Cramer's Mad Money - Social Insecurity (12/17/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday December 17.

Bernanke and Obama Save the Day: Jacobs Engineering (JEC), Aecom (ACM), Nucor (NUE), Joy Global (JOYG), U.S. Steel (X), Freeport McMoRan (FCX), Caterpillar (CAT), Deere (DE), Mosaic (MOS), Potash (POT), First Solar (FSLR), Trinity (TRN), KB Homes (KBH), Toll Brothers (TOL), Lennar (LEN), Morgan Stanley (MS), Goldman Sachs (GS), Schering Plough (SGP), Johnson & Johnson (JNJ)

Ben Bernanke and President Elect Obama are moving the markets, and while Wednesday finished down, most of the surge earlier in the day was due to the latest headlines. Jacob’s Engineering, Aecom, Nucor, Joy Global, U.S. Steel, Freeport and Caterpillar were up on talk of Obama’s infrastructure plan. Deere, Mosaic and Potash were up on Obama’s appointment of Iowa Governor Tom Vilsack to the post of Secretary of Agriculture. First Solar and Trinity rose on Obama’s remarks about alternative energy. Fed Chairman Ben Bernanke’s statement that the government would aid the economy “by any means necessary” breathed new life into housing stocks KB Homes, Lennar and Toll Brothers. With treasuries back and mortgage portfolios expected to be worth something, Morgan Stanley and Goldman Sachs saw gains. Lower interest rates will help low dollar plays Schering Plough and Johnson & Johnson, which also rose.

Cramer’s suggestion for the incoming Administration is to set up a government-led trading desk to buy and sell mortgage-backed securities which form the core of the current crisis. For instance, the government could take a 30 cent bid on the dollar from a buyer and match it with a seller’s 70 cent bid. The government would pay the 49 cent difference and sell it at 51 cents. This move would give the securities real valuation and help stabilize the banking system.

How Do You Want to Invest? Joy Global (JOYG), General Mills (GIS)

Which is the better stock, Joy Global or General Mills? It depends on how you want to invest. General Mills is a steady, recession-resistant stock that consistently beats estimates and delivers single-digit growth. Lower grain and oil prices mean General Mills will see larger margins, future earnings look good and the weak dollar will mean an upturn in overseas sales. For those who want a bit of excitement and see a turnaround coming, Joy Global is the name. It rises and falls with the markets, and although it reported a lackluster quarter, Joy jumped. Even after a 13% increase, Joy is still worth buying, according to Cramer. Both companies lead their sectors and yield 2.8%. The better choice is in the eye of the investor.

Cramer’s Outrage: Social Insecurity

While the press is calling Benard Madoff’s scheme “the biggest Ponzi scheme in history,” Cramer says “Give me a break!” The biggest Ponzi scheme is not illegal, he explained, in fact it is run by the U.S. government. Social Security has the same setup as a Ponzi scheme. People who are currently working are paying for the retirement of the elderly now and hope that their children will be able to support them in old age. However, as in any scheme, those who get in early benefit, while those who get in last end up getting hosed. Experts are now saying Social Security will not be able to support the elderly by 2042, which means that people in their 20s are not going to reap the benefits of their labor.

Mad Mail: Housing and Hedge Funds

A viewer asked Cramer if he still stands by his prediction that housing will bottom by June 30, 2009. Cramer says with recent news, his date may be a bit more “consensus-like” especially since a Wells Fargo analyst agrees that housing will recover by summer. Another viewer asked if he should sell stocks on December 30th and buy again on January 2nd to avoid hedge fund redemptions. Cramer replied, “No…I want you to be able to have some new money to put to work in January, and buy them if the hedge funds go wild again.”

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Comments

[long_on_oil:]

Amen Cramer...social security is a ponzi scheme. The difference is that the government can create the money to keep it going ad inf idem.

2008 Dec 18 09:06 AM

[Guero:]

Like it or not, after the "market" is through weaving its magic on 401k's Social Security will be the only thing keeping many seniors from living in a cardboard box & eating dog food....and that goes double for many of Bernard Madoff's victims.

2008 Dec 18 10:35 AM

[Gem Hudson:]

The money that is not earned and is not loaned from China but fractionize value out from a reserve of I.O.U. bonds is dying more than the deficit death and is crashing the currency into oblivion. The Mexicans that were running away just run right back into what peso problem they were running away from.

2008 Dec 18 10:49 AM

[schrumpfmei...:]

dierence with social security is the gov't can change the rules to make it solvent in a snap. folks with a net worth over $1m( inflation adjusted, actual ammont to be determined by actuaries) at age 70 don't get social security.

imo thats what fdr envisioned, not what he accepted way back when to compromise.

