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Cramer's Health-Care Mea Culpa

Cramer during tonight’s show offered a mea culpa to viewers: Despite the horrible effect he thought health-care reform was going to have on stocks, all the major indexes have held up since the bill passed on Sunday. In fact, barring today’s declines – and he didn’t think they were linked to health care – the market dipped for only about 20 minutes after Monday’s opening bell, then continued its bullish move upward.

Possibly even worse, Mad Money viewers who took Cramer’s advice missed a chance to buy that dip. He’d fully expected a pullback to follow the House’s yea vote, giving viewers a great entry point on any number of stocks. But that window of opportunity closed too quickly for most people. And investors who took profits before the vote never got the chance to get back in.

So what happened? Here are his 10 reasons why he missed the health-care call:

1. Comments from Caterpillar . The company said just before the vote that a reform bill would cost it $100 million, and Cramer took that to mean earnings across the board would get hit. But with CAT is just $2 off its higher right now, Cramer said, “Clearly I was wrong to get so bent out of shape by what they said,” Cramer said.

2. Panicked money managers would spark a sell-off. Cramer figured so many pros doubted health-care reform would pass that a Democratic win would cause a stampede of selling. That didn’t happen. He thinks money managers might have been happy that the debate was finally a thing of the past.

3. A sophisticated market would prepare for the coming tax hikes. Again, not true. Cramer assumed that investors would take profits before the investment-income taxes kick in – many start next year, others in 2013; only the tanning tax starts this year – but they apparently aren’t thinking that far ahead. “Even though it’s the rational thing to do,” Cramer said.

4. President Obama would be reinvigorated by passing health-care reform. If the White House wins this fight, Cramer thought, then cap-and-trade, card check and a host of other anti-business initiatives are on their way. But now it seems like the president has spent all of his political capital, and gridlock looks to be the most likely outcome of the upcoming midterm elections.

5. Health-care would increase the budget deficit. So much in fact, Cramer had said, that investors would walked away from stocks in general. He thinks we either haven’t yet reached that point, or that investors genuinely believe that the budget won’t be impacted.

6. Cramer’s predicted sell-off would create a buying opportunity. He thinks the coming earnings season will show that businesses are strong, and he wanted viewers to use a health-care–fueled pullback to buy their favorite stocks. But so many investors needed in on the market that the post-vote decline was terribly short lived.

7. Washington wouldn’t know when to quit. Cramer expected politics to trump everything, as Beltway insiders continued to show their anti-business bias. But it looks like most investors have learned to shrug off those comments. Case in point: The banks are rallying despite all the talk of financial reform.

8. Cramer didn’t want to be greedy. The market had run so much in the past year that Cramer assumed investors would use health care as an excuse to take profits. In order to protect their gains, he ended up getting too bearish.

9. Health care will hurt small businesses. Cramer thought the costs would be too great for many mom-and-pops to handle, and as a result cause a spike in unemployment. “But the economy’s now so strong it won’t happen … because of the bill,” he said. “At least not yet.”

10. Media hype clouded Cramer’s thinking. He usually tunes out the negativity, but the run-up to Sunday’s vote was so filled with doom and gloom that even he succumbed to it.

Now, that said, Cramer isn’t entirely sure we’re in the clear yet. And his health-care prediction could still come to pass (the bond markets sure seem worried, he said). But at least in the short term, he admitted, “We clearly ended up falling prey to the bearish litany of busted budgets and days of reckoning.”

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