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Wall St. Confidential: Tech Trouble

TheStreet.com Staff

Jim Cramer's got an antidote to the tech blues: drug, industrial and bank stocks. "If those areas are so easy right now," Cramer asked on TheStreet.com TV's Wall Street Confidential video Friday, "why take on something [tech] that's so hard?"

Case in point: Although IBM (IBM Quote) had one of the best quarters Cramer said he's seen in years, analysts were quick to run from it as soon as the stock was down.

"This is a very bad time to own tech," he reiterated to Aaron Task, the host of Wall Street Confidential. It has nothing to do with these companies' earnings. "What you're really seeing is seasonality in play."

Market players think they can get out of these stocks now and get back in later at lower prices, which is "smart, right and what people should be doing," Cramer said.

He does, however, believe people can own tech stocks that are driven by their product cycles such as Cisco (CSCO Quote) and Hewlett-Packard (HPQ Quote), which he owns for his charitable trust, Action Alerts PLUS.

And while Cramer also believes tech should outperform this year, he feels investors should stay away from those tech stocks that are at the mercy of the market and have nothing new from a product standpoint. It's too hard to own them, he said, advising people to capture the gains in such stocks as Texas Instruments (TXN Quote), Rackable (RACK Quote) and Network Appliance (NTAP Quote).

Away from tech, Cramer said to keep an eye on Caterpillar (CAT Quote) as a tell on where this market is headed. Cat, stuck at $60 and "outrageously difficult" to decipher, is the key to the market. Whichever way the stock goes, Cramer said he will have greater certainty of where the market will go.

"If it goes against me, it will go down and I will reconfigure my thesis," he said. "But I think we are going to see it start to climb."

People should also focus on looking at what's going to happen six months from now, because you can't make any money with what is happening now, he said. "We are not in a world where it helps you to know what IBM did yesterday," Cramer said.

Journalists only look at one side of the equation, so if there's strong growth in employment or decent pricing power, they presume the Fed doesn't need to do anything and will hold off on cutting or raising the rates, he said. But this is not true, Cramer insisted.

"The Fed's job is to stimulate growth when there's not a lot of growth and not a lot of inflation," he said. "We don't have a lot of inflation and people are not looking at that at all."

For example, despite reporting a "horrible" quarter, Pulte Homes (PHM Quote) is up today, Cramer pointed out. This is not because the market is stupid, but because the Fed is going to cut rates, he said.

"Of course I could be wrong," Cramer admitted. "But in the end, I'm making a bet."

He said he doesn't fear being wrong because when all is said and done, if he's a little bit more right than he is wrong, he knows he's going to make "big money."

Cramer called the May rate hike a "big mistake," and said if the Fed doesn't cut this time around, "the market will be caught leaning the wrong way again."