Cramer's Mad Money -10 Reasons the Economy Is Not So Bad (2/6/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday February 6.

10 Reasons the Economy Is Not So Bad: Cisco Systems (CSCO), State Street (STT), Wal-Mart (WMT), Apple (AAPL), Google (GOOG), Research in Motion (RIMM), Amazon (AMZN), UPS (UPS), FedEx (FDX)

The fact that the Dow rallied 217 points in spite of the worst unemployment number-7.6%- in 16 years shows the market is not as bad as it seems, said Cramer, who found ten other reasons to be optimistic:

1. The Federal Reserve has declared it will take necessary steps to save the economy.
2. Even as the government is still hammering out its stimulus plan, other markets, like China, are already influencing the U.S. market
3. The Baltic Dry Index has jumped, which is a good indicator of demand in China, especially for nickel, copper and other commodities.
4. The Chinese market is up 20%.
5. While Cisco had a negative outlook and State Street cut its dividend, the stocks are up 11% and 29% respectively.
6. Wal-Mart sales indicate the consumer is alive and well.
7. Housing sales are rising where the prices are low. In addition, the $15,000 tax credit for homebuyers might help spark a housing recovery.
8. Hedge fund selling is slowing and redemptions are reduced.
9. The four horsemen of tech: Google, Apple, Research in Motion and Amazon, are galloping again, and are market leaders.
10. UPS’ quarter was good, which is an important fact, since Cramer considers UPS a “tell” stock. FedEX and rail stocks are up, too.

Obama’s Second Honeymoon: Goldman Sachs (GS), Morgan Stanley (MS)

After all of the initial excitement surrounding Obama’s election and inauguration, many people are feeling“betrayed” by Obama’s stimulus plan, especially after Nancy Pelosi stuffed it with pork, according to Cramer. The Mad Money host suggested a “Second Honeymoon” plan for Obama. First, enough with draconian measures against banks, like salary cuts for executives of banks that receive TARP funds. The solution is one that seems unlikely but worked in the aftermath of the S&L crisis in the 80s. There should be forbearance for banks, Cramer said. Banks that are worth saving should receive a temporary “free pass” in exchange for notes promising to pay back the government when things get better. This saves the banks from having to sell assets to raise cash and can enable them to loan money to people in need. Now that we have two healthy banks, Goldman Sachs and Morgan Stanley, there is more hope than there was three months ago, and these two good banks can buy up the bad ones. Second, Obama should bring the infrastructure allocation back up to $300-$400 billion to get people back to work. Stimulus number two should be full of public works projects to get the country working again.

CEO Interview: Murray Martin, Pitney Bowes (PBI)

While Pitney Bowes has taken a hit, Cramer said it reported a “pretty darn good quarter.” One of the most shareholder friendly companies out there, Pitney Bowes has returned 48% of its free cash flow to shareholders in the form of dividends, which have been increased for 27 consecutive years, and stock buy backs. Currently, the yield is at 6%. CEO Murray Martin says in spite of a brief slowdown because of leasing issues, the company continues to have a 10-12% growth rate for the long term, 2-4% of which is organic. Murray Martin says the company is continuing to diversify and is a leader in software development. Pitney Bowes was hurt by its exposure to financials, but Martin says the loss has leveled out.

Speculative Play: GMX Resources (GMXR) with Chesapeake Energy (CHK), Anadarko Petroleum (APC)

When speculating in the energy sector, it pays to look at how cheap a stock is relative to its net asset value, which is the amount left after liabilities are subtracted from total assets. GMX Resources closed at $23.84, and its net asset value range is between $20 and $50. This is not taking into account its reserves which might bring the value to the range of $60-$85 a share. Cramer thinks GMX Resources could potentially be worth even three or four times its current value and may be an attractive takeover target. The company has a sizeable portion of the very rich Hanesville shale; 435 billion cubic feet in proven reserves and 3.2 trillion cubic feet in total reserves. The company is expected to increase production while lowering production costs. Cramer thinks GMX Resources has a lot in common with Chesapeake and Anadarko, but its production costs are lower. While Cramer thinks GMX is a buy, he still thinks it is speculative and would wait for a drop before buying and recommends using limit orders.

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Comments

[jimocarroll:]

> Housing sales are rising where the prices are low. In addition, the $15,000 tax credit for homebuyers might help spark a housing recovery.

Please excuse my cynicism, but I see the net effect of this "tax credit" as increasing the asking price of homes currently on the market by about $15,000 each.

Feb 08 08:58 AM

[texn2:]

Wal-Mart's earnings show that the conservative public is smart. The earnings also show just how wrong, anti-Wal-Mart agendas have been. Wal-Mart is like a tax break for all "smart" Americans. They are doing great things to help Americans get through this recession by saving them money on everyday items. Wal-Mart will do more to help "all" Americans save money than any government stimulous package ever could. Just walk through Wal-Mart and you will see the most multi-cultural customer base you have ever seen in your life. Truly an amazing operation!

Feb 08 11:10 AM

[Atypical:]

texn2
While consumers are happy to save money and Walmart's prices generally help them do that you're very selective in your comments.
This company hurts consumers by underpaying them, asking them to work overtime without paying them (they paid after being sued over that), not providing benefits, (pushing costs onto states rolls for healthcare) and forcing Americans to lose jobs here by buying most of their items abroad. When all this and more I could relate are calculated it is not your rosy picture. And by the way, the stimulus whatever its merits, is for the entire country's health, which covers more than just getting low prices in a discount store.

Feb 08 06:07 PM

[Hayweed:]

Rimm may be galloping but the fact that Verizon is selling blackberries on a 2-1 sale is going to hurt margins or is a sign that they have way too many blackberries in inventory. Either way that is a bad sign for Rimm. I would be short this and Amazon with its crazy pe ratio.

