"If you want stocks to go higher, support the homeowner," Jim Cramer told a throng of students at the University of Iowa in a special "Back to School Tour" episode of his "Mad Money" TV show on Wednesday. He said that if we solve the housing crisis, we will solve everything else. Cramer painted a bleak outlook for the market after another 400-point loss for the Dow Jones Industrial Average. He said consumer spending looks like it's falling off a cliff after electronics retailer Best Buy ( BBY) sharply cut its 2009 earnings outlook. Treasury Secretary Henry Paulson didn't help after he said the $700 billion TARP program will be used to help bolster an ailing financial system instead of buying mortgage-related securities as originally intended. "All of these issues come back to housing," said Cramer, who blamed the current economic mess on the 14 million people who took out bad loans. He said that if home prices keep falling, consumers will spend less, layoffs will get larger, and the government bailouts will continue as the market drifts ever lower. Cramer said that cycle must be broken in order for the economy to recover. He had three suggestions. First, stop all new home building. Second, have the government buy up all of the vacant homes. And third, offer big tax credits to those buying homes. Any, or all, of these steps, he said, will stop home price depreciation and get the markets back on track. In the meantime, Cramer recommended buying only high-yielding dividend stocks, stocks trading at or near their cash value and recession-resistant companies. He gave a nod to companies like Caterpillar ( CAT), KBR ( KBR), Kimberly-Clark ( KMB) and Clorox ( CLX).
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