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"If you want stocks to go higher, support the homeowner," Jim Cramer told a throng of students at the University of Iowa in a special "Back to School Tour" episode of his "Mad Money" TV show on Wednesday.
He said that if we solve the housing crisis, we will solve everything else.
Cramer painted a bleak outlook for the market after another 400-point loss for the
Dow Jones Industrial Average
. He said consumer spending looks like it's falling off a cliff after electronics retailer
sharply cut its 2009 earnings outlook.
Treasury Secretary Henry Paulson didn't help after he said the $700 billion TARP program will be used to help bolster an ailing financial system instead of buying mortgage-related securities as originally intended.
"All of these issues come back to housing," said Cramer, who blamed the current economic mess on the 14 million people who took out bad loans. He said that if home prices keep falling, consumers will spend less, layoffs will get larger, and the government bailouts will continue as the market drifts ever lower.
Cramer said that cycle must be broken in order for the economy to recover. He had three suggestions. First, stop all new home building. Second, have the government buy up all of the vacant homes. And third, offer big tax credits to those buying homes.
Any, or all, of these steps, he said, will stop home price depreciation and get the markets back on track.
In the meantime, Cramer recommended buying only high-yielding dividend stocks, stocks trading at or near their cash value and recession-resistant companies.
He gave a nod to companies like
Cramer: How to Play Google's Decline
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Last Ethanol Man Standing
When it comes to ethanol, Cramer made it no secret he's not a fan of the commodity, nor the companies that make it.
But with the collapse of
( VSUN), along with several other ethanol stocks, Cramer's changed his tune on
Archer Daniels Midland
Cramer said when all of the weak players get washed out of an industry, the last man standing usually wins. In this case, with just about all of the smaller ethanol companies now bought or bankrupt, ADM stands alone as a giant in the ethanol industry. Add that to an Obama presidency that heavily favors ethanol, and Cramer sees dollar signs.
Cramer said ADM is a huge buy based on its enormous size and global reach. He said in the biofuel business, size really does matter, and with its international business model, ADM is in the unique position of being able to shift its end product production to meet global demands.
For example, he said, now that ethanol is back in vogue in the U.S., ADM is shifting some of its corn syrup production back to ethanol to meet increased demand. Likewise, the company has the ability to weather disruptions in crop production by shifting supplies around the world.
Cramer said he's also a fan of ADM's bioplastics division, which makes bio-based plastics for plates, containers, utensils, coatings and other products.
When you put all of the pieces together, ADM is a buy, said Cramer.
Cramer gave his opinions on stocks pitched by student-run investment groups at University of Iowa.
The first stock was
( SHPGY). Cramer said he likes the company and its drug pipeline, but he wanted to see its 2009 earnings estimates before he'd consider buying.
A second student pitched uranium provider
. With the price of uranium still dropping, Cramer thinks this company has little hope of recovering and sees only further declines for the stock.
Cramer was bearish on
Principal Financial Group
Chicago Mercantile Exchange
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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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