive interview with Sangamo. And as toys gear up for their best week ever, how is a company like American Electric Power feeling? I'm talking to the CEO. ? Write ? Go to madmoney.cnbc.com. Mhm.
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