As the stock market plunged on Monday, taking the Dow Jones industrial average down almost 1,600 points intraday, CNBC's Jim Cramer wanted to help investors assess the drop.
"I hate to sound glib here, but ... we were due for a decline. We just were," the "Mad Money" host said. "Markets do not go up in a straight line."
Cramer noted that, on average, 5-percent pullbacks occur at least three times a year. Monday's weakness led the market to close down 8 percent from its high on Jan. 26.
"Despite the large, scary red numbers you see on your screen, the truth is that these things happen. You've got to be ready for them ... at all times," Cramer said.
First, Cramer analyzed the causes of the sell-off. Bullish exuberance, rising interest rates, declines in key stock sectors and weak-handed shareholders all contributed to the losses, but Europe really "got the ball rolling," he said.
Cramer on why the sell-off makes sense
Cramer saw Monday's 1,175-point drop in the Dow Jones industrial average as a "reset" for the broader stock market.
"Think of it as the terrifying process that gets us back to more reasonable levels where we can start to have a real advance, not a parabolic move that's destined to be repealed," Cramer said.
As concerned investors wait for some kind of resolution to the relentlessly red tape, Cramer argued that the market's downturn made sense.
So, based on a number of trends he has noticed in the last few months, Cramer compiled a list of six distinct reasons for the sell-off.
Cramer's sell-off strategy
In his nearly 40 years of investing, Cramer has noticed one thing about broad-based stock market declines.
"The market bottoms in thirds," the "Mad Money" host told a caller in a sell-off strategy session on Monday. "It pretty much tells you what's going to happen."
Cramer predicted that the first two sectors to bottom would be the banks, dragged down by Wells Fargo after the Federal Reserve placed restrictions on its business, and health care, which has seen more pain than gain of late.
Only then will investors start to see some stability, but that does not mean they should jump at the chance to buy in, Cramer warned.
Cypress Semiconductor CEO on IoT growth
If you ask Cypress Semiconductor President and CEO Hassane El-Khoury, his chipmaking company is a hidden winner in most of the industries it serves, particularly the internet of things.
"Our automotive outgrew the automotive market," El-Khoury told Cramer on Monday. "We grew 16 percent [in] our auto [segment], which is one of our biggest focus markets. Consumer outgrew. Industrial outgrew. Look at our IoT connectivity. Everything is getting connected. That grew 46 percent from an annualized Q4 '16. Forty-six percent."
But they're not just numbers to El-Khoury. The CEO also explained how end consumers come to interact with Cypress' products, which are featured in everything from wearable devices to connected cars.
"When people get in the car, they want to get the same experience as they do at home in front of their computer, their tablet or any consumer device," El-Khoury said. "You want to get in the car, you want your phone to be connected, you want your media streaming. You want the media to stream from the front to the back so your kids can watch. That's what we enable."
Lessons from the Eagles' victory
After Monday's brutal sell-off, which Cramer fondly labeled the "Pats crash" after the Philadelphia Eagles' Super Bowl victory over the New England Patriots, the "Mad Money" host didn't bring up his favorite team to gloat.
"I bring it up because it's pertinent," Cramer said. "As the season went on, you could see that this team was different, was special, and in the end, they showed you exactly how an underdog can triumph in the face of adversity. Isn't that what we have right now in the stock market?"
Cramer actually found that he learned some important and translatable lessons from the Eagles: be prepared for the worst, take risks and, most importantly, get your head in the game.
"You make a mistake or you get some bad luck ... you don't moan and groan and say, 'Woe is me,'" Cramer said. "Be like the Eagles and get back up from the turf. Get your head in the game ... no matter what. No woulda, shoulda, coulda. You don't control the luck. You do control the design."
Lightning round: You could very well excel in EXEL
In Cramer's lightning round, he zoomed through his take on some callers' favorite stocks:
Exelixis: "Very good spec. If you have to do a spec, I'll accept that one. I think they've got good technology."
Anthem: "That's a terrific stock to own. Let me throw in UnitedHealth for a two-fer."
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