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Even though the market was up today, Jim Cramer said on his "Mad Money" show Wednesday evening that investors need to be taking cues from what was down: commodities such as oil, copper and gold.
Inflation peaked Wednesday with the spike in the producer price index, Cramer said. But he said investors should no longer be focused on inflation; they need to keep an eye out for recession. Although we're not in recession mode just yet, he warned that we are in deacceleration mode.
Crude oil also wasn't immune from the commodity hit. "It just got too expensive," Cramer said. "All the commodities got too expensive."
As commodities cool off, Cramer said it's time to take profits in
( PD) and
And what to do as the economy takes a breather? Cramer recommended purchasing stocks that can make money even if the economy's in a pinch, such as
Procter & Gamble
. He also likes
Shed These Clothes
Cramer was dour on retailers, though, and said to stay away from stocks like
Abercrombie & Fitch
American Eagle Outfitters
Above all, make sure you're diversified, Cramer said -- if you are, your portfolio will be fine during this defensive period.
Because Cramer likes tech, a caller asked which tech stocks will do well, and which will do poorly, in the downturn. Cramer said to pay attention to whose products are hot, such as
Another caller wanted to know what specific indicators Cramer sees that indicate the cycle for oil and natural gas is over, and that it's time to get out.
"This has a lot to do with discipline. ... When oil represented 5% of the
, I made a mental rule. When it doubles to 10%, I am going to pull back regardless of where oil is, regardless of where the earnings are, regardless of where the stocks are. ... The bottom line is, we got there this week. We have to ring the register."
The Promised Land
Cramer says you want to invest in Israel because he believes the evacuation of the Israeli settlers from the Gaza Strip will be peaceful. Israel has low interest rates and falling inflation; furthermore, 1% of the population will need new homes. Cramer is recommending
First Israel Fund
A caller asked if there were other plays on Israel besides ISL. Cramer said most Israeli stocks don't trade in the U.S., which makes it difficult to invest in them. Those stocks that do trade here tend to be countercyclical. So he is recommending ISL as a way to play the entire Israeli stock market.
Another caller asked which stocks to buy as a hedge against the withdrawal going awry. "I would buy Israeli bank stocks if I had the ability ... maybe some construction stocks. But they all (trade) in shekels and I can't follow them. Be simple. Play it with ISL."
Cramer was bullish on
Martha Stewart Living Omnimedia
XM Satellite Radio
Johnson & Johnson
St. Jude Medical
Cramer was bearish on
Sirius Satellite Radio
United States Steel
Palomar Medical Technologies
Fifth Third Bancorp
Krispy Kreme Doughnuts
"Let's say your thesis is -- not mine -- but your thesis is the market is going to tank," Cramer said. "The economy is going to tank. Let's be prepared." Jim says the best move in such a scenario is "boring."
"What's the most boring kind of sector you can imagine? Utilities!"
Cramer's favorites are laggard utilities, such as
These companies have good fundamentals and are also excellent takeover targets. They're also nuclear energy companies, which with oil at $65, is bullish for nuclear energy.
Getting Aggie With It
Jim Cramer had Martin Richenhagen, CEO of
, as a guest on the show to ask if it was seeing the same weather-related problems as
"We are certainly facing a problem," Richenhagen said.
Have numbers been taken down enough, asked Cramer.
"We are fine, I think," said Richenhagen. "Weather in the ag business is always a problem. You have to put reserves in your plan to overcome those situations."
Cramer said to avoid the sector and not try to bottom-fish in Deere.
Finally, Cramer said
reported a "terrific number" after the close and
, which makes high-end stereo equipment, also had good earnings. "The high end is preserved. It's the middle-range -- the
range -- that worries me. So, let's get a little defensive."
At the time of publication, Cramer was long Altria, Commerce Bancorp, EnCana, Intel, Microsoft, Sears Holdings, UnitedHealth and Yahoo!.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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