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Cramer: Trading an Obama Health-Care Win

Health-care reform most likely will pass, Cramer said Monday, and investors better prepare for it. He thinks the win would embolden the White House to follow through on a number of other legislative initiatives, all of which could hurt shareholders across the board.

Cramer said that the Democratic leadership has been pressuring fellow party members who disagree with President Obama’s intended reforms, and as a result they are that much closer to becoming law. Not to mention, he doubted that any congressional Dem would be willing to deal the president such a catastrophic loss. Not at the expense of their party’s majority – and their jobs.

If Obama finally signs the bill, Cramer said, then other reforms could soon follow that would change the way business is done in the US. And Washington will have to find a way to pay for the White House’s sweeping agenda. He thinks the money will probably come from removing the favorable treatment given to capital gains and dividends.

A rash of selling wouldn’t be too far behind such a move, Cramer said, as investors look to take profits before the changes take place. Of course, the resultant sell-off would hurt the entire market. And that’s to say nothing of the effects that health-care reform would have on American businesses, which Cramer said could be so negative that they stall the improvements we’ve seen in US employment. That in turn would give investors yet another reason to sell

While Cramer wasn’t calling for any drastic actions here, his charitable trust has reduced its exposure to stocks. He cautioned viewers not to be complacent in the run-up to health care’s passing, and even suggested selling into strength as the bill signing approaches.

But that doesn’t mean there won’t be places to invest. Gold, foreign stocks and recession plays like Heinz, Kellogg and Altria should still work. The bottom line is that investors want to make sure they haven’t bought into an S&P 500 index fund. That could end up being a terrible mistake, Cramer said.

Cramer's charitable trust owns Altria.

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