Mad Money

5 Forces Driving This Year’s Market

A number of factors have changed the market since Mad Money first launched five years ago, said Cramer, celebrating the show’s birthday on Tuesday from Studio 8H at 30 Rockefeller Plaza. And they can be broken down into a simple acronym: P.A.C.E.D.

First, P, for president. While investors used to shrug off an appearance by President George W. Bush because they knew his statements would be irrelevant, what with employment and the economy not yet a problem, they now have their brokers on speed dial when President Obama holds a press conference.

The US government presently owns two of Detroit’s big three automakers, the world’s largest insurer AIG , the largest mortgage operations in Fannie Mae and Freddie Mac , as well as a third of Citigroup . And considering that the next 1,000 Dow points depends on whether or not health-care reform passes, Cramer said, it’s not wonder we’re so focused on Washington.


Then there’s the A for Apple . In the not-too-distant past, Apple, Research in Motion , Google and were completely separate companies, but that has changed over these past five years. Apple moved into RIM’s smartphone market, as did Google. And Amazon’s Kindle e-reader is preparing for a challenge from Apple’s iPad. So which should investors buy? Cramer likes Apple, thanks to the iPhone’s sales strength and the forward-thinking leadership of Steve Jobs.

The C in P.A.C.E.D. is for China. The days of US economic dominance are over, Cramer said, and now the Middle Kingdom is the driver of global business. When Mad Money started, there wasn’t even a BRIC (Brazil, Russia, India and China) but now he thinks we should focus exclusively on BIC, especially after America’s recent recession.

The E stands for energy. In this case, it refers to the US going from an importer of oil to one of the world’s biggest natural-gas producers. As a result, the related stocks are some of the market’s best performers. The drawback here is that we’re soon going to be a net exporter of petrol products as Britain, France and Japan rush to develop our properties and President Obama continues to emphasize so-called clean coal instead.

Lastly, there’s the D, for dividends. Cramer has endorsed what he called “accidental high yielders,” or stocks whose dividend yields were up after their share prices had been knocked down. The strategy was to collect the income until the stocks regained their losses, collect that income too, and then sell. He said this strategy helped get investors out at Dow 11,000 before the crash and back in at the bottom, Dow 6,500.

Those who followed Cramer’s lead have seen 64% returns from then until now, while investors who bought and held stocks the whole time have lost 3.2%. The takeaway? Unless a stock has the growth prospects of Apple, don’t buy it without a sizable dividend there protecting you.

These at the most important changes of the past fives years as Cramer sees them.

“And they must be obeyed,” he said.

Cramer's charitable trust owns Apple.

Call Cramer: 1-800-743-CNBC

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