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Cramer: After the ‘Cliff – a First Glimpse

Thursday, 13 Dec 2012 | 4:53 PM ET
President Playing Mr. Cool?
The markets are beginning to lose hope that Washington will compromise on a deal to prevent the fiscal cliff, explains Mad Money host Jim Cramer. The President is playing Mr. Cool, he says.

Wondering how the market will first react, if and when we go over the fiscal cliff? Cramer thinks we may have just gotten an early glimpse.

That's because sentiment in the market may have just shifted in a meaningful way.

Until now, there was some hope in the market that the cliff could be avoided. But after a recent excursion to Washington earlier in the week, business leaders are coming to think that's not the case. "What these business leaders have discovered is there's no compromise coming. That's the information that's filtering back to guys like me," said Cramer.

Goodbye compromise means hello cliff.

And as a result, Thursday's trade reflects a growing acceptance on the Street that the cliff is becoming unavoidable. So what's the takeaway from the price action?

Read More: Scaling the Abyss - 9 'Buys' if Nation Falls Off Fiscal Cliff

First, gold gets hammered.

"Washignton-mandated austerity is real anti-inflationary and gold's saying that even Fed Chief Bernanke's low interest rate posture won't change that," said Cramer. "Remember I want you out of the gold stocks and into the precious metal. Sell the gold stocks now. Buy the metal later."

Colin Anderson | Photographer's Choice | Getty Images

Second, no deal looks bad for oil and gas companies.

"I think that's a belief that demand for energy will decline, particularly the demand from hedge funds who like to play the energy stocks as a hedge against what would be non-existent inflation. I like oil and I want to remind you that it is an international market, so as EOG and Continental go down, consider them as a place to go," said Cramer.

Finally people seem to want to sell the drug stocks on the decline.

"Here I am sure that there are some who are worried that the government may begin to negotiate with the drug companies for better Medicare prices but I think what's really going on is that the drug companies have big dividends and the after tax return of those big dividends come down sharply after we go over the cliff."

What's not getting hit as hard as you would expect? China plays.

"Companies that have more marginal exposure to China than the U.S. performed relatively well. Hence you could see Joy Global hold its big gains because that company's mining equipment is more dependent upon a resurgent China."

What's the bottom line?

Now that business leaders have returned from Washington, the Street seems more resigned to going off the cliff. And recent market action may provide a valuable barometer for the price action in January – if and when we actually do go tumbling.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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