U.S. Vs. Them

The Dow climbed more than 100 points intraday on Monday only to close down 203. As stomach-turning as these up and down days can be, that’s still nothing compared to the regular and steep declines that overseas markets have seen. So what’s going on here? Why the rollercoaster ride here at home and the nosedive in China and other countries? Cramer thinks he’s found an answer.

Brazil, Russia, India and China soared to such heights that it’s no surprise their fall seems never-ending, Cramer said. He likened the drop to a five-story fall, while the U.S. has only fallen two stories. Look at the numbers: The Dow’s lost about 12% over the past five years, 38% year to date. But the Shanghai Composite is still up 26% since 2003 despite falling 70% just this year. India’s down 57% so far in 2008, but is still up 81% for the last half decade. These countries have a lot further to fall than we do.

And the U.S. has, Cramer said, the world’s strongest currency. There’s a bull market in the dollar, and that makes our stocks much more attractive than their overseas counterparts, which trade in weaker currencies. So while Europe is due for rate cuts, and Hong Kong, too, is struggling, the strength of the dollar allows the U.S. to sidestep a similar crash.

What U.S. stocks are working? Investors don’t want any company that relies on exports to make money. But stronger banks that don’t need capital, like PNC Financial and Wells Fargo (after it does its equity deal), work as strong dollar plays, Cramer said.

So, too, do high yielders that pay their dividends in dollars and don’t yet have much overseas exposure. Cramer recommended Altria, BB&T and Verizon here. For investors outside the U.S., Cramer said, these stocks are a good way to get paid a nice dividend while hiding in dollars. Basically, they’re high-yielding bonds.

Pepsi also got the thumbs-up because the company can grow its overseas business on the cheap because the dollar now carries more weight against foreign currency.

Jim's charitable trust owns Altria and Pepsico.

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