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Don't Believe the Hype

Monday, 5 Mar 2007 | 6:14 PM ET

All Home Gamers know that Cramer is a bullish guy. He isn’t bullish on everything – that would make him a lunatic – but he’s bullish nonetheless, even after last week. He’s been in the thick of it during major market events ranging from the collapse of the savings and loan industry in ’89 to the collapse of Mexico in ’95 to the downfall of Long Term Capital Management in ‘98.

Every time there’s a crisis, the Fed responds by cutting rates, which takes stocks higher. So Cramer isn’t running around saying the sky is falling. He isn’t worried. But he does take issue with some of the nonsense being spouted off as fact from analysts and talking heads trying to blindly make sense of last week’s misery.

First off, everyone needs to take a step back and understand that just because something sounds negative to someone, somewhere, doesn’t mean it’s necessarily bad for you. Take Japan, for instance. The Japanese market is down huge because the yen is so strong. But that isn’t bad for American stocks – it’s actually good. Coke is a safe example. Their weakest market right now is Japan. Because of the strong yen, even if the same amount of Japanese people continue to drink the same amount of Coke, the company’s profits, when repatriated, will rise because the same amount of yen will buy more American dollars. See? Japan’s loss is our gain.

That brings Cramer to the subprime issue. Crisis, issue, looming disaster – whatever it’s being called today - the fact is that it’s a problem that's being overblown. Subprime loans, which only service the working class, will account for about 1.5% of the loans in the system when they go bad. Obviously that’s bad news for the companies that are making big money in subprime, but it’s barely a drop in the bucket for the big banks like Citigroup or Bank of America ,who will benefit from the Fed cut (which will happen, in part, because of the lack of working-class loans).

Another thing that seems to get everyone worked up is when commodity prices go down. From now on, Cramer says, whenever you see the price of a commodity drop – it doesn’t matter whether it’s oil, gold, nickel or whatever – it’s a good thing, so long as you don’t own them. It’s good because it increases the likelihood of the Fed cutting rates in May. And there’s nothing bad about a rate cut.

So while we’re waiting for the May Fed meeting, we can still make some money. Cramer predicted that a third of stocks would bottom and they did. But at the same time, food and drug stocks are up. Last summer, when the market lost a thousand points from May to June, the first stocks to come back were food, drug and telco. Hershey , Merck , Celgene , Allergan and Qwest all went up last year, and Cramer thinks they will again. He’s even throwing in AT&T for the bargain.

Bottom Line: Don’t assume that all bad news is bad for you. In fact, what’s bad for Japan is good for America, what’s bad for commodities is good for you, and what’s bad for subprime is good for you, too. If you can’t wait to make a play until the Fed cuts rates, history shows us that food, drug and telco are where you want to be. They came back first last time, and they will do it again this time.

Questions? Comments? madmoney@cnbc.com

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