Economic guru Jim Cramer blames this week's rollercoaster stock market on a “group of complete morons” who are causing financial chaos with their uninformed, speculative bets.
"A group of complete morons" who traded little-known, leveraged products that bet on volatility is "blowing up" everything, Cramer said on CNBC’s "Squawk on the Street."
Cramer in particular has cited of the VelocityShares Daily Inverse VIX Short-Term exchange-traded note, which is traded under the symbol XIV, and those who put money into it.
The XIV is supposed to give the opposite return of the VIX, Cboe's volatility index, which is often referred to as the market's fear gauge, CNBC.com explained.
"What bothers me is the people who have never looked at a stock and don't know how to analyze it [are] out in full force today," said Cramer, host of "Mad Money."
"They've never been better about not knowing anything about the stocks," he said. "They got it all figured out," he said while rolling his eyes in exasperation and frustration.
Meanwhile, the Dow Jones Industrial Average sank another 500 points on Thursday as a renewed rise in U.S. bond yields and fears of higher inflation unnerve investors still piecing over a historic drop earlier this week.
The 10-year U.S. Treasury yield rose to a high of 2.884 percent in morning trade, nearing Monday’s four-year peak of 2.885 percent after the Bank of England said interest rates probably need to rise sooner than previously expected.
That added to expectations that the world’s major central banks are now firmly on course to wind down the emergency stimulus they have pumped through the financial system since 2009, driving an almost decade-long stock market rally, Reuters explained.
“Things haven’t quietened down. Things are all over the place. The market is trying to find a bottom to this madness,” said Jason Ware, chief investment officer at Albion Financial Group.
“Now we are having acute attention on what happens in the bond markets, so when yields move up there is an unsettling feeling in the equity market.”
The market's main gauge of volatility, the CBOE Volatility Index, rose to 29.67 on Thursday, still more than twice the level it held over the past few months. The index hit its highest level since August 2015 on Tuesday.
"Volatility has eased but by no means is it low. It is still far above the long-term average and unease about higher interest rates remain," said Randy Frederick, vice president of trading and derivatives for Charles Schwab.
"The outlook for the rest of the year remains positive and fundamentals remain strong. If the VIX falls below 20, then we should see some buying," Frederick said.
Investors are weighing whether the sharp swings in stocks this week are the start of a deeper correction or just a temporary bump in the nine-year bull market, spurred by concerns over rising interest rates and bond yields.
Federal Reserve officials have played down recent turmoil in global stock markets, sounding as resolved to push ahead with gradual increases in interest rates as before the rout, Bloomberg reported.
“Having a bump like this has virtually no consequence in my view of the economic outlook,” New York Fed President William Dudley said Wednesday at an event in New York. “My outlook hasn’t changed because the stock market is a little bit lower than a few days ago. It’s still up sharply from where it was a year ago.”
“That said, if the stock market were to go down precipitously and stay down, then that would actually feed into the economic outlook and that would affect my view in terms what’s the implications for monetary policy,” he said.
Dallas Fed President Robert Kaplan said on Thursday the central bank could hike rates three times this year and the recent market volatility in itself was not enough to change his base scenario.
For his part, President Donald Trump has some advice for investors: they’re making a “big mistake” by selling off stocks amid good economic news.
Trump, who has repeatedly praised Wall Street gains during his first year in office, dismissed recent market gyrations.
“In the ‘old days,’ when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down,” Trump said on Twitter.
“Big mistake, and we have so much good (great) news about the economy!”
(Newsmax wire services contributed to this report).
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