Hang Back for This One

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Cyprus is a real conundrum. There are some people who categorically believe this is the real deal, the big one, the one we prudent people have all been waiting for. These people believe the U.S. market is about to start the Giant Repeal of the gains it's made. They want to sell the market wherever it opens, and then double-sell for good measure.

Others say that, until this weekend, you didn't even know Cyprus exists. They say it is all a one-off event, because its banks had been well-known hideaways for Russian mafia money, and everybody knows that except the lowly Cypriots who are stuck having to bank there. You literally came to the nuisance. These people are looking to buy the dip and end up longer than they were going into the session.

Then, somewhere in between, there are the ironic historian types. These people say that, when you go all moral-hazard and hurt innocent people, like the million Cypriots who use their native banks, you are triggering "a Lehman." That's correct if you decide the collateral damage of hurting innocent depositors is a small price to pay when teaching a lesson to a totally rogue banking system. In that case, you have to expect that the "better but not great" banking systems of Spain and Italy are next -- even though they have almost nothing in common at all with that of Cyprus.

This article originally appeared on March 18, 2013, on RealMoney. To read more content like this + see inside Jim Cramer's $3 Million portfolio for FREE Click Here NOW.

To me the whole thing is a bit of an abstraction. As I told our colleague Doug Kass this weekend, never forget that the average portfolio manager in this country is thinking, rightly or wrongly, "What does this Cyprus thing have to do with the price-to-earnings ratio of Bristol-Myers ?"

In other words, when the smoke clears, we will want to know why we sold Bristol-Myers because the European authorities put a tax on the depositors in a renegade banking system. Portfolio managers are tired of selling U.S. stocks for non-earnings-related issues like European banks, or sequestration or fiscal cliffs. They do, however, respect the idea of selling if Fed chief Ben Bernanke stops providing liquidity, as he might when we hear from the Federal Open Market Committee Wednesday.