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In front of a live studio audience, Jim Cramer delivered his "State of the Market" address on his "Mad Money" TV show Wednesday.

He told viewers and watchers alike that the market is stronger than they might think, but has an Achilles' heel holding it back.

Cramer said it was clear from today's market action that there's life in this market, and that companies are doing better than expected. He said there are positives in just about every sector in the market, including technology, consumer goods, biotech, retail and even in some industrials and banking names.

Why then is the market tanking so badly? Cramer said the financials are killing the market, and it's impossible to separate them. The markets, he said, are not that dire, but the stress in the financials is palpable.

Cramer then introduced his "Obama Accountability Index," a group of six stocks that he says will grade President Barack Obama's success in fixing the nation's ailing markets and economy.

The index included Bank of America ( BAC) and Citigroup ( C), two stocks which he said will show the health of the financials. It also included Caterpillar ( CAT) and General Motors ( GM), which will show whether the infrastructure stimulus plan is working and whether the auto industry can be saved.

Cramer: Advice for Obama

Rounding out the Obama Index were General Electric ( GE) and JP Morgan ( JPM). General Electric, he said, is a gauge for the economy as a whole, while JP Morgan is an indicator of how the "healthy" bank stocks are doing.

Using this index of stocks, it should be possible to determine just how well, or not so well, Obama is doing at saving the markets, he said.

Good Cheap Stocks

Investors looking to make money off of Obama's infrastructure stimulus plan should just forget about it, said Cramer.

He said the only strategy that makes sense is to stick with cheap stocks that make sense no matter who's in the White House. Dividends and diversification are the name of the game, he said.

Cramer revisited his "Dow All Stars," a group of his favorite five Dow stocks, as the perfect example of his theory. Everything on the all-star list, he said, offers a juicy dividend and combined, offer perfect diversification.

The all-star portfolio, which debuted on Jan. 5, included Verizon ( VZ), Caterpillar ( CAT) and Home Depot ( HD), along with Hewlett-Packard ( HPQ) and Johnson & Johnson ( JNJ), two a stocks which he owns for his charitable trust, Action Alerts PLUS.

Collectively, the all stars are down 3%, while the Dow itself shed 8.1%. But that's only half the story, he said.

Because of the dividends, such as Verizon's 6% yield and Caterpillar's 4.2% yield, the portfolio is up slightly over the same period. These stocks, he said, are an example of what can work, even in a down market.

Stockpickr

One on One With Google's Schmidt

Cramer talked with Eric Schmidt, CEO of Google ( GOOG),and member of the Obama economic advisory team, to find out more about the president's plans for turning around the economy.

Schmidt made it clear that he plans to stay at Google, and not take the nearly created chief technology post at the White House. He said the country needs to create jobs and only the private sector can make that happen.

He said one of the tools needed is a $10 billion stimulus package, expected in February, to rebuild the country's broadband infrastructure, especially in rural areas.

Schmidt also said the government will achieve even more success through transparency, something the Obama administration is advocating. "Where did the money go," he asked regarding the $700 billion TARP program.

When asked where the next "big thing" in technology would come from, Schmidt noted several opportunities in the energy sector, including biofuels, photo voltaics, clean coal technologies and others.

But, he said, the country will need a smart power grid to take advantage of these advances. He advocated rebuilding the country's energy infrastructure to use the resources we already have instead of relying on foreign sources.

Finally, when asked whether print media is dead, Schmidt gave a decided "no," but said most people will be getting their information online from now on.

BankingMyWay

Lightning Round

Cramer was bullish on NYSE Group ( NYX), Ameritrade ( AMTD), Charles Schwab ( SCHW)and PPG Industries ( PPG).

He was bearish on Zions Bancorp ( ZION), Chicago Mercantile Exchange ( CME), Electronic Arts ( ERTS), Barclays plc ( BCS), Huntsman ( HUN)and CBS Corp ( CBS).

Check out the latest edition of "Cramer's Take onTop-Searched Stocks" on Stockpickr.

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

Read more of Cramer's Mad Money Lightning Round insights.

For "Mad Money" performance statistics and other links, check out Mad Money stats

At the time of publication, Cramer was long Hewlett-Packard, Johnson & Johnson.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.