RealMoney Radio Recap: Inflating Fear

Cramer says concern over rising prices is at the heart of the market decline.
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"There is one word that is at the heart of all these sickening declines," Jim Cramer said on his

"RealMoney" radio show Tuesday. That word, he said, is inflation.

Market players are always thinking about inflation - whether there is too much of it, or too little of it, where it is concentrated, etc.

The producer price index monthly report, which measures what it costs for manufactures to make products, came out today, Cramer said. It told us that in May prices rose. It is this number which makes people believe inflation is still here, he said.

People feel paralyzed until they figure out what the

Federal Reserve

is going to do.

"But before we say 'let's forget about the stock market,' let's take a look at two gauges that I have used in my career," Cramer said. "These two gauges to measure inflation have never failed me. They are gold and the 10-year bond."

Right now, gold is down huge, about $150 in a month. Gold, along with the 10-year bond, is signaling that we could be in a major slowdown, if not recession, he said.

"These two have never lied to me," Cramer said. "What they are telling me now is that inflation is not the problem, but we are seeing a lessening of business activity."

While the Fed is worried about too much demand gold and the 10-year bond are signaling too little demand. After 16 continuous rate hikes, a decline in commodities and now stocks, Cramer said he cannot go against his indicators.

Teetering Tech

There was an awful amount of money that was made in the technology sector in the last 20 years, Cramer said.

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However, the

Nasdaq

, which is the depository of many tech stocks, cannot seem to raise its head. First of all, the Nasdaq is expensive, Cramer said, meaning the price-to-earnings multiple is appreciably higher. In a situation like this, Cramer said he doesn't question the market, but tries to obey it.

"Right now, the market is saying you are not going to make money in expensive stocks," he said. "If you are impatient, stay away from the Nasdaq."

There are also not a lot of buybacks in the Nasdaq. Buying back stocks would really help tech, but it's not in its DNA of these companies, so it is not happening.

Although Cramer said he likes the biotech space, he advised his listeners to be cautious of it. In the end there is uncertainty in tech, and where there is uncertainty there is going to be selling, he said.

Taking a look at the homebuilders sector, Cramer said the stocks have become cheaper. "We are a growth country," he said. "People like houses and we never seem to have enough of them."

But this doesn't mean that every homebuilder is a winner, he said, adding that there are only two that he recommends at the moment:

KB Home

(KBH) - Get Report

and

WCI Communities

(WCI)

, which was $35 a year ago and is now at $18.

"These two companies are so down that they look up at me," Cramer said. "I'm not going to run away from companies that have been crushed and have good businesses."

MasterCard Malaise

"I believe in another environment where people weren't so scared,

MasterCard

(MA) - Get Report

would have gone up to $60,

whereas it's at $45 now," Cramer told a caller.

"Tune out the noise and stick to your guns," he told the caller. "I would wait 5 points before I bought any more. But I would buy, because it's cheap."

When a listener asked about

Grey Wolf

(GX)

Cramer said he's not sure when the stock is going to be finished going down but called the company "smoking good."

Cramer said he is not going to back out of the aerospace industry, as that sector is in a multi-year cycle.

When asked about

Marriott International

(MAR) - Get Report

, Cramer said that although he believes Marriott is a good company, he believes

Hilton Hotels

(HLT) - Get Report

is doing better and advised the caller to swap out and go into Hilton

EuroZinc Mining

(EZM) - Get Report

, a "call-option on copper," is a very good company, Cramer said. But it is a speculative stock.

People who bought the stock a year ago are ringing the register, and people who bought it a month ago at a higher price are hurting, he said.

"I don't want to give up on it," Cramer said. "But you have to understand that there are people who want out."

When a caller asked about

ConAgra Foods

(CAG) - Get Report

, Cramer sent the caller to

Pepsi

(PEP) - Get Report

, which he said has much better growth and is a better quality company.

Cramer told a caller

Cisco Systems

(CSCO) - Get Report

was not his type of stock and told a separate caller that

Electronic Data Systems

(EDS)

is a very well run company. Let Electronic Data come in a little and buy some more because it's a little expensive right now, he said.

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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