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NEW YORK ( TheStreet) -- Unless there's a compromise in Washington, doom and gloom will be returning to the markets in short order, Jim Cramer told his "Mad Money" TV show viewers Wednesday. He said even the upbeat news of a new Federal Reserve chairman will not be enough to buoy the markets for long.
The market craves certainty, Cramer reminded viewers, which is why it responded so positively to the appointment of Janet Yellen. Yes, for the most part, the markets like Yellen's policies, but they also like the fact that the decision has been made and that's one less uncertainty to worry about.
But as positive as Yellen's appointment was, Cramer warned the non-negotiating in Washington continues, sending the chance of an actual U.S. bond default into the 20% range. He said while many still believe a last-minute compromise will be reached, Cramer noted that many on Wall Street also felt a buyer would be found for Lehman Brothers.The fact remains that on Oct. 17, the government can no longer guarantee that it will pay its bills and will need to begin the painful process of picking and choosing who gets paid, and when. That will lead to yet another crisis of liquidity, causing credit to tighten, sending auto and home sales back into a tailspin, just when they were starting to regain their footing. Cramer said there's no doubt a default would send the U.S., and likely the globe, back into a recession, which is why even a 20% change of a default is enough for investors to begin preparing.
Alcoa's Undeserved ReputationCramer said he's got a stock that definitely deserves to be trading higher. Unfortunately, deserving has nothing to do with it. That stock, Alcoa (AA), is a fabulous company, he said. Sadly, no one cares. Cramer explained that Alcoa is actually two companies: one that makes aluminum, the commodity, and another that makes products from aluminum. It's the former that's been dragging the company down for years because Alcoa has no control over the price of the commodity and, frankly, there's still just too much of the stuff, he said.
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