Cramer: Apple Is a Sell Ahead of ‘Fiscal Cliff’
For years, Jim Cramer worked as a broker at Goldman Sachs, the prestigious investment firm on Wall Street. After stocks took a sharp nosedive in a post-election selloff Wednesday, he wondered what he might tell his clients, if he was still working as a broker.
To start, the "Mad Money" host would recommend taking profits in some of the biggest winners. He might even recommend selling a stock like Wal-Mart, which has had a huge run and could go up another ten percent. But if the capital gains tax rate goes up on the other side of the "fiscal cliff" that will hit in January, Cramer thinks it might make more sense to sell WMT now.
(Read More: What Is the Fiscal Cliff? CNBC Explains.)
"Needless to say, a stock like Apple is very right for this kind of call and I think it played out all day today because it makes so much sense to sell it now and take the capital gain as many have huge profits here," Cramer said. "These people are natural sellers and they don't care that next year could be better, they want to take the gain this year to get the tax break, which is worth more than any capital appreciation they could hope for."
(Read More: Obama Win Has Markets Staring at Fiscal Cliff.)
Next, Cramer would recommend taking profits on dividend-paying stocks that have produced healthy gains, such as AT&T and Consolidated Edison. After all, if the "fiscal cliff" is not resolved, he noted the dividend could be taxed at twice the current rate.
Perhaps most importantly, though, Cramer would not recommend his clients just "sell everything."
"That would be stupid. Just please raise some cash would be the watchword with the emphasis on some, only to revisit lower with sweet low-taxed capital gains," Cramer said. "I would then tell my clients that we will almost immediately start to put money to work in companies that will not be hurt by the fiscal cliff, ones that do fine in a slowdown that the cliff could bring."
Cramer would also recommend owning some gold as a hedge against the risk of inflation, which could be caused by the Federal Reserve's monetary policy. After all, the Fed's one power is to print money and under the Obama administration, it's using that power.
(Read More: What's the Federal Reserve? CNBC Explains.)
So what's the bottom line?
"If I were still a broker, I would get that sale. I would clinch it," Cramer said. "The client would then thank me and we'd do the trimming just as we both wanted and do a repositioning into what's worth more now that the election is over and the fiscal cliff is upon us."