Jim Cramer, former hedge fund manager and mercurial founder of TheStreet.com, makes claim to a rather intriguing tell as to future Fed tightening: “When BUD rises, it’s a sign that the Fed will tighten more than expected. We need to see other members of this cohort join in. But the BUD signal is almost never wrong.”
Love him or hate him, he’s an experienced fund manager with an interesting theory, using the basic consumer food and drinks to let you know when the collective market thinks the Fed is on the verge of imminent tightening:
“Anheuser-Busch is ramping. Remember, when you see BUD rising and breaking out, it’s a sign that the Federal Reserve is going to tighten harder than we thought. When you see this stock moving up on no new news, that’s big money betting the Fed is going to slow the economy.
Understand that we need more than just Anheuser-Busch moving up. We need to see General Mills, Sara Lee and Heinz ramping. We need to see Procter & Gamble through par and Colgate above $55. We need to see Gillette blow out of this range. Hasn’t happened yet. But stay tuned. Anheuser-Busch is almost never wrong. It is the king of stock tells, as well as the king of beers. (emphasis added)
I haven’t back-checked this thesis, but its rather intriguing. I assume the implication is that a sudden flight to consumer stocks, especially after a strong rise in the indexes, foretells a cooling off period.
But these consumer staples tend to do well regardless of the economy. BUD isn’t particularly economically sensitive, nor is Gillette. People gotta shave, regardless of what GDP is. And Beer has not been sensitive to unemployment numbers — its historically been recession proof.
Any Fed watchers out there who can comment on this, please do . . .
King of Beers Gives the Fed ‘High’ Sign
By James J. Cramer
12/04/2003 01:52 PM EST, TheStreet.com