RealMoney Radio: Price Punch

Cramer says the consumer price index is teaching the lesson -- and pain -- of patience.
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"It's interesting what three letters can do," Jim Cramer told his

"RealMoney" radio show listeners Wednesday. With stocks falling across the board, he said: "I blame the CPI."

The CPI, or consumer price index, was released in the morning and depressed the market by showing that inflation has been a problem, said Cramer.

The CPI measures what consumers pay for goods and services, and it was up 0.6% in April. The core CPI, which strips out volatile costs like food and energy, was up 0.3%. And Cramer said that both of these numbers were higher than what economists had expected.

This was disappointing to the bulls because every time inflationary pressures seem to be a problem, the

Federal Reserve

talks about raising interest rates. And every time rates go higher, we sell off because investors can earn 5%, risk free, by holding cash in the bank vs. taking a chance with stocks.

From this event, he said that investors are being taught two lessons: the pain of patience and how to buy into weakness.

But you can't buy all of your position at once, he said, because it is arrogance to believe that you know that a stock has found its bottom.

However, with the markets down so much, it's like there's a sale on good stocks, so he said to get your shopping cart.

He also said that the CPI is a "rearview mirror" index, meaning that it says what happened rather than what will happen. We have seen the commodities prices fall, and those prices were largely responsible for the inflationary pressures in April, he said. The CPI number next month will probably be a little more stock-friendly than what we just saw, he added.

Cramer said that in this down market, industrials are one place to be. He likes

United Technologies

, which he called one of the best-performing stocks on the

Dow Jones Industrial Average.

This company is winning while other conglomerates falter because 60% of its business is from overseas, he said, meaning that it is insulated from the ravages of the Fed.

He also likes

Caterpillar

(CAT) - Get Report

and

Deere

(DE) - Get Report

because demand for their products is so high that neither company can keep up with it.

It's your chance to buy a good stock on sale, he said. But he reminded listeners that we never know when a selloff will end, so it's essential to buy in small increments.

In an email, a listener asked how Cramer decides that a stock has bottomed and will go higher. Cramer said that he always buys in increments because it's not possible to know when the stock has hit its low. However, there are clues that a person can look at to determine whether a stock is near its bottom.

He looks at volume to see how many people are participating in a gigantic selloff. He also looks at whether a stock is acting well in a bad market. If a stock is up on a down day, that shows tremendous strength, he said.

Finally, he looks at the sector a stock is in. When it looks like a sector is bottoming, the stock will probably be nearing its bottom, too.

To see the most recent edition of The RealMoney Radio Recap in its entirety, please click here. This recap is published every day around 3 p.m. ET.

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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