Averting a Depression Is Reason to Rally

What are we pricing in? What are you buying here if you are buying now? I think that many stocks are pricing in a really bad recession. We have rallied from our lows, because the lows were pricing in a depression and the bank lifelines, the rate cuts, the commercial paper program, the annuity bailouts that are coming, the pending foreclosure relief for 3 million stretched homeowners and, most important, the Cerebrus bailout -- do you think the Chrysler-General Motors (GM - commentary - Cramer's Take) deal is anything but? - which are going to take that depression off the table.

That's why we have had such strong rallies.

Is it right to rally off the prospects of a severe recession and no depression? I think so. It means that we might be able to get out of this madness with no more than single-digit declines in GDP and low-double-digit unemployment -- 10% to 11% -- which will cause severe strain but not mass bankruptcies of publicly traded companies.

It is a reason to not sell stocks until they rally and to buy them back when they fail, provided they have sustainable yields -- think Verizon (VZ - commentary - Cramer's Take).

The reason why this will all work, no matter how expensive it is, is because it is inflationary, which is what we need. We get this economy back on its feet, because the risk/reward to lending is too great for profits to skip, and we will get back to normal at some point in the next 18 months.

Of course, the trick for many will be to find the Colgates (CP - commentary - Cramer's Take) and avoid the Avons (AVP - commentary - Cramer's Take), and it will be almost impossible to do. I prefer, in order of preference:

1. Buying stocks with good sustainable dividends.
2. Buying stocks near cash value.
3. Buying domestic, recession-resistant stocks (the dollar will be strong).
4. Buying health care -- I can't be more aggressive than fourth in priority this one, because I do fear Obama on the issue.

Could be better; but could be a lot worse.

At the time of publication, Cramer had no positions in stocks mentioned.

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