Cramer has said it before and he’s saying it again—2011 is not 2008.
“While the 2008 scenario may be scary,” he said Tuesday, “it's just not the least bit realistic when it comes to prospective stock prices ... given the improvement in the balance sheets of every single major company I follow.”
If we’re really in for a repeat of the 2008 Great Recession, then several things would happen.
First, many of our large financial institutions would be wiped out. As you may recall, in 2008 the U.S. government had to take a stake in Citigroup and names like Wells Fargo and Morgan Stanley traded down to $7.
These days, Wells Fargo and Morgan Stanley are very far from those levels. Plus, both Morgan Stanley and Goldman Sachs have raised tens of billions of dollars in capital and have strong balance sheets. And while all eyes are on Bank of America , Cramer said it certainly isn’t in a Citigroup-like scenario because it has a deposit base big enough to protect it from a terrible economy.
And what about the auto sector? If this was 2008, General Motors would have to be bailed out again, as well as Ford , the “Mad Money” host said. Both companies, however, are “brimming” with cash.
In a 2008 scenario, General Electric would have to slash its dividend. We'd also see a total collapse in credit that would cause orders to evaporate for companies like Caterpillar , Deere , Joy Global and Cummins . Never mind, Cramer said, that each of these companies recently reported great numbers.
The retailers would also be hit. Target would be cut in half, Macy’s would go down to $5 and VF Corp would trade down to $37, he said.
Remember AIG ? Cramer said it would go belly-up again if this was 2008, despite the fact that it is a “totally reconstituted [company] with an amazing balance sheet.”
And forget the rails, he said. They would be cut by almost two-thirds in a 2008 scenario.
But the most unbelievable, according to Cramer, is that if 2011 was 2008, then in March of 2012 we should reach levels that place most of the Dow Jones Averages down 40 percent from here.
All of it, he said, is unrealistic. However, he does think we can go lower—just not in the way we did before, and not in a way where he thinks he can get you out and back in again.
“In the end, all I have are the facts,” Cramer said, “and the facts say 2008 is not in the cards.”
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When this story was published, Cramer's charitable trust owned Bank of America, Cummins and Deere.
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