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Here we go, again! Jim Cramer saw investors in sell, sell, sell mode all over again on Tuesday, and the pain has rippled through all of the averages, guiding them all down.
"It's worth going over why people are selling stocks and why I can't blame anyone for wanting out, even though there's nothing truly earth-shattering happening—nothing that would make me want to yell 'fire' in a crowded theater," the "Mad Money" host said.
Cramer took the most heat of his career when raised the alarm in 2007 and 2008, when the market was a blazing inferno. Many laughed when he called for investors to take their money out of the market in the fall of 2008 based on the horrendous declines that were occurring at the time.
"What's more important is why I made that sell-everything call in 2008 and why I'm not making it now, even as I acknowledge that I don't like this market short-term and recognize it can go lower," Cramer said.
So what's the difference between 2008 and now?
Well, the market has lately experienced the same kind of incredible run that we saw leading up to the great recession. It was just one week ago that Nasdaq was hitting new highs and stocks were picking up immense gains.
The problem is that a lot of U.S. companies do business overseas and will be hurt because of the strength of the dollar. That will only get worse if the Fed decides to raise rates.
Many multinational companies would have earnings estimates cut because of the reduced exports due to a declining local currency overseas. That means stocks of companies that do business overseas will plummet.
Additionally, the same companies with business overseas will have a damaged bottom line because of unfavorable exchange rates.
This sounds terrible!
"So, considering all of those negatives, how come I'm not yelling 'fire'? One simple reason: we don't have systematic risk. We aren't about to fall apart at the seams," Cramer said.
Let's not forget that consumer sentiment is strong, and the banking system has plenty of cash, he said. This is not 2008.
So, what should you be doing?
Cramer recommends investors start trimming positions, beginning with a small portion of stocks that are at the highest risk if interest rates were to go higher. Don't sell everything! Just give a little haircut.
At this point, stocks have had a great run, and Cramer thinks taking profits makes a lot of sense.
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"It was unnatural that we kept climbing with nary a reversal for so long. This selloff is a normal correction based on legitimate worries that could impact a big swath of the market," Cramer said.
In other words—relax! Cramer thinks a downturn following a huge rally is completely normal. He thinks you should stay the course and wait for the inevitable big rally.