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Why are stocks falling like a stone? Cramer said the first reason is the Federal Reserve, which is now working against the economy instead of with it. Second is China, which continues to see a daily meltdown of its market, causing worldwide fears.
But more important that even China are the mechanics of the markets, Cramer explained. Big money managers look at stocks like Apple (AAPL) , a stock Cramer owns for his charitable trust, Action Alerts PLUS, and ignore everything the company has going for it, opting instead to liquidate their positions in the hopes of buying it back lower in a few days.
Given the big positions these funds have, the selling pressure is enormous, Cramer said, and until we see that crescendo moment where everyone just gives up, the selling will continue.
What History Tells Us
Regardless of what happens in China, the impact to our markets will be slight, Cramer told viewers. At least, that's what history tells us.
Cramer said part of being a good investor involves knowing your history and looking for patterns that apply to today. You only need to look back to August of last year to find when the Chinese government took a stand to prop up their Shanghai index at 3,000. It looks like tomorrow they could test that limit again.
So where were U.S. stocks back in August? The Dow Jones Industrial Average was a full 1,200 points lower than where it is today. In fact, only five Dow stocks are below their late-August levels and that's worrisome, Cramer noted, given the declining fundamentals of those that do business in China.
For a stock like Boeing (BA) , which has Chinese exposure, the company's current valuation seems suspect, and the stock's August lows could be retested again in the coming days.
The fear in this market is palpable, Cramer admitted, but as Pres. Franklin Roosevelt said, "The only thing we have to fear is fear itself." That's because many stocks in the S&P 500 are already off 20% from their highs, so even if things really are as bad as people fear these stocks don't have much father to fall.
Taking another lesson from history, Cramer noted the stocks he dubbed accidental high yielders, those with solid dividends that see their yields balloon as prices fall, did great during the financial crisis of 2008 and are likely to do great now.
Cramer said companies like Verizon (VZ) will continue to see solid cash flows, despite China, and are more likely to raise, than cut, their dividend. Likewise with Pfizer (PFE) , which is merging with AAP holding Allergan (AGN) .
To be clear, Cramer said he's not bullish on these stocks, but he does see them as bargains as they head lower.
Executive Decision: Frank Sullivan
Sullivan said RPM only derives 3% of its sales from Asia, which is why his company is seeing 8% sales growth and is doing well. He said the culture of innovation and organic growth drives the company's business, not the current stock price.
Among some of RPM's recent innovations are new commercial roofing products that can extend the lives of old rubber roofing for another 10 or 20 years. Sullivan noted there is over one billion square feet of rubber roofing out there and all of it will need repairing soon.
Cramer said RPM is the perfect example of business being done, despite what's going on in China.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer once again opined on the state of the oil market and what it means for the U.S. economy. He said that many investors are comparing today's low oil prices with those of 2008. That's not a good comparison because as back in 2008 there was a lack of demand but today there's oversupply.
The fact is that many smaller oil companies will get hurt from this decline. Some will spiral into oblivion while others will be forced to slash their distributions.
But then there are the other 80% of the S&P 500, the part that benefits from lower oil prices. Eventually the estimates for these companies will have to be raised and their stocks will flourish.
Too many investors are focused on just the energy sector and are ignoring the other nine sectors of our economy that benefit from cheap energy, Cramer concluded.
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