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"Look, everyone's entitled to their own opinion, but that doesn't mean I think everyone should express that opinion, especially when that person in question happens to run the Federal Reserve," the "Mad Money" host said.
Yellen used such terminology to describe valuations as "generally quite high" and that they represent "potential dangers." As a veteran of the markets, Cramer knows that this kind of language is often unhelpful.
Nothing good can come from someone in Yellen's position calling stocks overvalued. In Cramer's perspective, if she thinks that stocks are truly overvalued, why not just raise margin requirements?
The real worry about stock valuations is coming from people who are buying stocks with borrowed money, which can do some serious damage to the market. So, it makes a heck of a lot more sense to Cramer to raise margin requirements, something that Yellen has the power to do.
"So, Ms. Yellen, if you really think stocks are too expensive, raise those margin requirements. But please don't raise interest rates to pop this perceived bubble in valuation because the two often have nothing to do with each other," Cramer added.
Yellen also mentioned that bonds provide a low rate of return, but she did not flag them as being excessive or dangerous. Ha! Cramer argued that bonds are where the real bubble is, because they don't offer much of a return at all. It is the good dividend and strong balance sheet stocks that have better valuations than bonds.
"I found her analysis both disconcerting and off-point, and I say that as someone who thinks the world of this woman. But in this case, I think Yellen made a mistake," Cramer said.
Here are three reasons why Cramer believes her valuation comments could be wrong:
No. 1 Ever since he bought his first stock in 1979, Cramer has always heard chatter about the market being overvalued. It is something to always worry about, and while it wasn't wrong for the Fed chief to warn the market about her perspective—there are negative repercussions.
Using such strong language will only shake out the long-term investors from the market. It encourages people to take their money out of their index funds and put cash into retirement accounts, which is a terrible idea.
No. 2 By stating that the entire market is overvalued, that is totally contrary to the notion that stocks are a representation of an individual business. Cramer has always taught investors not to trade in and out of stocks in general, and to only own stocks of companies we like. When Yellen said the entire stock market is overvalued, that scares people away from making long-term investments in high-quality companies.
No. 3 So what, maybe stocks really are overvalued right now? But what if things change? Will Yellen then tell everyone that they are too cheap? Probably not.
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All of this to Cramer is just too darned vague and is nothing more than an excuse to dump stocks with no rationale behind something that could correct itself.
"So, if you want to, go ahead and take something off the table because of Yellen's warning," Cramer said.
Ultimately, Cramer warned investors not to let Yellen freak you out. She is great at running the Federal Reserve but is bad news when it comes to giving investment advice.