10 Reasons Not To Be Cautious

The market rallied nicely yesterday with the Dow Jones index rising over 100 points and the S&P 500 index up 1.4%. However, there was also a message of doom that kept many investors on the sidelines.

The Wall Street Journal had published an article titled “Is a Crash Coming? Ten Reasons to Be Cautious”. On yesterday’s Mad Money show, Jim Cramer refuted those claims and showed investors 10 reasons not to be cautious or at least not overly cautious.

1. The WSJ stated that the market’s already very expensive with stocks trading at 20 times cyclically adjusted earnings. However, Cramer pointed out that stocks are actually the cheapest they have been in 30 years, when you take into account other factors.

2. The Fed is concerned about growth or lack thereof. To Cramer, this doesn’t seem like a bad thing. Would investors be more comfortable if the Fed wasn’t concerned?

3. There’s too much bullish sentiment in the market. According to Cramer, the market is extremely bearish right now. This sentiment is being shown in the vast sums of money that continue to be transferred out of stocks and into bonds.

4. Investors are worried about deflation. Cramer feels that there is more reason to be concerned about inflation. Cramer believes that Fed Chairman Ben Bernanke is an expert on fighting deflation.

5. Corporations still owe the government money. Cramer says that company’s balance sheets are getting healthier and delinquencies are falling.

6. Unemployment remains high. Cramer did acknowledge that high unemployment is hindering economic growth. However, he believes that high unemployment is already priced into the market.

7. Housing continues to struggle. Cramer also conceded that the housing market remains very disappointing. However, he believes that housing prices have bottomed and that higher prices are in store. The decline in housing starts should also help lift prices.

8. Labor Day is approaching. This hardly seems like a good reason to be bearish since Labor Day occurs every year. Cramer feels that stock fundamentals should be used in selecting stocks, not the calendar.

9.Gridlock in Washington. Cramer doesn’t see this as a bad thing. After all, the corporate world doesn’t need anymore wide-sweeping regulations passed.

10. Amber alerts. Cramer labeled this a “piece of vulgosity.” He believes that fundamentals have never been stronger.