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One thing that really jumps out to Jim Cramer about the economy and stock market is there is just too much of everything! From his experience, he knows that means the stronger companies start to gobble up the weaker companies to eliminate overcapacity, leading the market higher like it did on Monday.
"That's why hardly a day goes by without a deal of some sort, because the CEOs in this country are well aware of the overcapacity," the "Mad Money" host said.
That is exactly why there were more deals announced on Monday, such as Endo International buying the privately held Par Pharma. In Cramer's opinion, there are way too many generic drug makers out there, anyway. Between Endo, Par, Actavis and the rest, they are all competing for shelf space.
Yet another competitor was taken out of the group, which should lift margins for everyone.
Then there was vicious takeover activity in biotechs, when Alexion paid $8 billion last week for Synagega. Could this be reminiscent of AbbVie's purchase of Pharmacyclics for $21 billion?
Or how about the semiconductor space? Cramer considers this to be a textbook example of an industry with too many companies. This industry has been nothing but a thorn in the side of investors, until we started seeing bold mergers like TriQuint and RF Microdevices, or the Cramer-fave Cypress-Spansion deal. These companies have all competed with one another in the past, and now they're a one stop shop!
And while Cramer never cared for RF Micro or TriQuint, he knows that as soon as the market smells a deal, it will drive stocks higher.
"I like all of these consolidation stories, because they offer a ton of upside, regardless of how the overall market's doing," Cramer added.
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One-off deals will not affect the market, but when the acquisitions are this pervasive and far-ranging—they will determine the direction of the averages.
"As long as interest rates stay low and growth is hard to come by, I think these deals will only accelerate," Cramer said.