RealMoney Radio Recap: Defense Wins

Cramer says defensive stocks are the ones working right now.
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Knowing he "sounds like a broken record," Jim Cramer started off his

"RealMoney" radio show on Thursday by saying defensive stocks are what's working right now.

When

Johnson & Johnson

(JNJ) - Get Report

bought

Pfizer's

(PFE) - Get Report

generic-products unit, people disagreed with the move, and the stock price fell. But now the stock is at $64 -- and it's going to $70, Cramer said.

"The industry

that Johnson & Johnson is in is recession-proof," he said.

Kellogg

(K) - Get Report

is another stock Cramer predicted will go higher -- from $49 to $55.

Although

Merck

(MRK) - Get Report

lost verdicts on its Vioxx drug as recently as 10 days ago, the stock is back above where it was before it lost the suits, he said.

Procter & Gamble

(PG) - Get Report

and

Coca-Cola

(KO) - Get Report

are two more stocks that are going up, Cramer said.

These companies supply products that people buy regardless of how the economy is doing, he said.

Unlike defensive stocks, however, "the housing business is weak," and the numbers here are discouraging enough that people are pausing.

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In addition, aluminum company

Alcan

(AL) - Get Report

, which Cramer owns for his charitable trust,

Action Alerts PLUS, has not moved from $45 since last month, even though it recently reported the single-best quarter of any company Cramer said he follows.

Honeywell

(HON) - Get Report

, a company related to aerospace, also reported unbelievable earnings.

But, "it doesn't matter," Cramer said. "People don't want these stocks."

In three more months, these stocks will go up, but not yet, he said.

Home Alone

"The American Dream is not as dreamy as it once was," Cramer said.

The housing sector is in trouble, and it's understandably causing ripple effects, Cramer said.

Williams-Sonoma

(WSM) - Get Report

"got hammered," but not because they have bad merchandise. The reason is because they have too much merchandise, he said.

"Nobody wants to fix up their homes right now," Cramer said.

He believes that although it's fine to invest in a home you are living in, it's not OK to invest in one in which you are speculating. Housing is not something that loses value when you are living in it, he said.

"I don't believe homes can fall as precipitously as stocks because they're not as liquid," Cramer said. "The government encourages home buying, not stock buying."

Further, he said he doesn't believe it won't become worse in the housing sector because the cause of the inventory bulge is that the

Fed

has "raised rates dramatically, and people have lost confidence."

But "this is no time to panic, as the Fed sees what we see," Cramer said. "And if anything, they should cut rates."

"Homes are not stocks because you can't live in stocks," he said. "Over 20 to 30 years time, you are going to gain equity on a house."

They are tax-favored and still "the No. 1 investment" -- that has not changed, Cramer said.

Big Blues

There was a time when

IBM

(IBM) - Get Report

"was the stock to own," but over time it lost its way and has been stagnant for a long time, Cramer said.

The company has gone through a series of acquisitions "that don't make any sense," he said.

IBM's made 12 acquisitions this year alone as it plans to revitalize its businesses. The company is always boasting that it's the most forward-looking company, Cramer said. But this has him wondering why IBM's divisions are not able to develop the products they are acquiring on its own.

"IBM's buybacks and acquisitions are not going to do anything for it," he said.

Instead, Cramer suggested buying application software company

CA

(CA) - Get Report

or

Oracle

(ORCL) - Get Report

.

Cramer on Demand

Every week, readers of

TheStreet.com

vote on the stock they most want Cramer to talk about. This week's stock was

Arch Coal

(ACI) - Get Report

.

Cramer said he believes over the long term -- six to 10 months -- coal will be "a more important piece of puzzle for the U.S. because it is the Saudi Arabia of coal."

"Arch Coal and

Peabody

(BTU) - Get Report

are two of the best coal operators in this country," he said.

He advised pulling the trigger on Arch Coal when it hits $30, but he reminded his listeners to buy in stages. Recently, Arch Coal was at $34.60

A Pinch of UST

UST

(UST) - Get Report

is probably the best stock he's been asked about this week, Cramer said.

It is a defensive stock, since people use smokeless tobacco regardless of the economy, Cramer said.

UST will go to $60, he predicted. Recently the stock was at $52.63.

Responding to another caller, Cramer said he does not like

China Mobile

(CHL) - Get Report

and would ring the register on the stock.

"China is an unstable place to invest," he said.

When asked about

Shaw Group

(SGR)

, Cramer called it "the worst-of-breed in an infrastructure sector" that he likes, but the market hates.

He said he would dump it right here and buy UST instead.

Cramer advised his next caller to swap out of

Nordstrom

(JWN) - Get Report

and move into

JC Penney

(JCP) - Get Report

.

Although Nordstrom is four points off its low, it could get back to its low again, he said. Plus, he pointed out that the store is a little high-end and more subject to economical whims.

Cramer said he likes

Burlington Northern Santa Fe

(BNI)

as a way to ship coal and ethanol, but it is the worst-of-breed in its sector.

"They are probably the least safe rail

company," he said.

It is not the time to be in rails, Cramer said, but

CSX

(CSX) - Get Report

is a rail company he likes.

When a caller asked about

Corning

(GLW) - Get Report

, Cramer said that although there was an inventory build, we know from

Best Buy

(BBY) - Get Report

,

Circuit City

(CC) - Get Report

and

3M

(MMM) - Get Report

that the big liquid-crystal-display glut has been worked off, and it's time for Corning to rally.

He would only buy it on a pullback, he said.

At the time of publication, Cramer was long Alcan.

Jim 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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here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click

here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click

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here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by

clicking here.

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