Cramer: Danger alert-don't buy on the market dip
Jim Cramer can see all of the chaos happening around the world right now, and there is just too much investor complacency going on for his taste. In fact, he doesn't want to buy anything.
And while the "Mad Money" host is a big fan of buying stocks on a dip, what happened in the market on Monday is far from a dip, in his opinion.
"Look, I believe that dips are good buying opportunities, but do you mind if we at least get a dip first? There's a lot of insanity in this tape, specifically the insane level of complacency that buyers exhibited toward the other markets around the world this very morning," Cramer said. (Tweet This)
So, what are these signs of complacency that Cramer says have led to insanity in the market?
No. 1 Greece: Most investors actually thought that Greece was really negotiating in good faith. Who the heck gave them that idea? To think that the Greek government would agree to any deal that didn't wipe out all of its debt is pure insanity to Cramer.
In fact, Cramer is disappointed with the previous compromise put in place. Five years ago, the Greeks should have either defaulted or cut their government size, trimmed pensions and paid more taxes.
The kick-the-can, middle-ground approach has been a ridiculous failure. The largest sign of complacency to Cramer was the fact that people thought that a deal could have been put in place, even though both the Germans and the Greeks clearly stand on separate sides.
No. 2 Market impact: The fact that the U.S. market declined on Monday shows that it cannot withstand Europe being down 4 percent. The big decline shows that there will be an economic impact from Greece to the U.S.
"I know how small Greece is, but I'm surprised that the Germans didn't have a better handle on the short-term economic impact for Europe," Cramer said. (Tweet This)
That means that U.S. companies with sales in Europe will take a hit this quarter.
No. 3 The Fed: Cramer's mind was totally boggled when he saw New York Fed President William Dudley say on Monday that a Fed rate hike for September is on the table. Really? He had to say that on Monday of all days? This news was not that imperative. Congratulations, Bill Dudley, you helped to bring the market down on Monday.
No. 4 World vs. Greece: Cramer is concerned that the world hasn't realigned while Greece is falling apart. While most people have gotten used to Greek Prime Minister Alexis Tsipras scowling at EU leaders, Cramer remembers one time last month when he was all smiles on a visit to Russia .
At that time Tspiras gave a resounding speech trashing the EU and expressing loyalty to Russia. Most people disregarded it because they assume that Russia is bankrupt due to Western sanctions. That is total nonsense to Cramer; it has plenty of cash.
Cramer is concerned that the interactions on Russia's impact with Venezuela, China and the Greeks have gone completely unnoticed. He thinks the world needs to have this on its radar.
No. 5 Stocks bounce: The "Mad Money" host was most concerned that stocks bounced down so easily on Monday. Most of the companies that he follows have stocks that have been breaking down ever since the dollar stopped going down, so it's reassuring that the euro is going back up. However, companies in the U.S. cannot afford to have one more big economic decline in Europe.
"I think we need to go lower before this level of complacency is purged. I couldn't believe how many people on the floor of the exchange told me they were buying the first dip," Cramer said.
No. 6 Puerto Rico: Did people really think that Puerto Rico wouldn't matter? There are investors out there who have spent a fortune buying bonds in Puerto Rico, and many hedge funds borrowed money to buy them. That means there is plenty more pain ahead; Cramer always says that it is the margined hedge funds that cause the most pain.
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No. 7 The world: The rest of the world is in a state of total chaos, as well! What the heck is going on with China? It had the largest bull market in history, and now investors are being hammered. Even Alibaba (NYSE: BABA) is sinking like a stone. Cramer is also concerned with Latin America, Canada and Mexico, too.
It is important to note that this list of warning signs does not mean that the U.S. is headed into another Lehman Brothers situation. That was systematic risk, but this is earnings risk and geopolitical risk.
However, Cramer recommended that investors at least wait for a real dip before buying. He is siding with prudence on this one.
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