Cramer's Mad Money - Return to the Forbidden Citi (12/19/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday December 19.

Game Plan for Next Week: Panera Bread (PNRA), Wal-Mart (WMT), Research in Motion (RIMM), Darden (DRI), Costco (COST)

As oil prices continue to fall, Cramer suggests some ways to play the trend. Lower gas prices and decreased mortgage rates means consumers have more money to spend. Cramer recommends Panera and Wal-Mart because both stocks are up year-to-date and won’t be sent down by tax-loss selling. He also thinks money managers will be interested in these stocks. A few stocks are a “tell” on consumer health; Darden Restaurants reported good numbers as well as Research in Motion, and Costco’s CEO Jim Sinegal said sales were strong. When the consumers are closing their fists, these companies are usually the first to get hit and the first to show signs of strength when consumers begin to spend again.

Return to the Forbidden Citi : Citigroup (C),

Cramer is removing Citigroup CEO Vikram Pandit from his CEO Wall of Shame because he feels confident Pandit can turn the company around. On the brink of collapse in November, Citi received $20 billion from the government to back $300 billion in assets. The bailout has given Citi some breathing room and the stock is now looking attractive. This wasn’t the case when the government gave money to Lehman Brothers. As a young investment banker, Pandit was the architect of Citi’s turnaround in 1991, and he might be able to save Citi once again. Cramer would like to see Sheila Bair and the FDIC insure $2.5 million CDs issued by Citi to corporations for a .25% fee. This would keep the government from printing too much money and is something corporate treasurers need. Cramer is taking Vikram Pandit off his CEO Wall of Shame and replacing him with Strauss Zelnick, Chief Executive of Take Two Interactive (TTWO). The company turned its nose up at a $25 takeover bid from Electronic Arts (ERTS) last year. Now Take Two is a mere $8.43.

Cramer Outrage: The Cox-Madoff Memorial Wall of Shame

While Christopher Cox could have been hot on the trail of Madoff as he made off with $50 billion, the SEC Chairman is now pointing the finger at everyone else. Cramer decided that to give Cox the Plaxico Burress Good Judgment Award would be an insult to the New York Giant’s wide receiver. As a tribute to those who characterize the current market which is run without shame or regulation, Cramer is giving his favorite spot a new name: The Cox-Madoff Memorial Wall of Shame.

Mad Mail: High Yields, Weak Dollar

A viewer asked Cramer about his trading strategy in this tough market. He replied,“We’re using yield…I prefer buying the stocks with accidentally high yields. So you start when a stock’s at 3.5% and then to 4% and then to 4.5% and then 5%. You buy a little bit at each level, and then you roll it right back up. It’s called trading around a core position.”

Cramer told another viewer about the advantages of a weak dollar; ““…The weak dollar’s great. The dollar got too strong. We have to maintain our competitive edge…A weak dollar keeps people at their jobs. I’m sorry. On Mad Money, we want employment. We don’t want foreclosures. We want people to keep their jobs. That’s why we like a weak dollar.”

Sequenom (SQNM)

Cramer’s biotech speculation pick is Sequenom, a company that is not yet profitable, but will see a substantial upside when it releases its genetic testing products. The company is developing a prenatal test for Down’s Syndrome; currently such tests are invasive, but Sequenom’s diagnostic will capture cells without the use of needles. The results are also expected to be more effective than current technology, which is vulnerable to false positives. Sequenom doesn’t need FDA approval for its new test, so there is no delay and the release is scheduled for January 31. He also thinks the company is an attractive takeover target, and if it gets a bid, Sequenom could jump from $20 to $27 and fetch a 33%.

Storing Oil: Jacob’s Engineering (JEC), Chicago Bridge and Iron (CBI), Fluor (FLR)

Cramer has a solution to prevent expensive oil from ever returning; he suggests Obama buy up massive amounts of oil while it is still cheap and keep reserve supplies in massive storage facilities. Companies like Jacob’s Engineering, Chicago Bridge and Iron and Fluor, which already rallied when Obama announced his plan to create infrastructure projects, and would benefit from such a plan.

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Comments

[James Wilson:]

Pandit should never have been on the wall of shame period.

Even Pandit gets tired and he deserved a rest and the people who took over CITI should have spend some time with Pandit learning how to manage a large business.

Pandit has set values that he will not corrupt and will not allow others to corrupt. He is the UBER MANAGER if there ever was one.

Just like you can't turn an army around on a dime he faces the same problems with Citi but he has hand picked people who can and will act.

Citi should be setting at $ 30 if JPM is above $10 in my eyes.

2008 Dec 22 05:29 AM

[maelstrom:]

Buy up massive amounts of oil and store them where? define massive and method of transporting/storing ....IDIOT

2008 Dec 22 08:08 AM

[ResourceWise:]

Miriam, you wrote: “Pandit was the architect of Citi’s turnaround in 1991”?! I wasn’t aware of this historical ‘fact’. Even though I have followed Citi’s fortunes since 1988, the first I heard of Pandit was when he sold Old Lane Partners to Citi for $800 million in 2006 and then liquidated the fund in 2008.

2008 Dec 22 08:24 AM

[Ouch$:]

Mad mail: High Yields
I bought stock with a core position, but explain the meaning of ROLL IT RIGHT BACK UP.

2008 Dec 22 09:42 AM

[lgtccjm:]

Thank you for pointing out this obvious fallacy - that Pandit rescued Citi in 1991 - a little research on the internet indicates the Pandit was working for Morgan Stanley at that time. Not likely that Morgan Stanley helped to rescue Citicorp, a large commercial bank.


On Dec 22 08:24 AM ResourceWise wrote:

> Miriam, you wrote: “Pandit was the architect of Citi’s turnaround
> in 1991”?! I wasn’t aware of this historical ‘fact’. Even though
> I have followed Citi’s fortunes since 1988, the first I heard of
> Pandit was when he sold Old Lane Partners to Citi for $800 million
> in 2006 and then liquidated the fund in 2008.

2008 Dec 22 10:43 AM

[john1940:]

I listen to Cramer a fair amount to get his input and info. In sum, his contribution is a zero. His value is offset by his misses. What's so great about storing oil? Is he suggesting that someone is going to buy oil cheap and then sell it cheap when prices get higher. Give me that guy's name. Storing oil is a business, but not a great business. This suggestion doesn't solve anything and I don't understand what Cramer thinks is so great about it. The other thing that no one understands outside the oil industry is that filling a large number of large storage tanks takes pipelines. Those don't come cheap and don't appear overnight. All this adds up to tremendous investment requirements.

2008 Dec 22 10:53 PM