Cramer's Mad Money - We Have Nothing to Fear but Missing the Next Rally (3/30/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 30.

Nothing to Fear: General Motors (GM), Lincoln National (LNC), Metlife (MET), Hartford Financial (HIG)

Cramer admitted he couldn't account for the huge decline in the Dow on Monday. He explored several theories, such as the call for General Ford's CEO Rick Wagoner to step down, oil's 4% decline and Lincoln Life's skewering of its competitors, such as Metlife and Hartford Financial after committing the crime of declining federal assistance. Whatever was the real cause of the decline, Cramer would use it as a buying opportunity. He doesn't think the market will drop below 3% or 5%, and doesn't see the Dow under 7,000 or the S&P 500 below 750. Cramer thinks we have nothing to fear but missing the next rally.

Obama is No Herbert Hoover

With a staggering drop in the Dow, the fearmongers are back announcing another Great Depression. Cramer is skeptical, because, for one thing, Obama is no Herbert Hoover. The infamous father of the Hooverville was balancing the budget and reigning in spending at a time when he should have been reforming the system, as Obama is doing. Bernanke is no Roy Young, the Fed Chairman in 1929 who was raising interest rates where Bernanke is lowering them. The banks are healthier than in the Depression, thanks to FDIC insurance TARP and other safety measures. Cramer thinks that unemployment might reach 10%, but not the 24% rate of the Depression, nor will productivity decline 75%. Cramer would use the decline as an opportunity to buy.

CEO Interview: Dennis Nixon, International Bancshares (IBOC)

In the old days, it was easy to decide whether a regional bank stock was worth owning, said Cramer. It was as simple as looking at the book value, the franchise value and the location and to wait for a takeover. Now that valuations in the financial sectors are completely out of whack, Cramer is wondering if International Bancshares is a buy. Sure, the stock trades at half book value and has a strong 9% dividend, but is it a safe bet?

CEO Dennis Nixon said the bank has received TARP money, which seemed like a vote of confidence and support from the government, but he added: "Obviously now Congress has now demonized the whole process, and made us all look like fools." Nixon said the bank is under constant examination as a TARP recipient and t 99.5% of its securities are Fannie Mae and Freddie Mac pastured. He discussed the advantage the Southwest has over the Northeast and noted housing prices are on the increase in Texas. While Cramer said "everything I heard I like," he is still leery about recommending any bank stock.

Mad Mail: Agnico Eagle Mines (AEG), El Dorado (EGO), SPDR GoldShares (GLD)

Cramer told a viewer who was worried about the future of gold that gold should be a part of every portfolio. He doesn't think this is the season to own yellow metal, but Cramer would buy on the way down. He has recommended AEG, EGO and thinks GLD is a buy under $90. Cramer told another viewer concerned about the national debt that gold is a good hedge in an unpredictable market. Cramer explained to another viewer that hedge funds try to drive up positions the last few days before the end of a quarter rather than on the last day, which might partly explain the rally late last week.

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Comments

[Robert91C:]

So, major segments of the economy avoiding bankrupcty only due ongoing bailouts, a stream of dividend cuts, and decreased demand (massive and global with no end in site) are not to be feared? I commend Mr. Cramer's courage. He was pretty courageous a year ago as well:

www.youtube.com/watch?...

Being the coward the I am, I'll hold onto my fear that the market is ludicrously overbought. The only hope for equities is that foreign powers divest from T-bills into them.

Mar 31 07:03 AM

[lghitis:]

The people writing this article are going short on IBOC?

Mar 31 07:10 AM

[basehitz:]

CNBC provides enough misinformation without this constant re-reporting what these trader mouthpieces air. A little history:

Early 2000: Irresponsible cheerleading, almost giddy reporting of daily new Nasdaq highs. Instead of responsibly warning of unsustainable valuations, the cheerleading was constant. Remember "Price/page hits" in lieu of P/E or P/S cause most had no "E", and some had no "S". No problem for bubbleTV.

2002 late summer: 3 years of pounding, the market near a bottom, and now . . . FINALLY. . . the adults get some air time warning of the deep-rooted problems. Backwards again.

2007 and well into 2008: Relentless cheerleading is again in vogue. Larry Kudlow, Dennis Kneale, Erin Burnett, to name just a few of the chronic cheerleaders.

Oct 2008: AFTER the damage, now CNBC airs those predicting the worst. AFTER the damage.

And you can further break down the above into countertrend moves within a primary trend. Basically, whenever the cheerleaders are in full pom pom mode, watch out. Whenever they are crying in their beer, have your BUY watching list ready. If you follow them, you are more than likely backwards.

So why does CNBC chronically get in back-asswards? 2 possible theories:
1) Ratings, and by extension advertising revenue. I have repeatedly read from other sources that CNBC ratings go higher during market volatility, whether rally or selloff. So, if CNBC can cheerlead overbought markets higher, or scare investors during a selloff, either way they get higher ratings. (And either way their viewers lose money if they follow the advise.)

2) CNBC is a shill for the traders, who know all this "advise" is back-asswards but use CNBC to mislead their viewers cause they want your money. And CNBC needs something to put on cause their “experts” are mostly actors.

So, since we know historically CNBC is more apt to give misinformation than good advise (and this is not disputable), why does anybody watch? As the above 10 years shows, they do. As for why, ask Dr Phil. I have virtually discontinued watching all CNBC programming. They are just too wrong too many times.

Mar 31 08:00 AM

[PeteK:]

Most medias nowadays are quite bias.
Otherwise Hillary would have been at a higher position now.
Freedom of Speech, that's what we get !!

Mar 31 08:58 AM

[tedster98:]

You're right. Obama is no Hoover. Obama is a communist.

Mar 31 11:13 AM

[Crude Oil T...:]

Please remove Jim's comments until we are back in a bull market. Jim is not qualified to give advice in a bear market and a lot of new investors are reading this and being sucked into a trap.

Anybody reading this needs to know all of the smart is short this market until we get to the 600 level on the SP 500. That is just the cold hard facts.

Let's just let Cramer vacation until 2010 or so, then he can come back and teach people how to use fundamental's etc.



stock-market-club.blog...

Mar 31 01:57 PM

[ScroogeMcduck:]

SCROOGE LIKES GOLD

Mar 31 04:38 PM

[doctordoctor:]

"basehitz" is spot on. good history lesson. again if one uses barron's marketlab sp500 estimate of 26, market is vastly oversold by an order of 60-80 percent. but again, maybe this time is diffrerent. us older folks however have experience that says its probably not.

Mar 31 06:53 PM

[moron:]

is what anyone who thinks the S&P is going anywhere near 600 is...

It might test 700 again, but 600, give me a break...

That said, watch the next two weeks, they could be a bit choppy. I am hearing a lot of talk of sideways trading but I see more of a downside here.

Mar 31 07:49 PM