Cramer's 'Mad Money' Recap: Significant Downside Risk (Final)

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NEW YORK ( TheStreet) -- "How significant is the word significant," Jim Cramer asked of his "Mad Money" TV show viewers Wednesday.

If you're the Federal Reserve, and you're adding the word "significant" in front of the words "downside risk," Cramer said it's very significant.

It's only been six-and-a-half weeks since the markets last heard from the Fed, yet in just that short time the central bank felt it necessary to add the word "significant" to its downside risk assessment of the U.S. economy. Cramer said that means that the doom and gloom the markets have been predicting may indeed be more fact than fiction.

Cramer said nowhere was the market's skittishness more evident than in the coal stocks, where coal producers Walter Energy ( WLT) and Alpha Natural Resources ( ANR) both disappointed Wall Street.

The aftermath was quick and brutal for not only other coal stocks, like best of breed Peabody Energy ( BTU), but also mining equipment makers like Caterpillar ( CAT), a stock which Cramer owns for his charitable trust, Action Alerts PLUS .

But the carnage didn't stop there, even the rails which ship coal took a hit, with CSX ( CSX) and Norfolk Southern ( NSC) both down over 8% in a single day.

Cramer said this panic selling had nothing to do with the fundamentals, as both Peabody and Norfolk Southern have told us that September is shaping up to be terrific. Rather, he said that today's action was a sad reflection of weary investors getting yet another taste of bad news.

Cramer said that unfortunately this new negative reality will be with us a lot longer than the six and a half weeks it took the Fed to sour its outlook.

Emerging Market Demand

In the "Executive Decision" segment, Cramer once again spoke with Mike Sutherlin, president and CEO of mining equipment maker Joy Global ( JOYG), a stock that fell over $5 today after rivals Walter Energy and Alpha Natural Resources lowered their production outlooks.

Sutherlin said that Joy Global sees the U.S. as a slow growth market, but it still sees significant demand from the international markets and in particular emerging markets. He said the shortfalls seen by Walter and others were a result of production problems rather than of falling demand. Metallurgical coal, he said,is mined in more difficult conditions.

When asked for more details on emerging markets, Sutherlin said that China and India are seeing some slowing in their economies, but over there slowing means dropping from 9% growth to 7% or 8% growth and not the 2% growth the U.S is experiencing. He said both China and India are rapidly building their electrical grids, China at 14% a year and India at 8% a year.

When asked to compare today's environment to that of 2008 when the mining stocks plummeted, Sutherlin noted that in 2008, Joy Global saw $600 million in order cancelations, something that's not happening today. "I feel good about our backlog," he said.

Joy Global has also shortened lead times for delivery of its equipment to just one year, down from two years, giving the company a more solid outlook. "We work side by side with clients," said Sutherlin, so they know which projects are in active development versus those still on paper.

Cramer said today's fall in these stocks was purely an emotional reaction, and he urged investors to let the prices come down and the emotions pass before they buy in.

Social Gaming Boom

In a second "Executive Decision" segment, Cramer sat down with John Riccitello, CEO of Electronic Arts ( ERTS), the No. 2 player in social gaming online. Shares of Electronic Arts trade at 19 times earnings, a level that Cramer said is far too small given the huge opportunity in front of the company.

Riccitello said that his company's console gaming business, which includes titles for Sony's ( SNE) Playstation and Microsoft's ( MSFT) Xbox360, are still growing in the high single digits, but mobile and social gaming is now growing at double- and even triple-digits. He said that Electronic Arts has tripled its online user base in just the past three to four months.

Riccitello said that mobile and social games are being played worldwide and one of Electronic Arts' strengths is its ability to bring its already popular console games to the new, emerging platforms like mobile and Facebook.

When asked about Zynga, the highly anticipated IPO, Riccitello said that Zygna is almost entirely a social gaming player on Facebook and the company did have a first mover advantage.

However in recent months, he said Electronic Arts has closed the user gap from 10:1 to just 3:1 and is aggressively targeting Zynga's user base.

Riccitello noted that Electronic Arts is now the number one gaming company on Apple's ( AAPL) iOS platform that powers the iPhone and iPad. Cramer owns shares of Apple for Action Alerts PLUS.

Riccitello closed the interview with a demo of the Sims Social game, which like the original Sims title, follows people through a simulated home life, complete with bills and relationships. However with the new social edition, players can interact with and visit the homes of other real-life players as well as buy items using real money to speed up the process of becoming the coolest house on the street.

Cramer said he remains a fan of Electronic Arts, the fastest growing stock that he follows.

Am I Diversified?

Cramer spoke with callers to see if their portfolios have what it takes. The first caller's portfolio included UPS ( UPS), Yum! Brands ( YUM), Ford ( F), Brown-Forman ( BF-B) and Humana ( HUM).

Cramer said that this portfolio had perfect diversification.

The second caller's top holdings included Ford ( F), Carrizo Oil and Gas ( CRZO), Kirby ( KEX), SPDR Gold Shares ( GLD) and Redhat ( RHT).

Cramer said this portfolio was also properly diversified.

The third caller had Nike ( NKE), Bristol Myers-Squibb ( BMY), Polo-Ralph Lauren ( RL), Ford ( F) and Chevron ( CVX).

Cramer said this portfolio was also terrific and he blessed these stocks.

Lightning Round

Cramer was bullish on Halliburton ( HAL), Abbott Laboratories ( ABT), Honeywell ( HON), Tyco ( TYC), Xcel Energy ( XEL) and Entegris ( ENTG).

Cramer was bearish on Bank of America ( BAC), Flowserve ( FLS) and Brown & Brown ( BRO).

Companies Count

In his "No Huddle Offense" segment, Cramer reminded viewers to not forget about what individual companies are saying. He said when the woes of Europe stop controlling our markets, those comments will mean something again.

Cramer said in today's market, the successes rarely get noticed, as the markets only focus on the negatives. Case in point, Oracle ( ORCL) vs. Hewlett-Packard ( HPQ). Cramer said both companies sell technology, but Oracle delivered great numbers while Hewlett floundered.

The same pattern emerged with General Mills ( GIS) vs. ConAgra Foods ( CAG). Both companies faced inflation issues, but the General passed with flying colors, while ConAgra missed big and offered only a negative outlook.

Cramer said shares of Hewlett-Packard soared today on rumors of that its CEO may soon be ousted. "Doesn't that say it all?"

--Written by Scott Rutt in Washington, D.C.

To contact the writer of this article, click here: Scott Rutt.

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To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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For more of Cramer's insights during the Lightning Round, click here .
At the time of publication, Cramer was long Caterpillar, Apple.

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."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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.

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