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NEW YORK (TheStreet) -- Don't bet against the American consumer, Jim Cramer advised on "Mad Money" Wednesday. Cramer said with nearly two-thirds of the U.S. economy powered by consumer spending, investors need to pay attention to consumers' every move.
There have been many negatives surrounding the retail sector coming into 2014, Cramer noted. The failure to pass an unemployment benefits extension, high heating bills and the worst winter in nearly 37 years all contributed to a lack of faith in the retailers. When even Wal-Mart (WMT) missed estimates, the panic began to set in.
Cramer said that initially it was thought customers just switched from apparel to hard goods, but poor earnings from Best Buy (BBY) squashed that notion. Then it was assumed that shoppers just moved to Amazon.com (AMZN), avoiding brick-and-mortar stores altogether.
Couple all these negatives with the massive security breach at Target (TGT) and it's easy to see why retail stocks have been pummeled this year.
But Cramer noted that investors have only been looking at the negatives surrounding retail. They've been ignoring stronger new-home sales, increased spending around existing homes and comments from retail execs that sales have been stronger ever since Valentine's Day.
These positives are how retail stocks have been able to rally this week, even on disappointing earnings, Cramer concluded.
Executive Decision: Gregg Engles
For his "Executive Decision" segment, Cramer spoke with Gregg Engles, chairman and CEO of WhiteWave Foods (WWAV), a stock that's up 30% since Cramer last checked in back in November. WhiteWave just delivered a two-cents-a-share earnings beat on an 11% rise in revenue.
Engles said America's tastes are changing; thanks to the more savvy younger demographic, families everywhere are beginning to embrace healthier eating. That's why brands like Horizon, Silk and Earthbound Farm continue to see strong growth.
Horizon is a brand that families trust, said Engles, which is why the company continues to only put that brand name to products that are family- and kid-centric. Meanwhile, WhiteWave's Silk brand continues to be a leader in non-dairy milk products made from soy and almonds.
Engles also had positive things to say about his company's partnerships in China. He said as China moves up the economic ladder, its people are demanding more protein in their diets, which plays into WhiteWave's portfolio of organic products.
Cramer reiterated his recommendation of WhiteWave Foods.
Executive Decision: Dan Hesse
In his second "Executive Decision" segment, Cramer spoke with Dan Hesse, CEO of Sprint (S), our nation's number three wireless carrier. Shares of Sprint are down 22% in 2014 after a strong performance in 2013.
Hesse said that by the middle of 2014 Sprint will have completed about two-thirds of its network upgrade, one that is seeing the complete replacement of the old Sprint network. That will mean some short-term pain, Hesse continued, adding that investors understand that a world-class network will take time to complete.
When asked about the competitive landscape, Hesse said the U.S. market is still a duopoly, with two strong players and then everyone else. A market with three strong players would be much better for consumers, he said.
Turning to the topic of growth, Hesse noted that tablets and wearables, such as watches and other add-on accessories, have been the real drivers of growth for Sprint as the smartphone market begins to mature.
For the next installment of "Cramer's Playbook," Cramer answered the question of how much cash investors should keep on hand to buy more stock when the market dips.
Cramer said that no portfolio should ever be 100% invested in stocks, as that prevents flexibility, something that's dearly needed in volatile markets. He equated a portfolio with no cash like a car with no gas, your options will be sorely limited. "Don't be that foolish," he said.
Instead, Cramer said that all portfolios should have at least 5% in cash at all times. As the market rallies, that percentage should grow to 7% or 10%, or even more after big moves to the upside.
Buy low, sell high. Cramer said that notion never goes out of style, which is why he likes to wait for a 10% pullback in the markets before putting that reserve cash back to work.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer reminded viewers that "the money has to come from somewhere." For stocks, that often means money rotates out of one sector and into another.
Two groups where money is leaving are the banks and the consumer packaged-goods companies, said Cramer. The banks need higher interest rates to make more money, and they remain littered with lawsuits that crimp their potential.
The consumer packaged-goods sector, on the other hand, has two problems. First, yields simply aren't as attractive in a higher rate environment; second, the trend towards healthier eating eschews anything that is packaged, processed or comes in a can.
Cramer said these are the reasons why the money is pouring out of these groups, and that's not likely to change anytime soon.
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-- Written by Scott Rutt in Washington, D.C.
To email Scott about this article, click here: Scott Rutt