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Jim Cramer's Mad Money Recap
Monday, November 17, 2008
The Market Gloom Thickens: "Am I too negative?" Jim Cramer asked rhetorically on his Mad Money TV Show Monday. His reply - "No, I don't think so." Cramer said every time the Dow Jones Industrial Average bounces off its lows of 8,200, he really wants to be a bull. But then, reality returns and he realizes the bad news is still getting worse, not better. While the federal bailouts may have prevented everything in the economy from completely falling apart, Cramer said they still haven't addressed the real problem of home price deflation, nor have they created a single new job.
While falling gas prices may give consumers much needed reprieve, Cramer said the dismal retail sales numbers prove that the consumer is still not spending. Cramer said the fact of the matter is things aren't really improving. Home builders, he said, are still turning out new homes as fast as they can. And the fate of General Motors (GM) still linger over the economy like a huge black cloud. Cramer said the only things that would change his mind on the markets are interest rate cuts in China and Europe, or a resolution to the GM crisis. Until then, he said, "there are just too many negatives out there."
Green Stocks Fade: With the collapse in crude oil prices, Cramer took a hard look at his basket of green stocks to see if his green thesis still holds up in a cheap oil world. The green basket included such stocks as First Solar (FSLR), Foster Wheeler (FWLT), Shaw Group (SGR), MEMC Technologies , BorgWarner (BWA), TetraTech (TTEK), OM Group (OMG) and Fuel-Tech (FTEK). Since Cramer first highlighted the green stocks on April 16, 2007 and Nov. 6, 2008 the stocks enjoyed a 65% gain on average.
However, since Nov. 6, as oil and natural gas prices have plummeted, so have their green alternatives. The green basket is now down 37% from April 2007 to today. Cramer said his green thesis was an trading thesis and not a investment thesis. Green stocks have fallen many many times before, he said, but never as quickly as in recent weeks. Cramer recounted Jimmy Carter's plan in 1977 to make 20% of the U.S. energy supply renewable energy by the year 2000. President Ronald Regan, though, dismantled much of the plan when oil prices fell in the 1980s.
Today, the U.S. relies on renewable energy for just 6% of its energy, on par with that of 1977. Cramer blamed today's fall in green stocks on lower oil prices, as well as forced selling by ailing hedge fund investors. He said that with President-elect Barrack Obama clearing in the ethanol camp, he sees little chance for a resurgence for the natural gas alternative or in any of the wind or solar plays anytime soon.
Outrage of the Day: Cramer took issue with the Securities and Exchange Commission. Instead of going after those responsible for trillions of dollars in bank and investment losses, it took aim today took aim at celebrity investor Mark Cuban for insider trading. Cramer said if found guilty, Cuban deserves punishment, but called the move by the SEC an amusing sideshow among unprecedented other issues.
Today's Mad Money Stocks: APC
Friday, November 14, 2008
We Can't Afford a General Motors Crash: What would the economy look like if the government allows General Motors (GM) to fail? Jim Cramer pondered that very question on the Mad Money TV show Friday. Cramer said its no secret GM is borrowing billions of dollars that it doesn't have the ability to repay. And its no secret things at the company are getting worse by the day. But the economic consequences of a GM failure would be staggering, said Cramer.
GM, and its suppliers, employ millions of Americans, said Cramer. The resulting mass surge in unemployment if GM failed would be felt immediately by the 2/3 of the U.S. economy that depends on consumer spending. Cramer predicted the impact would translate to another 2,000-point drop in the Dow. General Motors, he said, would have double the impact of the Lehman Brothers collapse.
Cramer said he's not sure which way the Federal government will fall with General Motors, but until then he sees two options: sit on the sidelines and wait, or sell ahead of the news. He said investors simply can't buy into the markets unless they're sure GM will be saved. "If GM is saved," said Cramer, "only then would I be a bull." He continued by saying that if GM is left to fail, he'd be a buyer only after his predicted 2,000 point freefall.
