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Silent killer stalking stock market, says Cramer

Wednesday, 24 Jul 2013 | 6:00 PM ET
Rates headed higher?
Wednesday, 24 Jul 2013 | 6:00 PM ET
Interest rates could indeed head higher, explains Mad Money host Jim Cramer. A look at why interest rates are higher, and whether investors should embrace it.

(Click for video linked to a searchable transcript of this Mad Money segment)

There's a silent killer out there. Lurking.

It's preying upon investors. Cramer says you need to stay alert.

The silent killer is higher interest rates and if you're not always thinking about how higher rates might impact the stocks you hold, the next victim could be you.

But that doesn't mean you should run from the stock market – quite the opposite. As long as you remain vigilant, the Mad Money host thinks the neighborhood is perfectly safe.

However, make no mistake, you must remain vigilant because Cramer is convinced high rates are coming.

"Look no further than housing," Cramer said. "It's just too darned hot. New home sales increased 8.3%, the highest in five years. Prices of homes are up 12% in a year." The issue has already manifest itself in this sector with mortgage rates making two year highs.

Image Source | Getty Images

"Second, the auto market is going great guns," Cramer added. Typically strength in the auto sector is a bullish sign for the economy overall. "I think you could argue that the ten year Treasury should be at 3.6% not 2.6%."

Also Cramer said results from Delta and US Airways suggest better times are ahead. "When you see the airlines beat the numbers—something that rarely happens—that says to me times are flush."

In addition, Cramer cited strong results from Boeing and United Tech to confirm his thesis; that is business is so strong, Cramer thinks they will need to add workers to keep up with demand.

When taken in tandem, Cramer thinks there's only one conclusion. The economy is starting to percolate. "Therefore, I have to conclude that interest rates are ridiculously low versus the strength in these key markets."

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Of course, in the long-term that's good for stocks. But right now, with pros worried about Fed tapering, Cramer believes higher rates will hurt stocks. "I just don't think stocks are ready for the interest rate climb to resume once again," Cramer said.

Therefore, Cramer suggests keeping a close eye on developments that could result in a rate spike. And understand how higher rates impact the stocks you hold. "I don't think there's any escape," Cramer said. "It's coming for you."

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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