What exactly needs to be done? During today’s Mad Money, Cramer laid out his Game Plan for the US, Europe and China. Until they do the following, he won’t get bullish.
Here in the States, Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, the most powerful banking legislator in the country, needs to take Senator Blanche Lincoln’s amendment to the financial-reform bill off the table. Lincoln wants to American banks to divest their lucrative swaps businesses, but, as Cramer has said before, that would be tantamount to giving customers away to Deutsche Bank. Cramer doubts the amendment will get through because Treasury Secretary Geithner and Federal Reserve Chairman Bernanke are against it, but he’d like to see President Obama go public with his dislike of it as well.
After financial reform is done, Obama’s focus has to be jobs, jobs, jobs.
“That’s what the next six months in this country needs to be about,” Cramer said.
And the Securities and Exchange Commission needs to offer some clarity on circuit breakers, so what happened on the afternoon of May 6 never happens again. The circuit breakers also must include doubled- and triple-leveraged exchange-traded funds, which allow institutions to sidestep margin and short-selling rules and hurt individual investors.
In Europe, European Central Bank President Jean-Claude Trichet has to bring interest rates to zero. That access to cheap money would help alleviate at least some of the pain inherent in the enormous budget cuts the most troubled countries there have to push through, and it certainly worked here in the US. Also, Germany and France need to come to some agreement about the PIGS (Portugal, Ireland, Greece and Spain; he doesn’t think Italy should be looped in with the rest anymore).
“Just that resolution alone would cause a gigantic rally,” Cramer said.
China, meanwhile, needs a soft landing. Cramer had originally thought the country’s growth would either continue at its furious pace or the economy would slip into a recession. But now there are reports that the Chinese Communists will both stimulate certain industries even as it cools residential and commercial real estate. Cramer thinks China has to keep that going in order to avoid joining Europe in pulling the rest of the world down.
If these things don’t happen, Cramer said, “We will be in a world of hurt.”
That’s why he’s watching the defensive stocks right now. They will offer the protection we need if the world’s governments don’t come through. Three in particular report next week that investors should keep their eyes on: Campbell Soup , yielding 3.1%; Heinz , yielding 3.7%; and Diamond Foods , a faster-growing, higher-margin food company than the others.
Again, their earnings won’t matter if the US, Europe and China don’t step up. But at least they operate in the very food business that investors flock to when the market heads south.
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