Today's Mad Money Stocks: AMD ETN
Thursday, November 13, 2008
Don't Be Seduced by the Tech Rally: "This is only the first quarter of what looks to be a horrible recession," Jim Cramer told viewers. He warned that this is not the time to buy tech stocks, it's the time to sell them. Cramer said today's 553-point move in the Dow was merely a technical rally and cautioned that the rally in technology stocks was totally undeserved. As the Dow re-tested the 8,000 level, it caught some buyers, who should not have been buying tech, he said.
Typically, the quarter leading into the busy holiday season is the time to buy technology. However with chipmaker Intel's (INTC Quote) slashing its forecast for the current quarter, it's clear the fundamentals in tech are bad, he said. Despite that dire forecast, the Nasdaq powered forward today, up 11.8% from its recent lows. "Tech stocks are not a safe haven," he warned. According to recent comments from another tech giant, Cisco (CSCO), the recession started in October. And while many analysts still touting buy ratings on tech companies, Cramer contended there are far too many downgrades and much negative news to come.
Cramer went on to explain that a real bottom in tech won't happen until all of the analysts have lowered their estimates and become negative on the sector. Companies will also need to work through their excess inventory, he said, and the economy will have to turn before a true bottom can be achieved. Cramer reminded viewers that in the last recession Intel shares fell 82%, Dell (DELL) 71%, Microsoft (MSFT), 66% and Oracle (ORCL), 84%. "Things just turned bad, how can they be getting better already," asked Cramer.
Sell Block: In the Thursday Sell Block segment, Cramer added Lincoln National (LNC), Hartford (HIG), Prudential (PRU) and Principal Financial to the list of companyies investors cannot afford to own. Cramer said he's getting scared about these life insurance companies after reading the recent research report from Goldman Sachs on them. According to the report, these companies have been losing money on commercial real estate investments and now are trying to raise capital in the toughest of credit markets.
Cramer said the insurers got too greedy, selling too many variable annuities that they may now have problems paying. With ratings cuts on the horizon, he said it may be impossible for these companies to come up with the money they need. Further clouding the issue is President-elect Obama's plan to allow families to pull up to $10,000 from IRAs and 401Ks without penalty. If this plan is approved, Cramer said, the insurance companies will need even more cash that they don't have to cover the 401K withdrawals.
Today's Mad Money Stocks: T
Wednesday, November 12, 2008
How to Turn Around the Markets: "If you want stocks to go higher, support the homeowner," Jim Cramer told students at the University of Iowa in a special Back to School Tour episode of Mad Money on Wednesday. He said that if we solve the housing crisis, we will solve everything else. Cramer painted a bleak outlook for the market after another 400-point loss for the Dow Jones Industrial Average. He said consumer spending looks like it's falling off a cliff after electronics retailer Best Buy (BBY) sharply cut its 2009 earnings outlook.
Treasury Secretary Henry Paulson didn't help after he said the $700 billion TARP program will be used to help bolster an ailing financial system instead of buying mortgage-related securities as originally intended. "All of these issues come back to housing," said Cramer, who blamed the current economic mess on the 14 million people who took out bad loans. He said that if home prices keep falling, consumers will spend less, layoffs will get larger, and the government bailouts will continue as the market drifts ever lower.
Cramer said that cycle must be broken in order for the economy to recover. He had three suggestions. First, stop all new home building. Second, have the government buy up all of the vacant homes. And third, offer big tax credits to those buying homes. Any, or all, of these steps, he said, will stop home price depreciation and get the markets back on track. In the meantime, Cramer recommended buying only high-yielding dividend stocks, stocks trading at or near their cash value and recession-resistant companies, such as Caterpillar (CAT), KBR (KBR), Kimberly-Clark (KMB) and Clorox (CLX).
