As the Dow Jones industrial average saw its worst day of 2012, Cramer on Wednesday refuted bearish arguments and claimed “these pullbacks are temporary and not malignant.”
To start, the “Mad Money” host noted the transports are getting crushed, which is troubling because they are a good read on the underlying economy. After all, a good chunk of commerce relies on transporting goods and services. If the transports are doing well, it means business is booming and vice versa.
But even though the transports were crushed on Wednesday, Cramer doesn’t think investors should be too concerned. He explained the real weakness in the sector is coming from the rails, which transport more coal than anything else.
“The sudden, precipitous and perhaps lasting decline in the price of natural gas, which I do think is bottoming albeit at a very low level, is at the root of the transport weakness. As is the perception that President Obama will be re-elected and utilities live in fear of the Obama anti-coal EPA,” Cramer said. “Therefore it makes good political and economic sense to switch from coal to natural gas. That's crushing the rails, which is, in turn, pummeling the transport index.”
Next, Cramer said the U.S. housing market needs to turnaround before we’ll see a sustained increase in stock prices. Few houses are being built today and the low build rate is having an effect on housing-related plays. Cramer still believes in a second-half housing recovery, though. So he thinks housing will likely come around in a matter of months.
Then, there’s agriculture. Growing food more efficiently is big business in the U.S., Cramer said. He wants to see farmers do well because they spend a lot of money when things are going well. But John Deere reported a strong quarter on Wednesday, only to proceed to question whether crop prices aren’t peaking.
“That wouldn't be bad for a cash-strapped consumer who's been paying through the nose for all sorts of foodstuffs, Cramer said. “Today, though, the Deere decline gives us pause that the machinery stocks have run too far.”
What about the Web? Cramer said two things most greatly impact technology, namely the Internet and Apple . So when Apple’s stock reversed intraday, many people blamed him because they thought they bought it too high.
“Sure, Apple can reverse. Does that mean it's finished? Does it have to split to go higher? I hear this nonsense all day,” Cramer said. “Apple's fine. You can't go up every day.”
People were also concerned about the horrible quarter from social gaming play Zynga.
“When a major Facebook-related name gets hammered for slowing online gaming sales, it reflects poorly on the whole group. I can see why people want to take a tech breather, especially if Facebook might also be slowing,” Cramer said. “I think the problems are with Zynga alone, but people love to extrapolate.”
Finally, the financials have rallied all year, especially Bank of America . Now some of the realities are setting in, though, and the bank has caught some downgrades. To Cramer, the rebounded is looking more and more like a dead cat bounce.
Bottom line: Cramer can see why people would want to take profits right now, but he thinks these are just bumps in the road.
When this story was published, Cramer's charitable trust owned Apple.
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