Cramer: Bernanke Is Doing the Right Thing
After Federal Reserve Chairman Ben Bernanke spoke to the press on Wednesday, stocks ended sharply up and climbed to new multi-year highs, even though Cramer said the Fed chief said nothing new.Bernanke did, however, give the market confidence. Asked why he’s sticking with his monetary policies, even though there’s no evidence to prove its working, Bernanke noted the stock market has recovered and is rallying. There is, Cramer said, value to that and even for those who don’t invest. When the stock market goes higher, Cramer said companies can become public and put people to work. Other businesses can fix their balance sheets and start hiring once again. A higher stock market also helps to increase consumer confidence, Cramer said, leading to greater retail sales. Finally, a higher stock market strengthens people’s IRAs, 401(k)s and other retirement plans.
Cramer said many lawmakers don’t understand why a higher stock market helps the greater economy, though. Bernanke’s understanding of the stock market’s importance is what makes him unique among policy makers, he said. To Cramer, Bernanke seems to be the only person in Washington, who is fostering an environment where stocks can go up.
Critics of Bernanke think his bond-buying program is creating inflation, but Cramer disagrees. If Bernanke’s monetary polices was causing inflation, Cramer said stocks would be going lower, not higher. History shows us that stocks do poorly in a long-term inflationary environment, Cramer added.
Gold did go higher on Wednesday, but Cramer said that’s because it’s in short supply. It’s also being bought because people want a safe haven from paper currency, Cramer said. Think of gold as a kind of insurance, he explained. Cramer thinks it’s a good idea for every investor to have a little gold in their portfolio anyway.
Meanwhile a number of companies, including Amazon.com [AMZN] and Hess [HES], reported positive earnings results on Wednesday. The strong earnings results show Bernanke has created an environment where good earnings and stock gains can happen, Cramer argued. Thanks to Bernanke’s policies, companies are able to borrow at better rates in order to expand and execute their plans, he said.
“I say three cheers for Ben Bernanke for opening up the secret society of the Fed, telling us that he’ll stay the course and boldly admitting that, yes, the stock market’s a terrific barometer of our nation’s economic health and a great indicator of how his policies are doing,” Cramer said. “I couldn’t agree with him more.”