Today's Mad Money Stocks: ADM
Tuesday, November 11, 2008
Wrong Assumptions Plague Markets: Investors looking to sum up what's gone wrong in the markets need only one word - assumptions, Jim Cramer told viewers on Tuesday. He said the markets simply assumed that everything couldn't possibly go wrong all at once, but they did. For example, Proctor & Gamble , normally a recession resistant bellwether, admitted on a conference call last week that it made incorrect assumptions on their raw costs and the strength of the dollar, both of which hurt the bottom line and the stock price.
Insurance companies like Hartford (HIG), Prudential (PRU) and MetLife (MET) all received a downgrade from Goldman Sachs (GS), because they made wrong assumptions about the strength of their stock price and the health of the commercial real estate market, both of which are forcing them to seek additional financing to pay their obligations. The hedge fund industry assumed the price price of oil would climb forever. Meanwhile, no one anticipated that demand in China would ever fall off a cliff, leaving coal, steel and copper companies upside down in their assumptions.
Bad assumptions are affecting everyone, said Cramer, from Tyson Foods (TSN), which failed to forecast higher feed prices, to retailers JC Penney (JCP) and Saks (SKS), both of which are sitting on mountains of inventory from assumptions of higher Christmas demand.
Mad Mail: Cramer told a viewer he's been wrong every time he's tried to call a bottom in Starbucks (SBUX), so he's not calling one now. He told another viewer that he can't recommend Goodyear (GT), since it's too levered to new cars, but he is still a fan of Monro Muffler (MNRO) in the auto-part space.
Today's Mad Money Stocks: EMR NAT
Monday, November 10, 2008
Market Needs GM Bailout : Jim Cramer said General Motors (GM) must be saved if there is any hope for a sustainable rally in the stock market. He told viewers not to count on such news as the Chinese economic stimulus, which prompted an early rally today in the Dow Jones Industrial Average before it closed down 73.27 points, or 0.8%, to 8870.54, after being up by as much as 215 points. The markets cannot rally until the federal government offers a bailout not only to GM but also Ford(F) and Chrysler. "It's all one piece," he said. Cramer said the Bush administration has done plenty to help preserve the bonuses and dividends of troubled financial institutions while leaving workers on Main Street to dry. He said President-elect Barack Obama understands the need to bailout of the auto industry is all about saving jobs.
Cramer said his East Coast friends have joked about the idea extending a hand to well-paid autoworkers who do little work. But he said the only real option to get a sustainable market rally is to go through with the bailout for Detroit. Failure to do so would result in a worsening economy and further declines in the market and 401Ks.
Mad Mail: A viewer wrote Cramer and asked if there was a trade in higher gun sales that are happening due to some perception of a crackdown coming from an Obama presidency. Cramer said there was not: "Sometimes there are things that aren't investible." Cramer told another mail writer that he didn't favor the idea of reducing risk by buying mutual funds or exchange-traded funds with yields. He believes he can pick the best individual stocks offering top yields. Another viewer asked Cramer if there were any healthcare of energy plays ahead of the Obama presidency. Cramer offered Tenet(THC) as a healthcare play, but said any energy or solar names just aren't working right now.
Am I Diversified?: Cramer found three winning portfolio's in a special Monday edition of "Am I Diversified?" The first caller's portfolio comprised Advanced Micro Devices(AMD), CBS(CBS), Caterpillar(CAT), Procter & Gamble(PG), and John Deere(DE). Cramer OK'd the holdings, saying Procter & Gamble holds up well in a tough economy, AMD is becoming an interesting speculation with an upcoming splitoff, while Caterpillar and Deere serve very different customers.
The next caller held Pfizer(PFE), Oneok(OKS), Bank of America(BAC), AT&T(T), and Altria(MO). Cramer blessed the portfolio, liking both the diversification and high-yield names. Finally he gave the thumbs-up to a caller's holdings of USBancorp(USB), Merck(MRK), Chesapeake Energy(CHK), Coca-Cola(KO) and Altria as a well-diversified, nicely yielding portfolio.
Today's Mad Money Stocks: PPG
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