The Problem With Consumer-Confidence Reports

Consumer confidence reports get a lot of press, Cramer said during Tuesday’s Stop Trading!. Maybe too much.

The “Mad Money” host’s comments came after the Conference Board released its latest consumer-confidence number, a 48.5 in September, down from a revised 53.2 in August, Reuters reported. Cramer’s problem with the report, though, was that it seems to fly in the face of the bullish action in retail stocks.

“All these sentiment indices have failed to generate accurate reactions in the stock market,” Cramer said, “and people short … retail stocks off these confidence indices. That’s a known hedge-fund trade, and it has failed repeatedly.”

Cramer pointed to Costco , Walmart and Target —which was downgraded on Tuesday but is performing well regardless—as proof for his statement.

“Retail’s good,” he said.

Cramer thinks a more accurate read on consumer behavior may be the Retail HOLDRs exchange-traded fund, which is a broad basket of retail stocks whose performance depends on consumer spending.

Elsewhere in the market, Monsanto “may be the worst stock of 2010,” Cramer said. He recommended Deere as a better play on the agriculture sector.

And finally, in housing, “Affordability is trumping right now the [inventory] glut,” Cramer said, “or else house prices should have fallen 9%, 10%.”

Also, he reiterated his call on home-retailer plays like Weyerhaeuser , Stanley Black & Decker and Home Depot , rather than homebuilders like Pulte . The first three have exposure to what Cramer sees as stronger existing-home sales, while the latter does not.

“Even Lowe’s” would work, Cramer said, “which has not been a favorite of mine.”

When this story published, Cramer’s charitable trust owned Weyerhaeuser, Stanley Black & Decker and Home Depot.

Call Cramer: 1-800-743-CNBC

Questions for Cramer?

Questions, comments, suggestions for the Mad Money website?