Since last week, Cramer has recommended investors take profits, lighten up, raise cash and become more defensive. With the market now in the thick of the sell-off, however, he's getting a little less caution and more opportunistic. After all, stocks get cheaper as they go lower.
The pullback, Cramer said, is about one thing: money managers are betting that the market will be a repeat of the great sell-off that began in 2008. At that time, oil prices got high enough to crimp the economy. Under this assumption, money managers are buying heavy cyclical stocks and then dumping them when commodities start to fall, as they had on Monday. Fund managers are trying to be as nimble as possible and quickly selling names, assuming that if they get out first, they'll do better than those who get out later.
As was the case in 2008, hedge fund mangers are watching oil prices. Oil broke at $147 because it turned out that the price of crude was being buoyed hot by supply and demand, but by nothing more than speculation and asset allocation. The hedge funds got out of oil and gas names. By that time, though, the high oil prices had already done damage to the world's economies.
Today, Cramer said the hedge funds are following the same playbook. They are selling oil and gas names on the belief the global economy is much softer than people think. As they get out of oil and gas names, they are buying high-growth stocks that tend to do well in a slowdown, like Chipotle Mexican Grill , Netflix and Panera Bread . Fund managers are also buying slow growth names, like McDonald's , Procter & Gamble and Phillips-Van Heusen .
The "2008 replay" strategy only works if the market truly repeating 2008 all over again, Cramer said. He thinks this market is different.
Take oil, for example. Cramer noted the current price of $113 a barrel doesn't compare to the $147 level reached in 2008. Oil today has barely breached the "danger level" at $110, so gasoline prices surpass $4 a gallon for long, if at all. Unlike in 2008, oil prices today are being pushed higher by the crisis in the Middle East. Finally, today's market hasn't seen the demand destruction that occurred in 2008. Back then, higher oil prices translated into higher gasoline prices, which caused people to consume less.
Commodities did, however, get overheated. The various crises around the world have kept prices artificially high. To meet futures demand, the Saudis cut instead of raising production. In other words, the oil futures demand is phony while real demand is lagging.
The biggest difference between today and 2008 is that our economy is now on the mend. It's being helped by falling commodity prices, too. If the commodity bubble can be "nipped in the bud," Cramer thinks hiring will accelerate.
"It is not 2008, even as the hedge funds think it is. There are more buys than sells down here," Cramer said. "I've been telling you to raise cash. Now it's time to put that cash to work, picking at the higher growth and safety cohort, because we're still only in day two of the sell-off."
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