Cramer's Mad Money - Unsafe at Any Yield (3/12/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday March 12.

Unsafe at Any Yield: Alcoa (AA), BB&T (BBT)

Cramer likes accidental high yielders: stocks that see a rise in their dividends when their stock prices fall, but a precipitous fall, such as Alcoa's plunge from $44 to $6 puts its large $11.5 dividend in doubt. First, the company's balance sheet is a mess, said Cramer; it has $10.6 billion in debt compared to $762 million in cash. Yet the company is going to increase spending, as it intends to borrow another $1.5 billion to fund its projects. Earnings are not generous enough to cover the dividend, said Cramer, whose rule of thumb is that earnings should be at least double the dividend. Alcoa expects to lose 70 cents a share in 2009 after losing 70% of its earnings power. Cramer would also beware of BB&T, the only TARP recipient that has not cut its dividend.

7 Reasons the Rally Will Continue: Wal-Mart (WMT), Costco (COST), Lowe's (LOW), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), JP Morgan (JPM), General Electric (GE), Merck (MRK), Genentech (DNA), Gilead (GILD), CV Therapeutics (CVTX), Schering-Plough (SGP), IBM (IBM), Taiwan Semiconductor (TSM), General Motors (GM)

Cramer has been saying that this rally will continue, and on Thursday, he gave seven reasons why:

1. Retail sales are better-than-expected. Yes, they are down, but there are signs of hope in Wal-Mart, Costco and Lowe's. Low gas prices might spur the consumer on further.

2. Bank of America, Citigroup, Wells Fargo, JP Morgan are all profitable. Cramer thinks the Dow could gain another 500 points if Bernanke's advice not to focus too much on past bad loans is heeded.

3. General Electric rose after a Standard & Poor's downgrade. This indicates that the bad news was already baked into this conglomerate

4. M&A activity in pharma. This affected Genentech, Merck, Gilead and Schering-Plough, and may have a positive impact on the entire sector.

5. Pharma is up. The M&A activity encouraged investors to put their profits back in the market.

6. Good news from Taiwan Semiconductor and IBM; TSM had an upside surprise and IBM beat earnings.

7. General Motors said it didn't need the last $2 billion it received from the government.

Cramer's Outrage: The SEC

With Bernie Madoff finally behind bars after defrauding his investors of $50 billion, Cramer vented his rage at the SEC which dropped the ball. The only way to stop these crooks is for the SEC to wake up and keep a watchful eye, according to Cramer.

Mad Mail: ConcoPhilips (COP), DB Crude Oil Double Long (DXO)

When a viewer noted ConcoPhillips was down, Cramer said one reason was the management said oil needs to be higher so the company can make more money. He added; 'What an opportunity to buy Conoco. Because it has a great yield, it has great management, and I think oil stabilizes and they make a ton of money.”

Cramer told another viewer that he dislikes double long funds like DXO almost as much as he dislikes Double short ETFs.

The nightmare scenario of nationalized mortgages won't happen, said Cramer, who would go with banks that hold onto their mortgages rather than sending them off. He added: "You know what, look [at] what we just went through because competition was freewheeling – the worst housing situation in the world that gave us the second worst bear market ever.”

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Comments

[MGA_1:]

Cramer says buy gold, it immediately goes down. Bear stearns was one of the all time awful calls. Buy when the DOW is at 14000. The fed should get out of the way... the fed need to jump in and save the economy.

www.youtube.com/watch?...

He's very entertaining but I'd be careful of anything he says.

Mar 13 09:38 AM

[Emerald:]

It is irresponsible to simply repeat a quote that "the banks are profitable". What does this mean? Profits before write-offs, profits before increasing loan loss reaserves for credit card defaults and commercial loan defaults?

Mar 13 10:48 AM

[whisperonth...:]

GM actually said it didn't need that 2 billion THIS month. It WILL need it soon. And if the suppliers don't get some help pretty soon, it won't matter whether any of the auto manufacturers get money because they won't have any suppliers left. The manufacturers will be at a red light with no place left to go.

Mar 13 06:44 PM

[Shiva1968:]

He doesn't like the double long or double short etf's. Why? Not like I really care about his opinion anyway.

Mar 15 03:18 PM