Many investors were confused as to why stocks entered a mini-bear market and then a bull market within the same 24 hour period following the news of Donald Trump's election into presidency on Wednesday.
Jim Cramer broke down what happened for investors in plain English. After all, he was also puzzled.
"The simple fact is there were a heck of a lot more people who wanted in after this election than wanted out, and a gigantic number of hedge funds who were on the wrong side of the trade and had to reverse their stance," the "Mad Money" host said.
Cramer broke down the buyers into eight groups, and explained their motivations:
The first buyers were those who were waiting on the sidelines for the election to end. For them, there were just too many questions and uncertainty to pull the trigger. Cramer referred to them as "agnostic" buyers — they were going to buy stocks, regardless of who won.
"The people who sold everything last night, the people who said to sell everything, let's just say they aren't worth a bucket of warm spit … I've railed against these sell everything folks for months, but obviously pajama traders don't listen," Cramer said.
The second group were those who wanted a smooth transition. They also didn't care who won, as long as the winner was magnanimous and the loser was gracious to allow a peaceful transition of power to occur. These buyers bid everything up when they saw that Trump wasn't going to threaten to put Hillary Clinton in jail.
The third group of buyers were those who believe Trump as a businessman who will cut taxes and borrow money to fix America's infrastructure. This group knows Trump is comfortable borrowing money, so they did the same with the Treasury given that 30-year rates are so cheap.
"Face it, rich people love it when their taxes are cut and they love capital gains, so they love stocks!" Cramer said.
The fourth group were those who got the election wrong. These are the short-sellers who assumed Clinton was a shoo-in for president. Many hedge fund managers made huge bets against pharma and banking stocks with the assumption that Clinton would win the White House, along with a Democratic Senate majority.
The fifth set of buyers were those who like the idea that something can be done with corporate taxes to repatriate the money overseas. That would mean more buybacks, more dividends and more deals, which Cramer did not think would happen with a Democratic White House.
The sixth group were those who believe that the predatory nature of regulations and foreign trade partners have met their match. Many CEOs want free trade. Part of Trump's reputation is to disrupt the status quo, so he could have his eye set on everything from the Affordable Care Act, to NAFTA.
The seventh group were those that just had a shopping list of stocks they liked. Defense contractors, fossil fuels, pipeline companies and railroads all got the green light from Cramer.
Finally, there was the group that bet that Americans would go out and spend now that the election is over. This means the refurbishment trade could be back, with more people spending to fix their homes at Home Depot.
"The coalition of the willing buyers cobbled together to produce an improbable rally. But then again, wasn't this whole darned election improbable? What a fitting way for it to end," Cramer said.