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Cramer: First crisis of the year

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

If there's one thing Wall Street hates its surprises. And it just got a dilly.

According to a string of news reports, one of China's high-yield trust investment products appears set to default -- for the first time, ever.

"Until the last 24 hours, no one was really focused on the issue," Cramer noted.

However, on Thursday "the Street decided collectively that it can reverberate into every company that has any exposure to China, as far ranging as Ford and Coach and Boeing and Goldman Sachs." As a result all the major averages finished sharply lower.

Stockbyte | Getty Images

"It's the first crisis of the year," Cramer said. And in typical Wall Street fashion, pros are going into 'sell first and ask questions later' mode.

New economic data out of Beijing did little to assuage overseas concerns. It showed activity in China's factory sector contracted in January for the first time in 6 months.

Of course Cramer understands the seriousness of the situation. "We have a bank potentially being allowed to go under," as well as deteriorating economic signals, he noted. "There could be serious implications."

But largely Cramer thinks the Street is overreacting.

"China has a habit of pleasantly surprising us just when you think that they're about to jump off a cliff without a net," Cramer noted.

But more important, Cramer doesn't see developments in China having any serious impact on the US.

"Yes, China is important to the global economy, but it's still not nearly as important as the United States, and the US remains strong," he said."One look at the robust existing home sales figure and the very good jobless claims number we got this morning tells you all you need to know about that. Neither housing nor employment here in America should be hurt by China."

Therefore, as China induced panic sweeps across Wall Street in the days ahead, Cramer thinks a shrewd investor should take advantage of the lower prices that go hand in hand with a sell off and put money to work.

Here's how Cramer would proceed.

"Right now, do some homework on the stocks you've wanted to buy but were too expensive," Cramer said. In other words, favorites that had rallied too far too fast.

Determine an attractive entry point and hope that over the next few days panic drives those shares down to your preferred point of entry. If they get there, pull the trigger.

Then, Cramer. says look at stocks which sold off due to fears of contagion but really have little connection to the problem.

"In this case that's domestic regional banks, which have been terrific to-date and have nothing to do with China, but have been brought down by the ETFs that handle the financials."

After that, look at industrials and determine, which if any, appear to be oversold.

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That's the way Cramer would approach this crisis – with a cool head and a clear strategy. "Again, no need to rush into anything," Cramer said. "But get ready to move. I think you're looking at an opportunity to buy your favorite stocks at much lower prices than we've had for some time now."

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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