Mad Money

Cramer: Why You Should NOT Buy Bonds Right Now

Despite all the positives that Cramer sees in this market – from mobile Internet plays like Apple to advertising buys like Google and retail picks like Costco , with each sector showing strength – investors are buying bond funds, not stocks.

That’s “a mistake,” Cramer said during Tuesday’s Mad Money, “a big one.”

Getting Back to Even

Some key brokerages, from Knight Capital to TD Ameritrade to Charles Schwab , have reported declines in business. That means investors have withdrawn their money and placed it in Treasurys, apparently for safety’s sake. But Cramer highlighted a number of reasons why stocks right now are a better bet.

First, while bond funds seem the safe choice, they are in fact “reckless,” Cramer said. Banks may be issuing stock to pay back debt, but the US government will be doing that for far longer. As a result, bond holders will own a piece of paper that is constantly diluting itself.

Also, certain stocks offer better yields than Treasurys, and they carry the potential for growth. Plus, dividends are taxed at a better rate than bonds. Keep in mind, too, that a number of companies continue to raise their dividends, General Mills and McDonald’s recently among them. So buy one of them, or an Altria or Inergy , which offer 7% yields or more, before buying government debt.

Investors shouldn’t ignore these down days in the market either. Instead, they should use them to buy strong companies. Best Buy dipped despite a strong quarter? Buy it, Cramer said. McDonald’s pulled back because analysts thought its growth was slowing? It was buyable. Wall Street didn’t like Pepsi purchasing the Dr. Pepper bottling rights? Again, buyable.

Lastly, don’t forget Citigroup’s upcoming offering. Cramer likes it at $3.25 a share.

There will come a time when interest rates are much higher, and Cramer will bless Treasurys. And there will come a time when he declares that stocks have run too much. But that time is not now. If investors want to get back to even, he said, they have to get back in the game.

“There are too many great opportunities in the stock market,” Cramer said.

Cramer's charitable trust owns Altria, Costco and Pepsi.

Call Cramer: 1-800-743-CNBC

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