Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Thursday December 4.
Cramer has a solution for the trillion-dollar mess over mortgage-backed paper. Originally Treasury Secretary Henry Paulson said he would use $700 billion in TARP funds to do this, but the money was used to bail out banks. Cramer urged the government to set up a trading desk to bring together buyers and sellers and negotiate sales. Until the housing market bottoms (Cramer’s target date is June 30th), it is hard to know how to value these assets. With Cramer’s scenario, a buyer might want to pay just 30 cents on the dollar, a seller might want to demand 50 cents on the dollar, but the government would make a compromise bid of 39 cents, sell it for 41 and pocket the remaining 2 cents. The worst case scenario is the government will be left holding the paper. But if housing bottoms in June, as Cramer predicts, it won’t be long before the paper will be worth something. “It would solve so many of our problems with so little capital,” he said, “and actually make the taxpayers money.”
Cramer thinks the bottom is near for housing (June 30th to be exact) and some confidence in the sector seems to be returning to the market with fresh news of the Fed lowering interest rates to 4.5%. Cramer praised Toll Brother’s solid quarter which brought its stock up. The lower mortgage rate will mean “pretty spectacular affordability” said Bob Toll. If the government provides a $20,000 tax credit for homeowners, Toll thinks “housing might lead us out of the morass we are in.” When Cramer asked Toll about the ease of getting a loan, Toll answered “Come to us, we’ve got it” as long as potential customers have a good credit rating and a down payment. Cramer said Toll has a “beautiful balance sheet” and added Toll is a survivor in the housing sector.
Cramer pulled Wes Edens off his CEO Wall of Shame, since Fortress is crumbling. With the stock just above a dollar, “it’s just mean” to pick on Edens anymore. So even though he doesn’t do anything to merit a reprieve,” Cramer is removing him;“Call it euthanasia.”
Cramer was not happy with President-Elect Obama’s selection of Tim Geithner for Treasury Secretary, but he decided to give him a chance. Even before the Obama’s swearing in, Geithner has already upset Cramer by threatening to get rid of FDIC Chairman Sheila Bair because she doesn’t toe the party line. While Bair has firsthand experience in how to rescue companies, given her involvement with Indymac, her criticism of current bailout strategies has fallen on deaf ears. Cramer said Bair’s supposed crime is that she “stood up to a totally complacent team that kept getting it wrong,” and she “is an honest, independent breath of fresh air who has real answers.”
Hedge funds have knocked down many winning stocks to levels where they might look like attractive takeovers. Cramer would like to see Illinois Tool Works make a bid for Manitowoc, which has been knocked down from $50 to $6.46. Another possible match might be Nike and Under Armour, which has declined to a $1.18 billion market cap with a price of $24 from its former $3.3 billion market cap and price of $67. Since Nike spends $5 billion in share buybacks and has an extra $2.6 billion in case, it can certainly afford to buy Under Armour. A takeover would most likely mean an offer of around $32 a share for Under Armour.
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