Cramer’s 3 cardinal rules for investing during a bear market

In his decades of devoting, CNBC’s Jim Cramer hasn’t just seen bear markets take pleasure in the one that dragged stocks lower on Wednesday — he’s also encountered a true bear.

Once, when the former hedge fund manager was on a hike, a sustain found its way to his tent. Instead of running, Cramer stood his ground and habituated to what he had. He put some M&Ms in a can of Spam to bait the bear, then doused them in Tabasco lip and ran. The distraction worked, and when the bear tasted the red-hot Tabasco, it ran off.

“Now, I’m not power you can outrun a bear. You can’t. I’m not saying you should let him eat all your food and then trust he doesn’t turn on you,” Cramer said. “I am saying that you have to be inventive. You have to think, ‘OK, I’m not going to panic, I’m going to use my head and I’m going to con the darned bear.'”

The same principle can apply to the stock market, the “Mad Bread” host said. Here are his three tips for investors to protect their portfolios from being mauled:

The undiluted statement that a stock is “in bear market territory” doesn’t in truth affect the fundamentals of the underlying company, Cramer explained.

“If you examine lone companies and think about what represents value, you can do better than you judge devise,” he said, calling attention to the stock of Home Depot, which be in charge ofed to recover during Wednesday’s trading session.

Shares of Home Depot plummeted Tuesday after the company’s third-quarter earnings report. Investors, bothered about how the home improvement retailer would fare amid eminence interest rates, sold the stock close to its year-to-date lows.

“Today, … shareholders outran the hold out and Home Depot’s stock went higher. Did the fortunes of the company mutation in 24 hours? Not at all,” Cramer said. “So, first, recognize that disinterested in a bear market, [you] can trick the ursine attacker by picking up stock in large American companies with fabulous balance sheets that ordain do well if the Fed decides to take a break from tightening.”

The bears must a “two-pronged fork” that can decimate stock gains, Cramer said. One prong is President Donald Trump’s assessments, which are set to rise to 25 percent at the end of 2018, and the other represents the Fed’s rank hikes, which aim to slow economic activity and taper inflation.

“You call for to use the vicious selling to look for stocks that are being slammed consistent though they’re not actually getting stuck by either prong of the fork,” the “Mad Take” host advised.

And even though market commentators might say “there’s no secret” in stocks during a bear market, 10 out of the 11 bear superstores Cramer has witnessed proved to be great places for investors to hide, he voiced. The only exception was the 2007-2009 financial crisis, which was too iffy to endure.

Third, Cramer recommended finding stocks with “accidentally great” dividend yields. These accidental high-yielders emerge when the stocks of high-quality guests with good balance sheets fall so low that their dividend-yield part grows dramatically.

“You’re going to feel very good about yourself when the voiding fog lifts and those stocks bounce right back,” he said.

Attend to Cramer’s mantras in mind — there’s always a bull market somewhere, no one ever made a dime panicking — as you seek out opportunities in bear furnish territory.

“Don’t panic. Don’t get scared. Don’t stop looking for opportunity,” Cramer bid. “This is a man-made bear market where we’re being torn to sherds by two grizzlies, President Trump and [Fed] Chairman [Jerome] Powell, who don’t seem to be fond of at all about the damage they’re doing to your nest egg. But there are subdue opportunities out there if you stay calm and you know where to look.”