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"The important take-away from today is not Treasury Secretary Henry Paulson or Securities and Exchange Commission Chairman Christopher Cox" but that rallies are for selling, Jim Cramer told viewers of his "Mad Money" TV show Friday.
Cramer said the astonishing 779-point rally over the past two days can only mean one thing: sell.
He advised viewers to spend this weekend evaluating their portfolios so that they are ready to sell their bad stocks on Monday and take profits on the winners.
Cramer returned to a selling strategy he's used many times. He said to rank every stock in a portfolio from one to four. One's are the stocks you'd buy right now. Two's are those you'd buy on a pull-back. Three's are those you'd sell into strength. Four's are those you need to sell right away.
After ranking all the stocks in your portfolio, Cramer advised selling 20% of your portfolio on Monday. He said that there should not be many stocks still ranked "one," after the huge rally the past two days.
Cramer recommended taking profits in stocks like
, which he recommended on July 21 at $27 a share, but is now trading at a 52-week high of $39.50.
He also recommended taking profits in
Cramer told viewers to consider selling stocks in other sectors such as natural gas, technology and retail that have been up huge since Wednesday. For example,
, is a good candidate to trim, he said.
As for things to buy, Cramer said he likes
should report a good quarter and be a good defensive play.
Cramer's Game Plan
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Pulling Back From the Abyss
"Our financial system is built on confidence," Cramer told viewers, as he tried to explain in plain English what the federal government's recent actions really mean to the markets.
Cramer said had the government not taken the actions it did, consumers next week may have found their bank's local ATM machines out of cash. He credited Paulson for single handedly preventing a run on our banking system.
Until this week's actions, Cramer said the government's takeover of
had done nothing to restore confidence in the markets and had managed to spend $900 billion of taxpayer's money.
However, he said the government is now trying to do everything, from buyouts to trusts to regulations, to restore stability.
Cramer said it took a decade to recover from the Great Depression but Paulson's actions will usher a much quicker recovery, despite the size of the current market collapse. The only downside, he said, will likely be just a few hedge fund failures.
As for the pricetag of the bailout, Cramer said the government should not suffer as much as some believe. He said many of the mortgages now owned by the government hold value, and it's possible to still reward responsible borrowers while punishing the reckless.
Cramer called the bailout a "coherent plan" and the best thing the U.S. government has done for the American taxpayers in a long time.
Private Food Label Play
Despite the market's huge rally, Cramer said there are still some stocks worth buying. On that note, he recommended private label food maker
Cramer said the discounter, which competes against
, should do well for consumers who are trading down to cheaper products during harder economic times.
He said Ralcorp reminded him of
which he said is up $18 since he recommended it on Aug. 18, 2007 at $24 a share.
Cramer said Ralcorp should benefit as grocery chains get more aggressive about pushing their private label brands. But he said the real catalyst for the company is the falling costs of commodities, which should flow right to the bottom line of the company.
He also sees Ralcorp as a potential acquirer if consolidation in the industry occurs.
Cramer told a viewer that the wife of investor Boone Pickens called him regarding the large sale of
. According to Pickens, it was her stock, not his, that was sold for personal reasons and both she and he, still support the company.
Cramer told another viewer that
is not in the "Sell Block" although he acknowledges the negative pressure the firm, and the stock, is under.
Cramer was bullish on
Cramer was bearish on
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At the time of publication, Cramer was not long on any stock.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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