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