Click here for an archive of Jim Cramer's Mad Money recaps.
The best way to sustain Friday's late rally is for the government to cut a back-room deal with the largest banks and brokerages to get them to start making loans again, Jim Cramer told viewers on his "Mad Money" TV show on Friday.
On a day when Dow closed down 128 points after another extremely volatile session, Cramer said this "secret" meeting is necessary to get the economy, credit markets and stock markets rolling again and avoid a repeat of this past week's brutal market.
Cramer said he would have the
take the initiative by inviting to the meeting the CEOs of large financial institutions such as
Bank of America
, the latter three of which he owns for his
Action Alerts PLUS portfolio.
Cramer said the Fed would tell the CEOs that it would not repeat the mistake it made when it allowed
to fail. Instead, he said, the Fed would do all that it can to get the financial institutions "open for business" again.
He said the Fed would guarantee all their debts as well as their brokerage, savings and corporate accounts. Furthermore it would allow them to pay off their bonds with federal money, permit them to sell their credit default swaps lower and provide them $100 billion each to lend.
In return, these financial institutions would have to live up to their end of the bargain by "opening the spigots" and make loans again. He said the loans will be targeted to corporations, small businesses and individuals -- but not hedge funds.
He also said the Fed would have the financial institutions divvy up the "bad banks" among themselves, with the aim of having them assume the good deposits while selling the bad assets to the federal government's newly created Troubled Asset Recovery Program.
Cramer: Shop for Yields
var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1847355240; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);
The New Game Plan
Cramer said that after the market's worst-ever weekly drop it's "time to change our incredibly negative bias," as stocks are no longer in endless sell mode.
For Cramer it's time to "rent" some stocks, with a look at owning longer term if the market again approaches the lows seen on Friday. Cramer believes the market will chase those lows since the market rarely bottoms on a Friday, and the snapback by stocks was "too far, too fast."
That means a new game plan is needed for the cash that Cramer told traders to peel off last month.
Expecting a gap down on both Monday and Tuesday, Cramer advises putting 25% of that cash back in play on both days. As usual, Cramer is against buying all at once.
As for where to put it, Cramer offered a stock like
as a template, based on its rallying behavior a year after the 1987 crash.
Of course, Cramer said this isn't 1987 - times are a lot worse. Given that, Cramer suggests loooking at companies that are trading around their cash on hand, such as
You should also look at companies that make products that you eat, such as
. Cramer owns Kraft and Altria in his Action Alerts Plus portfolio.
Cramer also likes giant pharmaceutial
, cyclical plays
, which he also owns for his
Action Alerts PLUS portfolio, but reminded viewers that you only want a small position with the last two, since they aren't self-financing.
For oil plays, Cramer likes
Kinder Morgan Energy
, with its 9% yield, and
, although oil is still going down.
Cramer would be careful with financials, but he likes
, and threw in a recommendation for
The new leadership is companies that don't need money, Cramer said.
Cramer likes that traders dodged a bullet on Friday, with a "spectacular" rally off the lows of the morning, but he believes it's important to lay out the worst-case scenario so investors can go forward "with their eyes open."
In the worst case, the model isn't the 1987 market crash, which saw equities bounce back only a year later, but a "1929 scenario" which brought an 89% peak-to-trough drop and a "decline that just wouldn't quit."
In that model, Cramer said, currently flailing stocks like
wouldn't be done yet.
Cramer said that unfortunately the parallels with the 1929 crash are too close for comfort. As in 1929, he explained, we have a presidential administration that's in over its head. Listening to Bush say the government taking necessary actions to solve the crisis is like President Herbert Hoover saying than that the worst is behind us.
Cramer noted the market's tanking after Bush's most recent comments about the market, as well as the similarities of a Federal Reserve too focused on inflation and a wave of bank failures.
Cramer said he believes the federal bailout plan can help, but that a second Great Depression is still on the table. "That's why you have to be careful with your buying," he said.
Cramer was bullish on
Johnson & Johnson
He was bearish on
AK Steel Holding Corp.
P/>Want more Cramer? Check out Jim's rules and commandments for investing by
Read more of Cramer's Mad Money Lightning Round insights
For "Mad Money" performance statistics and other links, check out Mad Money stats
At the time of publication, Cramer was long Johnson & Johnson, Goldman Sachs, Kraft, Altria, Freeport McMoRan.
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."
None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.