People are afraid of Covid-19 and the possibility it could spark a global recession, Jim Cramer told his Mad Money viewers Monday after one of the biggest down days in stock market history.
U.S. stocks tanked Monday, global stocks sank and bond yields were sharply lower as investors' fears about the spread of the coronavirus deepened and oil prices plunged as producers argued over how to cut production and lift prices in the face of weaker demand. The Dow Jones Industrial Average finished down 2,013 points, or 7.78%, to 23,851, the S&P 500 declined 7.6% and the Nasdaq sank 7.29%. The Dow had its worst day since December 2008.
Make no mistake, today was ugly, Cramer said. Monday's trade was halted moments after the open as circuit breakers were triggered to slow the momentum. Oil saw its biggest one-day decline since 1991. And the 10-year Treasury yield fell to a record low.
Cramer said our government needs to change its tactics to restore investor confidence. He recommended four things that need to happen:
First, he said, we need a fiscal stimulus plan to help small businesses weather the storm. Small restaurants can't afford to have everyone stay at home for a few weeks. They need to make payroll.
Second, Cramer said, President Trump needs to change his tone. Instead of hoping for the best, America needs to see Trump preparing for the worst. Even by just providing more Covid-19 test kits, we'd have more data to go on and more data mean less fear.
Third, Cramer said our government needs to encourage private industry to find a cure or vaccine. Offer grants, rewards or whatever assistance is needed for America's medical research machine to come to our defense.
Finally, Cramer said, our government must back our community health systems and provide supplies and resources to make sure cases are diagnosed quickly and contained properly.
Read more in Trump Vows Payroll Tax Cut in Face of Covid-19: As stocks plunge, Trump says U.S. economy is in great shape and promises 'dramatic' economic relief.
Join Jim Cramer's special Action Alerts PLUS members-only call Thursday to prepare your investment strategy during the stock market and economic fallout from the coronavirus and plunging oil prices.
Out of Oil
The time to invest in oil stocks has come and gone, Cramer again told viewers. A few weeks ago, Cramer declared the oil stocks "un-investable" because younger money managers were increasingly choosing not to invest in fossil fuels. Monday, we got a new reason to sell oil stocks, a price war between Saudi Arabia and Russia which sent a shock wave through the oil market, with crude oil prices plunging 24%.
Cramer called the Saudi decision to flood the world with fresh oil supplies just plain stupid, as lower oil prices could destabilize both Iran and Venezuela and will do nothing to discourage U.S. oil producers from remaining the world's top exporter of oil. That's not to say that there won't be losers in the oil patch, however.
Cramer called out Occidental Petroleum (OXY) - Get Report as particularly at risk. The company paid $55 billion to acquire Anadarko, but now Occidental finds itself valued at just $11 billion, putting its monster-sized dividend, and its entire company, at risk.
Overall, Cramer said the strong oil producers will come out ahead, as they pick off assets from the weaker ones. The banks are also not likely to be affected, as they were in 2016 when oil hit $26 a barrel, because most banks have diversified away from oil.
Cramer said investors who own at-risk oil stocks like Occidental must sell first thing Tuesday, while others should sell into any strength as the trajectory for oil stocks over the long term will decidedly be lower.
After Monday's historic decline, what should investors be buying and what should they be avoiding? Cramer combs through the 30 names in the Dow Jones Industrial Average to find the answers. Monday night, he offered his opinions on the first 10 stocks in the Dow.
Under normal circumstances, Cramer would be buying 3M (MMM) - Get Report, but with the company's weakened balance sheet and environmental liabilities, he couldn't recommend it. He was bullish on Apple's (AAPL) - Get Report services revenue as a way to offset a weakened China, however. He would take a pass on American Express (AXP) - Get Report, which is levered to small businesses, and with Boeing (BA) - Get Report, which will begin to show some balance sheet stress as both it, and its customers, struggle.
Cramer was slightly more optimistic with Caterpillar (CAT) - Get Report, but said the stock needs to fall even lower before it becomes a buy. He said that both Chevron (CVX) - Get Report and Exxon-Mobil (XOM) - Get Report are fossil fuels and cannot be bought.
Rounding out the list were Cisco Systems (CSCO) - Get Report, which he said is not enticing above $36 a share, and Dow (DOW) - Get Report, which is not enticing at any price given it's levered to oil and has a nasty balance sheet.
Looking for Answers
Cramer took calls Monday night from viewers to help provide answers after a brutal day for investors.
He told the first caller to keep his retirement savings diversified, but don't sell into this panic. In three to five years, when the caller planned to retire, Cramer said his portfolio will have recovered these losses.
Cramer told the second caller that he still likes Tesla (TSLA) - Get Report, which has fallen $360 from its high. He said Tesla has the cars that people want and is a technology company on wheels, not really a competitor with the likes of Ford (F) - Get Report.
Cramer said he liked what President Trump had to say Monday evening and he'd start doing some opportunistic buying as the market continues to sell off.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Monday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position in CSCO, AAPL.