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Cramer's 'Mad Money' Recap: Game Plan How-To

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

"You know what you need in a volatile market?" Jim Cramer asked "Mad Money" viewers Friday. "A game plan," he answered.

"Forget the gibberish, and let me show you how to make a game plan," said Cramer, who explaned that he understands how market-players feel about the recent market volatility. "You may feel like throwing in the towel," he said. "You are still scared, and you want to see a bottom to end all bottoms."

Cramer noted that when the Dow Jones Industrial Average dipped Thursday, it failed to break through the bottom reached on Tuesday. "In fact, we bounced off this low heavily," he said.

According to Cramer, that's a bullish sign. "This is called a whoosh," he said. "It means we went down hard and bounced back." It's also called a "crescendo bottom."

"If you need a safety blanket, the crescendo bottom is it," he said. Cramer estimated the odds of its being a legitimate bottom at roughly 50%.

Regardless of whether that turns out to be a solid bottom, Cramer said, investors need to have a game plan.

The first part of the plan calls for investors to spend the weekend ranking their stock holdings into one of four groupings, just as he does for his Action Alerts PLUS charitable trust:

• Ones are the stocks you want to buy no matter what.
• Twos are those you'd buy if they dropped in price.
• Threes are those you'd sell if they moved higher.
• Fours are the stocks you want to sell.

"Come Monday morning, sell all the Fours," Cramer said. It's called "throwing your maidens into the volcano to appease the gods."

"That way, if the selloff continues, you have cash available to buy more Ones."

Another phrase to describe the process is "circling the wagons," he said. "Use the quiet time of this weekend to circle the wagons."

Cash From Trash

"There is good money in the garbage business," Cramer said. "That's because you can always count on Americans to generate tons of waste."

But the industry now has the added benefit of a changing political picture in Washington, D.C.

"The Bolsheviks are already in Congress and could storm the White House," Cramer said in reference to Democrats.

He expects the Democratic Party will try to introduce more business regulations. Although such factors may be bad for many stocks, that isn't necessarily so for the garbage sector.

"Some businesses thrive on regulation, and one of those businesses is trash," said Cramer.

Cramer's picks are Clean Harbors(CLHB) and Allied Waste Industries(AW).

"Clean Harbors is an end-to-end hazardous-waste play," Cramer said. It has been able to pass through price increases recently, he explained. "That's because customers can't fight it."

He also adds that Fidelity Investments is buying Clean Harbors shares, which should help push the stock price higher.

"Allied Waste is more boring; it's just a garbage company," said Cramer. "But it's one of best."

He explained that the company was caught in a virtuous circle of deleveraging. Because the company is using its strong cash flows to reduce its debt level, that improves cash flow and allows continued retiring of debt.

The Wages of Sin...

"Nice guys finish last," said Cramer. That's especially true when it comes to stocks.

So on "Mad Money," we are joining the Vice Squad, said Cramer, becase as he explained it, there is no room for socially responsible investing if you want to make money.

"You can't save the world if you don't have the resources," he said.

Cramer said he compared a portfolio of the stocks of the top 10 corporate citizens with that of the Vice Fund(VICEX).

The "good guy" stock portfolio Cramer looked at consists of:

• Starbucks(SBUX),
• General Mills(GIS),
• Nike(NKE),
• Advanced Micro Devices(AMD),
• Motorola(MOT),
• Timberland(TBL),
• Intel(INTC),
• Agilent Technologies(A)
• IBM(IBM) and
• Green Mountain Coffee Roasters(GMCR).

The Vice Fund consists of:

• Altria(MO),
• Diageo(DEO),
• British American Tobacco(BTI),
• Reynolds American(RAI),
• Imperial Tobacco (ITY),
• Las Vegas Sands(LVS),
• MGM Mirage(MGM),
• Wynn Resorts(WYNN),
• International Game Technologies(IGT) and
• Constellation Brands(STZ)
.

While the group of socially responsible stocks, as a whole, fell 4% over the past year, Cramer said, the vice-stocks group climbed 30%.

"From this empirical evidence, sin does pay," he said.

Lightning Round

Cramer was bullish on TD Ameritrade(AMTD), Goldman Sachs(GS), Virgin Media(VMED), GlobalSantaFe(GSF), Six Flags(SIX), Exxon Mobil(XOM), Rite Aid(RAD) and Corning(GLW).

Cramer was bearish on Qualcomm(QCOM), Syntax-Brillian(BRLC). and Aqua America(WTR).

For more of Cramer's insights during the Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by clicking here.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting