State of the Market

There’s always a bull market somewhere, Cramer’s known to say, but right now those bull markets carry a lot more risk and they’re harder to find. So while he doesn’t want Homegamers to take their money and run, they need to play it cautious.

The bottom line here is that Cramer thinks the Fed can’t cut interest rates fast enough to prevent a “brutal economic downturn.” So don’t let Monday’s midday rally fool you. That’s what happens when the market is oversold. Everyone who wanted to sell did, so inevitably the market bounced back a bit, he said.

Cramer admitted he was wrong about the Fed’s intentions before – in 1998 when Long Term Capital Management imploded and Alan Greenspan (and a number of big banks) came to the rescue – but he thinks this time is different. The Fed back then was more nimble and less defensive, Cramer said, and today’s market reminds him more of 1990, when commercial construction was causing all the trouble the way residential is now.

So investors need to focus on capital preservation, Cramer said. It’s all about reducing risk. Ten percent or more of a portfolio should be in cash until this market settles down. That money will come in handy later when we reach a bottom and all the best stocks are on sale.

As for stocks, remember Cramer’s Indestructibles: Coca-Cola, Altria or Medco Health. These are the companies that he thinks usually do well no matter which way the economy goes. High-growth stocks work, too, especially because they become more and more rare (an valued) the worse the market gets. Celgene is a Mad Money favorite for this category.

Jim’s charitable trust owns Altria.

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