2008 Dec 18 11:12 AM

[Econ 101:]

since when is 70 minus 30 equal to 49???

Which part of the treasury do you work for Miriam??

2008 Dec 18 12:51 PM

[hwood007:]

you should read an article by the non-political AIER (American Institute for Economic Research. The beloved trust fund has only gov IOUs in it and by 2017, someone will need to pay more money to the feds in order to make the social lsecurity payments. You believe the story that the trust fund will make up the difference until 2041 but that is untrue. food luck to all.


On Dec 18 04:04 PM WAKEUP wrote:

> I have always recognized that Cramer is a narcissist and a blowhard.
> Add to that the fact that his financial advice is worthless. His
> personality is truly offensive to anyone who does not condone filthy,
> sneering, snarling, smug facial expressions and hostile attitudes.
> Now he has further revealed that he hates social security, a fact
> that unmasks his Nazi mentality. There is nothing wrong with social
> security, and pogues like mad dog Cramer know this. Social security
> will not go broke, as ignorant pretenders like mad dog Cramer are
> always snarling will happen. (I notice that as the years go by, their
> predictions of WHEN social security will "go broke" are pushed further
> and further into the future.) What is irking mad dog Cramer and others
> like him is that social security is actuarily sound, and will continue
> to be sound as long as premiums are kept in line with benefits, the
> very benefits that do in fact keep millions of elderly persons from
> starving, after the unsound investing schemes of people like mad
> dog Cramer have wiped out these elderly people's other savings.

2008 Dec 18 04:59 PM

[irondoor91:]

You assume that the "governement" is going to actually be able to audit every SS recipient's net worth? How are they going to establish valuations on illiquid assets? How are they going to locate all assets? Who is going to do it? How are they going to handle valuation disputes? You and I know that it cannot work.


On Dec 18 11:12 AM schrumpfmeister wrote:

> dierence with social security is the gov't can change the rules to
> make it solvent in a snap. folks with a net worth over $1m( inflation
> adjusted, actual ammont to be determined by actuaries) at age 70
> don't get social security.
>
> imo thats what fdr envisioned, not what he accepted way back when
> to compromise.

2008 Dec 19 12:03 PM

[HOBBorg:]

Is this a cruel joke?
Bernanke’s statement that the government would aid the economy”. ..to breathe new life into housing stocks of KB Homes, Lennar… Surely Bernanke saw the October 18, 2008 New York Times: “Building Flawed American Dreams” and BusinessWeek AUGUST 13, 200, “Bonfire of the Builders” and the building industry’s involvement in the creation of massive Toxic Mortgages.

Please… Give us a break. A bail out for who?

The same KB Home that paid HUD $3.2 million for its mortgage affiliate (KB Mortgage) loan “irregularities”? KB Home whose other affiliate is Countrywide Mortgage? KB Home that was sued by the FTC in 1979 and has continued violations of the original FTC federal consent decree. The same KB Home with ties to AIG that got a huge government bailout and then got caught while on junkets to the luxury St. Regis Resort in Monarch Beach, California, and again when top executives secretly gathered at the Phoenix luxury resort. The same KB that built the infamous substandard $22M federally funded Mirasol homes with no back doors or windows that made residents sick and underwent $6M of wasted repairs.

Then there is Lennar… whose construction defects and development of contaminated and bombing range land development is rivaled by none other than KB Home…

Have Wall Street and its financial advisors and Washington gone mad? This is the very industry that successfully conjured up the whole insane scheme to target a market of people who didn’t qualify to buy new homes.

Don’t be surprised if you hear that the “Ponzi” schemer Bernard Madoff and the Illinois Governor Bernard Blagojevich are given community service sentences for their crimes and become the administrative czars for all the federal bailouts.

2008 Dec 19 05:37 PM

[Lin:]

WAKEUP ,

You are correct ! I have paid into my IRA since I was 22 . It was decimated 1st in 2000-2003 by Fidelity Investments in the Dotcom bust . Now what was left of iRA funds down to a trickle . My Real Estate , Get Real , Home values have plummented . You seem to " get it " more than most . However , please read site 24hGOLD article dated today I believe entitled " A Shock to the System " by Micheal Panzer . Read it all , + note details . Hopefully , this will open some eyes as to " how dire " the situation really is .

2008 Dec 19 06:51 PM

[Lin:]

Re 24hGOLD

This is a great site for economic commentary , Also see "Asia Times" for foreign insite .

2008 Dec 19 06:58 PM