Cramer's Mad Money - Secretary Cramer (11/5/08)

by: Miriam Metzinger
Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday November 5.

Secretary Cramer: AIG (NYSE:AIG), Ford (NYSE:F), General Motors (NYSE:GM), Chrysler (DCX), Valero (NYSE:VLO), Marathon (NYSE:MRO), United Health (NYSE:UNH), Wellpoint (WLP)

While Obama has promised to mend the economy, an interest rate cut in Europe and China is the fastest way to get the U.S. economy going again, said Cramer.  However, there are some steps President-elect Obama can make if he wants to turn the economy around.

  1. 1. Obama must make Cramer Securities and Exchange Commission chairman, Federal Reserve chairman and Treasury secretary. Cramer said he could do all three jobs better than the “current crowd of jokers who are partially responsible for the mess we are in.”
  2. 2. Rescue the auto industry according to the AIG bailout model. Cramer suggested the government buy up billions of dollars worth of common and preferred GM, Ford and Chrysler stock This would allow the companies  to raise capital  and to turn their bonds in to high-grade paper. He would also encourage a merger between GM and Cerberus.
  3. 3. Create energy independence and jobs by taking full advantage of natural gas resources by making natural gas cars part of the auto bailout deal and to withhold tax credits from oil companies unless they open natural gas fueling stations.
  4. 4. Stop deportation of immigrants. While this may be a controversial move, Cramer noted default rates are almost zero among both legal and illegal immigrants who take on multiple jobs to ensure their mortgages are paid. Cramer suggests buying up 1.3 million homes in the most beleaguered areas

After outlining his 100 day plan, Cramer took a couple of calls. He told one caller that Obama’s alternative fuel plans including clean coal and nuclear will not have legs and the country will have to rely on conventional energy for a while.  He would switch from Valero to Marathon, which will split itself up into two separate businesses in January and offers a high dividend. He told another caller to switch from United Health to Wellpoint which is “the cheapest and the best.”

CEO Interview: David Novak, Yum Brands (NYSE:YUM)

While Yum beat its quarter by 4 cents in October and was up 4% both domestically and abroad, the company trades at a mere 14 times its earnings, a decline from its historical average of more than 17 times earnings. Sales in China have decreased a bit because of higher prices on chicken, but David Novak said this is a temporary rather than a permanent problem. He said the company’s “global portfolio of leading brands” will see it through the current headwinds. While margins have fallen in China, the company plans to build 500 new stores by the end of the year, bringing up the total t. 3,000. There is much more room for expansion, given the country’s huge population. Concerning Russia, Novak said there is political risk but significant potential. While Cramer still likes Yum, he would wait for the dividend to reach 3% before buying.

CEO Interview: Jim Rogers, Duke Energy (NYSE:DUK)

Cramer was disappointed with Duke’s earnings which sent the energy company’s stock price down $1.30 to $15.62 from $16.90. However, the reasons for the decline were temporary: higher costs from Hurricane Ike, a mark-to-market impact of its hedges and an accelerated write-down from a real-estate joint venture. However, there are opportunities for an upside with a new $11 billion contract with the State of Ohio, falling coal prices and its new investments in wind and solar. Seventy-percent of Duke’s operations are regulated and rising costs are passed on to customers. Rogers is confident that the company can help bring the cost of solar down and says coal is here to stay and the development of clean coal is a top priority. He also discussed the company’s “Save a Watt” proposal that would reimburse utilities for encouraging consumers to save energy. Cramer says he likes the dividend and thinks Duke is a “smart company and a good play.”


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