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Cramer: What to Expect This Earnings Season

Cramer offered Mad Money viewers some good news on Thursday: The stimulus is working, people are spending, they’re buying more goods, demand is tightening, and hiring might even be the rise. The bad news?

He was talking about China.

That’s the message Alcoa’s latest earnings report signaled to the market today. The company announced a better-than-expected quarter, but only because of layoffs here in the US and more business in the Middle Kingdom. Unlike many investors, Cramer rarely uses Alcoa , which always reports its earnings first, as a leading indicator, but he expects similar statements from other firms as earnings season progresses.

“Alcoa’s earnings report could be at least an excellent predictor of what’s to come,” Cramer said. “I don’t really believe what I’m seeing.”

On the conference call, Alcoa CEO Klaus Kleinfeld praised China’s stimulus for its size and its “shovel ready” infrastructure projects, which allowed for immediate impact. The US stimulus, he said, was “far from immediate.”

Kleinfeld also pointed to China’s rising consumer confidence, up 113%, government-sponsored goods consumption and an auto build rate that will top that of the US this year. Cramer said these stats made it look like China would drive any global economic recovery, and not the US.

So going forward, expect companies to make money the Alcoa way, firing Stateside employees in favor of building factories overseas. That, of course, will translate into even greater unemployment and, as a result, less demand, which leads to more layoffs…and so on and so on.

It doesn’t have to be this way, though, Cramer said. If President Obama’s priority was the economy – and not health care or cap-and-trade or antitrust issues – our stimulus might produce the same results as the Chinese Communists. But investors have no choice but to keep their US-exposed stock holdings in defensive names, while looking for offense in China.

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