Jim Cramer's 'Mad Money' Recap: A Gloom and Doom Forecast

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.

NEW YORK ( TheStreet) -- Unless there's a compromise in Washington, doom and gloom will be returning to the markets in short order, Jim Cramer told his "Mad Money" TV show viewers Wednesday. He said even the upbeat news of a new Federal Reserve chairman will not be enough to buoy the markets for long.

The market craves certainty, Cramer reminded viewers, which is why it responded so positively to the appointment of Janet Yellen. Yes, for the most part, the markets like Yellen's policies, but they also like the fact that the decision has been made and that's one less uncertainty to worry about.

But as positive as Yellen's appointment was, Cramer warned the non-negotiating in Washington continues, sending the chance of an actual U.S. bond default into the 20% range. He said while many still believe a last-minute compromise will be reached, Cramer noted that many on Wall Street also felt a buyer would be found for Lehman Brothers.

The fact remains that on Oct. 17, the government can no longer guarantee that it will pay its bills and will need to begin the painful process of picking and choosing who gets paid, and when. That will lead to yet another crisis of liquidity, causing credit to tighten, sending auto and home sales back into a tailspin, just when they were starting to regain their footing.

Cramer said there's no doubt a default would send the U.S., and likely the globe, back into a recession, which is why even a 20% change of a default is enough for investors to begin preparing.

Alcoa's Undeserved Reputation

Cramer said he's got a stock that definitely deserves to be trading higher. Unfortunately, deserving has nothing to do with it. That stock, Alcoa ( AA), is a fabulous company, he said. Sadly, no one cares.

Cramer explained that Alcoa is actually two companies: one that makes aluminum, the commodity, and another that makes products from aluminum. It's the former that's been dragging the company down for years because Alcoa has no control over the price of the commodity and, frankly, there's still just too much of the stuff, he said.

But the other half of Alcoa, the one that makes products, is on fire. Aluminum is being used is all sorts of new products. Areas like aerospace have been strong, with a 10,000-plane backlog now on the books at major manufacturers. Heavy trucks and trailers are also strong around the globe and commercial construction is just starting to tick upward.

That's why Cramer said Alcoa deserves to sell higher than it does because its products half is doing everything right. Eventually, supply with meet demand for the other half, he said, and when that happens, shares of Alcoa can rise to where they deserve to be.

Stock Survival Guide

With money managers starting to worry about what will actually happen if the U.S. defaults, Cramer said all types of stocks, including many of the high fliers, are getting pummeled. Managers are looking for less risk, he explained, as he introduced his survival guide of what to buy in the worst-case scenario.

Cramer said the defensive, recession-proof stocks will be the place to be after the fallout from Washington has settled. Stocks including Costco ( COST), which just disappointed on its earnings, yet fell very little, is one such stock, as is ConAgra ( CAG), the food maker that plays heavily in the private label, trade-down items consumers crave when times get rough.

Also on Cramer's list are Coca-Cola ( KO) and Johnson & Johnson ( JNJ), two stocks off their highs, and also Procter & Gamble ( PG), the company that's regaining its mojo thanks to a new CEO.

Cramer said all of these stocks will also get hit in the worst-case scenario, but they won't stay down for every long because they're exactly the types of stocks investors will flock to when the all-clear sounds.

Lightning Round

In the Lightning Round, Cramer was bullish on Coca-Cola Enterprises ( CCE), Pepsico ( PEP), Insys Therapeutics ( INSY), Facebook ( FB) and AGCO ( AGCO).

Cramer was bearish on United Therapeutics ( UTHR) and Deere & Company ( DE).

The State of the Union

In a special interview, Cramer spoke with Chris Matthews, political commentator and host of MSNBC's "Hardball," on the state of affairs in Washington and Matthews' new book, "Tip and The Gipper: When Politics Worked," which recalls how politics used to be in the 1980s under Ronald Reagan.

Matthews said there were hard issues fought in the 1980s, including Social Security, but no one at that time ever said they weren't negotiating. There were many differences but in the end things always got done.

Today, however, Matthews said he simply doesn't know if the U.S. will be allowed to default as Washington continues to "play with crazy." He said his expectation is someone will debut a broader compromise that leaves health care out of the equation, and then there will be a focus on entitlement or corporate tax reform in return for a higher debt ceiling.

Cramer agreed the situation is getting more dire by the day and said Matthews' book will be a great reminder of a time when the issues were just as tough but the players involved handled things differently.

Off the Tape

In his "Off The Tape" segment, Cramer sat down with Ben duPont, managing director and founder of the privately held Mobeam, which is helping to connect cash registers to smartphones for better mobile shopping.

duPont said there are currently 200 million checkouts in America today that cannot talk to smartphones, and Mobeam is working to change that. The company's technology is currently on two flagship Samsung devices, but he noted the company is in talks with every major handset manufacturer and expects to be on 100 million devices by year's end.

Companies have two options, duPont said: They can upgrade their systems, as Starbucks ( SBUX) did to accept mobile payments, or they can partner with Mobeam for far less. He said the Mobeam option gives retailers the same functionality and it works globally.

Cramer said companies like Mobeam have the technology he wants on his next phone.

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

To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

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

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC
At the time of publication, Cramer's Action Alerts PLUS had a position in FB and JNJ.

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.

If you liked this article you might like

The Truth About Trade: Cramer's 'Mad Money' Recap (Friday 3/2/18)

The Truth About Trade: Cramer's 'Mad Money' Recap (Friday 3/2/18)

Jim Cramer: Not All Tariffs Are Bad

Jim Cramer: Not All Tariffs Are Bad

Profit With Technical Analysis: Cramer's 'Mad Money' Recap (Tuesday 2/20/18)

Profit With Technical Analysis: Cramer's 'Mad Money' Recap (Tuesday 2/20/18)

Cramer: Hunting for Bargains

Cramer: Hunting for Bargains

Tuesday Looked a Bit Like a Waterloo Moment for Bulls: Market Recon

Tuesday Looked a Bit Like a Waterloo Moment for Bulls: Market Recon