Cisco says the market for networking gear stinks. Only thing I see positive is that Superbama will save us.

Feb 08 08:03 PM

[brewer:]

texn2, you must be kidding about wally-world. That company is a scourge on humanity, and the prices are no better than ant other large discount store. Finally, it is definitely not a cross section socioecomically, it full of lower class and generally low IQ shoppers, nothing 'smart' about it, and all the 'buy American' rhetoric is pure propaganda. They could care less. They aren't doing that well either.

Feb 08 10:02 PM

[Harry Tuttle:]

Number 1 takes the price for most stupid argument in a logical discussion.

I mean, what ELSE could they say? Is there ANY chance that the Federal Reserve declares that the will NOT take the necessary steps to save the economy? or that they don't really know what to do?

By the way, am I the only one who remembers that Bernanke said that the sup-prime crisis was "contained?" or that he said the American banks were "strong and well capitalized?". All of this from a guy who, unlike most of us, actually had ACCESS to the books.

If I had to bet, I'd say that by the end of this crisis the Fed will have no credibility. But what do I know? I am no Cramer.

Feb 08 10:22 PM

[Mmarrkk:]

Atypical: you said that WMT is "not providing benefits, (pushing costs onto states rolls for healthcare)".

Please answer me this: Where is it written that healthcare benefits MUST be underwritten by employers?? Why is that something that HAS TO BE PAID for by an employer? Healthcare is not a right, particularly a right of employment. Companies that pay for healthcare pay for it either out of the kindness of their hearts or because they have a business case...keep employees healthy and they show up at work and make me lots of money!!!

The nanny state...a trainwreck waiting to happen! Just ask your friends in the Former Soviet Republics how great it USED to be for them!!

Feb 09 09:50 AM

[Atypical:]

Mmarrkk

Healthcare is a right. How its administered is the issue. Walmart is all about restricting expense. What I wrote above are some of the facts about their MO. In addition, they play manufacturers against one another and have caused some to be hurt financially just to be able to sell to Walmart.
If you feel that companies shouldn't have to support employer-paid healthcare then you should be in favor of single-payer healthcare. It is the least expensive and most efficient option.
If you feel that it is not a right then what happens to those who fall ill. Let em die, right? What if it is you?
Nanny State? Soviet Republics? What does that have to do with healthcare? Why do opponents of anything for average people always quote communism, or socialism. So you don't want a society that provides services for people. Okay, don't call the police, fire dept, take mortgage deductions, drive on roads, get social security, go to veteran's hospitals, okay?
Society for the wealthy only, right. Everyone else can F off, right?
Are you upset about the unnecessary war that was based on lies. Do you know how much we spend on it and how much has been stolen? If you don't want to spend money "unnecessarily" then fight to get the war stopped and regulations on uncontrolled capitalism implemented. What will the bailout cost? But you are worried about a nanny state for individuals in need rather than corporate thieves. Your concerns are misplaced.

Feb 09 10:37 AM

[Randall Arnold:]

It's easy to pluck independent numbers out of the mix and find optimism... but to me it looks like Cramer is desperately grasping for it.

And MMarrkk, you might do well to read up on subjects before spouting off. Atypical (above) is on target. And it's funny that you support a company's "right" to deny healthcare to employees while simultaneously decrying the possibility of the federal government getting into the business. So... what's your solution to healthcare? That should be an entertaining read.

Feb 09 06:38 PM

[Mmarrkk:]

Healthcare is not a right. But we can debate that for a long time without agreeing.

I am not supporting a company's "right" to deny healthcare. What I am questioning is why do we assume the companies MUST provide healthcare coverage at all? Where did that get written in a law, a constitutional amendment or regulation?? You see, I don't agree that companies should be FORCED to supply healthcare coverage. If they offer it, then that is great. But if they don't, then we shouldn't judge them harshly. Now, their employees can judge them harshly and use their feet to vote! They can decide not to work for WMT because Target or anyone else decided to offer healthcare coverage.

What we're approaching, since so many of you decided that healthcare is a "right", is healthcare as welfare. Again, if that's what the majority of the country wants, then I guess that's where we're going. But don't impale the system with rules that will strangle the free-market side of the biz. Previous attempts would have made it ILLEGAL for a provider to work within the government's system and a free market pay as you go system. That is ludicrous. If I can pay for a doctor out of my pocket, why shouldn't he be allowed.

How about we take a few trillion out of O's "Steal-from-us" plan and use it to buy a high deductible healthcare plan for everyone?? Then, I'm sure we'll have to give out checks for the deductibles for everyone but the evil rich. Personally, I have a HSA and a HDHP that covers catostophic events.

What next? Owning a home is a right? Owning a car is a right? I guess with the new "fix" the gov't will be bailing out the idiots that got in over their heads with high leverage mortgages and couldn't read or comprehend those evil loan documents. While those of us living within our own means still have to pay 100% of our mortgage, these clowns will have 30-50% of their loan balances "forgiven". I'd like for someone to say "thank you" when I finish paying for their stupidity and greed.

Feb 10 09:04 AM

[cubanstockp...:]

This is a buyers market, I want to see a seller try and pull that one off in this market. I am telling sellers what my clients are going to pay them and they willingly obey.


On Feb 08 08:58 AM jimocarroll wrote:

> > Housing sales are rising where the prices are low. In addition,
> the $15,000 tax credit for homebuyers might help spark a housing
> recovery.
>
> Please excuse my cynicism, but I see the net effect of this "tax
> credit" as increasing the asking price of homes currently on the
> market by about $15,000 each.

Feb 12 02:28 PM