Mad Money

The Vanishing Middle Class

Cramer's Tale of Two Cities

"It was the best of times, it was the worst of times."

Pardon the literary reference, but that's probably what people will say when they look back on this "increasingly Dickensian era," Cramer said Wednesday.

But the disturbing part is that, unlike fast-growing countries, like Brazil, China and India, the middle class is evaporating in the U.S. Instead, the rich are spending more while everyone else is pinching pennies. As a tip of the hat to Charles Dickens, Cramer called it "A Tale of Two Cities."

To play this trend, Cramer recommends looking at high-end and ultra low-end companies. He likes Perrigo , which enjoys a 70 percent share in the over-the-counter generic drug market. Cramer said the company has become an expert at making smart acquisitions, has been building a strong international presence and recently reported a strong quarter. Although its stock is currently trading off its 52-week high, Cramer thinks it still has more upside.

Cramer also likes Treehouse Foods , which makes a variety of house brand products. The company reported a disappointing quarter, but most of the miss came from higher freight and fuel expenses, Cramer said. He thinks its underlying trends are strong. It reported 4 percent organic revenue growth and has been able to raise prices without losing customers.

While generic brand companies are working in this environment, Cramer would stay away from traditional defensive plays, including Clorox , Colgate and Procter & Gamble .

"These companies are part of the vanishing middle and even though their stocks have done a lot better than most lately, I don't feel very good about the underlying businesses," Cramer said. "Their margins are being squeezed and they're facing increased competition from knock-offs."

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