Cramer's Mad Money (1/6/09) China Saves the World

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Tuesday January 6.

China Saves the World: Qualcomm (QCOM), McDonald’s (MCD), Merck (MRK), BHP Billiton (BHP), Joy Global (JOYG), Eaton (ETN)

Although in the past Cramer has been dubious about trusting Chinese stocks, he thinks Chinese Communism will actually save Western Capitalism. China is saving itself because it cannot afford a further decline and is throwing money at its problems; the Chinese government has cut interest rates five times and has a $600 billion stimulus package, which includes $40 billion for telecom (this is good news for Qualcomm, Cramer observed.). Why does this matter to the U.S? Cramer says the China trend will be a huge catalyst that will move investors out of stocks like McDonald’s and Merck and into more cyclical stocks such as BHP Billiton, Joy Global, Freeport McMoRan and Eaton.

CEO Interview: Sandy Cutler, Eaton (ETN)

Sandy Cutler, who last appeared on Mad Money in November 2008, discussed Eaton’s progress. The stock has risen 27%. Cramer wondered if it is time to take profits or if Eaton is worth holding. In spite of the rise in stock price, the company lowered guidance and had a challenging fall because of the global liquidity crisis; Cutler doesn’t expect business to improve dramatically for another 6 to 9 months. However, 55% of Eaton’s business is overseas and cost-cutting measures are having a positive effect. “No more selling for Eaton,” said Cramer, praising the company’s clean balance sheet.

Another Dow Favorite: Verizon (VZ), Sprint (S), Research in Motion (RIMM)

On Monday’s show, Cramer discussed his favorite Dow stock, Hewlett Packard. On Tuesday, he discussed his second favorite, Verizon, which fell 6% on a downgrade from neutral to underweight with a target price between $27 and $32 a share. Cramer thinks this downgrade was unjust and is based on false assumptions. Cyclical stocks are actually doing well, and Verizon’s main competitor, Sprint, is performing poorly. The Blackberry Smartphone sold out in just a matter of hours, which is also good news for Verizon’s partner, Research in Motion. While not everyone is in love with FiOS, Cramer said the service is taking market share and is benefiting Verizon. Cramer likes the company’s high 5.8% dividend, which he says is quite safe. Even if there were some truth to the downgrade, he notes a drop in the stock price to $27 would lift the dividend to 6.8%.

The Biggest Loser: General Mills (GIS) CEO Ken Powell

No, General Mills is not a loser, nor is its CEO Ken Powell, who appeared on Tuesday’s program. Powell discussed General Mills sponsorship of the NBC program “The Biggest Loser” and its “pound-for-pound” program which donates 10 cents to Feeding America (the largest food bank in the U.S.) for every pound lost by visitors to the company’s website. General Mills’ fundamentals are sound “even in this tough commodity environment,” said Powell, who reported growing margins and a great second quarter. While a strong dollar could hurt General Mills overseas, the company has a strong enough domestic business to weather the storm. Cramer endorsed General Mills and pointed out its century-long tradition of paying its dividend.

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Comments

[CautiousInv...:]

I watched the show and noted Cramer's comments about China. In thinking about investment themes for the new year, China shows up on the radar screen because it's size and the fact that it is still growing.........maybe 5% down from 10%. Wireless and other consumer sectors appear interesting.

With respect to the stimulus package and China fueling exports, I would urge caution. Reuters quoted Shanghai Citigroup Ken Peng as saying, “The stimulus package is big, but it’s actually a combination of a lot of things that have already been announced.”

A glaring example of China’s PR machine in action is that the $600-billion package included nearly $3 billion that Beijing had already earmarked for rebuilding in Sichuan province and other regions devastated by the earthquake earlier this year.

The stimulus plan also called for some $292 billion on the railway system. But Ting Lu, a Merrill Lynch analyst, reported that most of it had been previously allocated. He pegged the real number at $58 billion of new funds — still a sizeable number but far short of what China led the world to believe.

Jan 07 05:49 AM

[sr9web:]

"Cramer says the China trend will be a huge catalyst that will move investors out of stocks like McDonald’s and Merck and into more cyclical stocks such as BHP Billiton, Joy Global, Freeport McMoRan and Eaton."

Ha!Ha!Ha!

What a laugh riot!

Even as we speak BIG MONEY is selling China bank shares in large $$....

USA recession is the tail which wags the global dog.

China is going to be sucking wind just as bad as USA - maybe worse.

Jan 07 07:31 AM

[Norman Lepo...:]

Ignore Cramer! His advice is awful!

Jan 07 08:38 AM

[Michael Del...:]

Norm,

You are beginning to sound like a broken record. Why ignore Cramer if one finds him entertaining? Should one buy a stock because Cramer says it is a good deal? Absolutely not. Can one get some ideas from his show for further research? Sure one can. But one should not buy anything unless one has researched it oneself and concluded that the fundamentals indicate a strong company. Then check the technicals to determine a fair price to pay.

You have strong anger issues with Mrs. Cramer's baby boy. Maybe you lost a lot of money betting on a stock that Cramer recommended and you will never forgive him for it? Take credit for your wins. Take responsibility for your losses. Don't blame others for your misfortune.

Jan 07 02:02 PM