Cramer believes the market is misleading you. Look at today’s tape: Colgate , which just had the best quarter of all the soft goods companies, got marked down along with other consumer staples like Procter & Gamble and Coke . The cyclical stocks ramped. The retail stocks rallied. It gives the indication, Cramer said, that the Fed has gone soft and Bernanke is going to cut rates. Cramer doesn’t buy that for one second.
You can see the truth in this market if you look at stocks like Washington Mutual , Wachovia or Beazer Homers , Cramer said. They’re the oracles.
Because of Bernanke, you’re losing money right now if you’re invested in just about anything, Cramer said. He doesn't think the Fed wants to make you poor – but it is committed to wiping out all the speculators and ending the whole chain of cheap credit and easy money. That gameplan wouldn’t be all that bad if the problem was just contained to homes and mortgages, Cramer said. Unfortunately, the spillover has already begun. The banks are getting wrecked, the brokers are under pressure and a lot of funds, including mutual funds, bought too many mortgage-backed securities and now they’re suffering too, Cramer said. He believes that Bernanke is willing to let this happen and take us into, or perilously close to a recession. A rate cut, which Cramer has passionately called for, could solve these problems but the Fed chief doesn’t look like he’s interested in that right now. He’s betting that the economy can absorb this pain and not go into recession or go into recession and then he could cut rates to make things better.
So what’s the scenario if Bernanke is right and Cramer is wrong? It can’t hurt to start thinking about going into recession mode and playing a little defense, Cramer said. That means selling stocks that could get crushed by the collateral damage of this mess. It means selling retail until a rate cut, selling the automobile companies, selling airlines and anything dependent on tourism. Any U.S. company that doesn’t have a global business will get hit if Bernanke sticks to his plan, Cramer said.
Bottom Line: If a rate cut isn’t imminent, and Cramer doesn’t believe it is, then you need to play defense and try to recession-proof your portfolio.
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