Cramer's 'Mad Money' Recap: Retreat to Defensive Stocks

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The Federal Reserve refused to acknowledge the gravity of problems in the financial system when it cut rates by a "dinky" quarter-point, Jim Cramer told viewers of his "Mad Money" TV show Tuesday.

Cramer said he was disappointed, saddened and angered by the action. The market needed to see that the Fed understands what's going on, but it's clear, Cramer said, that the Fed is not going to lead investors out of the woods here.

The Fed, he said, is not made up of bold people. They "dreadfully misunderstand" the seriousness of the current crisis, Cramer said. What people needed was a morale boost, but instead now they know that the Fed appears to be out of touch with reality.

Cramer said even his favorite stocks -- Apple (AAPL Quote - Cramer on AAPL - Stock Picks) and Research In Motion (RIMM Quote - Cramer on RIMM - Stock Picks) -- can languish in the hands of a clueless Fed.

Because of the Fed's recklessness, it's time to return to the 1990 playbook, he said. Cramer said the Fed didn't do what investors wanted, so now they have to go back to buying defensive stocks like Coca-Cola (KO Quote - Cramer on KO - Stock Picks), PepsiCo (PEP Quote - Cramer on PEP - Stock Picks), Merck (MRK Quote - Cramer on MRK - Stock Picks) and Altria (MO Quote - Cramer on MO - Stock Picks), the last of which he owns for his charitable trust, Action Alerts PLUS.

"Don't panic, but take cover in recession stocks," Cramer said.

The Fourth Horseman in China

Now that the Fed has shown how clueless it is, Cramer told viewers he's resuming his title as an "international pimp." He said he has a great foreign growth story which, even though will be down like everything else in the market tomorrow, is something people should consider buying.