This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Cramer's 'Mad Money' Recap: Facing a Worst-Case Scenario

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.

NEW YORK ( TheStreet) -- Investors need a game plan to deal with worst-case scenarios, Jim Cramer warned "Mad Money" viewers Monday. But what exactly is the worst case? Cramer laid it all on the line in plain English.

Cramer said there are two worst-case scenarios being floated by the bears. One is the markets will return to 2011 lows, with a 10% decline in the Dow Jones Industrial Average. The other assumes a return to the 2009 lows that saw the Dow touch 6,500, a full 50% decline from current levels.

So could the markets return to the lows of last year? Cramer said they could indeed. The situation in Europe is worse now than in 2011 while China has cooled and the economies in India and Brazil have decelerated. Couple that with the return of gridlock in the U.S. political picture and falling employment, and a 10% decline in the markets seems par for the course, said Cramer.

On the plus side, however, Cramer noted that unlike 2011, the U.S. housing market has stabilized, auto sales are better and corporate profits and balance sheets remain strong. Thus he only sees a 50/50 chance of the markets taking another 10% plunge.

But what of a 2009-style market collapse? Cramer said this scenario assumes a total collapse in Italy and Spain, events that would send all of Europe, and with it the U.S. and the rest of the world, into a severe recession. According to the bears, our Federal Reserve is out of ammo to prevent such a catastrophe.

But Cramer said that 2009 is totally "off the table" as the markets are in far better shape now than they were then. Credit is far easier to come by, he said, and many companies have been raising their dividends as their balance sheets have been improving. That makes stocks the only game in town when compared to Treasuries and other bonds. Given these strong profits and high yields, Cramer said there is no way stocks can lose 50% of their value from here.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
ARIA $8.24 -3.74%
IMGN $8.95 5.05%
AAPL $124.43 -1.54%
FB $82.22 -1.18%
GOOG $548.00 -0.73%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs