Cramer's Mad Money - Profits of Doom (6/9/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 9.

Profits of Doom

No matter what the news is, the press is determined to put a negative spin on it, said Cramer. Rising gas prices could just as well be a sign of increasing demand as it could be an obstacle to the consumers. And why is repaying TARP money such a terrible thing? Prophets of doom decry rising bond yield, but perhaps this indicates that people are actually able to buy bonds. Cramer says he's sick of hearing the phrase "derail the economy" constantly in the media and instead prefers to focus on what is keeping the economy on track. He suspects the media adage "if it bleeds it reads" is applicable in this case, and that a negative spin is being applied to grab more attention.

Off the Charts: Ebay (EBAY)

Cramer's favorite technician, Dan Fitzpatrick, says Ebay's chart does not indicate a move in either direction, and he predicts Ebay will trade sideways for a while. Many expect a decline in eBay's stock price and cite CEO John Donahoe as the cause of Ebay's problems. Cramer disagrees, and thinks Donahoe inherited a world of problems from predecessor Meg Whitman. He actually thinks eBay is due for an upside with improvements in product search, free shipping options and payment protection. PayPal and Skype are still valuable assets and eBay has $3.2 billion in cash. The company is also levered to international growth since 52% of its revenues are from overseas.

CEO Wall of Shame: Boeing (BA), Verizon (VZ), AT&T (T), DryShips (DRYS)

When Cramer asked viewers who should be the next inductee to his CEO Wall of Shame, his inbox was flooded with e-mails, but two suggestions he felt were unjustified were Boeing's James McNerney and Verizon's Ivan Seidenberg. Even though the release of Boeings Dreamliner 787 has been delayed, Cramer thinks it will make an appearance before the Paris Air Show in June 15, and Boeing declined a mere 12% compared to the S&P 500's 22% drop. Cramer also thinks Ivan Seidenberg has been the recipient of unfair criticism, particularly since his company is down only 6% compared to a 6% decline in AT&T, a 36% drop in Qwest's stock price and Sprint-Nextel's 58% decline. Verizon's success with FiOs and wireless caused a 44% bounce between 2002 and 2008.

The new inductee to Mad Money's CEO Wall of Shame is Dryships CEO George Economou. DryShip's stock price has declined 66% since he has taken the helm. The CEO insisted on buying new ships while the price was high instead of waiting for a discount. For Economou's lack of economic sense, he joined other the disgraced CEOs.

Mad Mail: MasTech (MTZ), Quanta Services (PWR), Annaly Capital (NLY)

Cramer recommended MasTech and Quanta Services as plays on replacing the energy grid. He told another caller not to buy Annaly Capital.

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Comments

[Bob C:]

"Many expect a decline in eBay's stock price and cite CEO John Donahoe as the cause of Ebay's problems. Cramer disagrees, and thinks Donahoe inherited a world of problems from predecessor Meg Whitman."

This shows that Cramer does Not do his homework, and is Not to be trusted.
Donahoe has created most of eBay's current problems with fee increases and insane policies.

Jun 10 07:25 AM

[redbaron:]

I agree with Cramers overall thoughts on the market as expressed here, but disagree on eBay's potential. Donahue has dug himself a hole, and I don't see him climbing out of it. I am a long time seller, long time investor, and I have successfully shorted the stock several times in the past few years. I have no position currently.

Jun 10 09:14 AM

[Philip Cohen:]

I have no doubt that eBay buys analysts like they buy governments (and for a lot less consideration), that's probably how they get away with knowingly “aiding and abetting” unscrupulous shill bidding sellers to defraud consumer (via their “hidden bidders” nonsense) with nary a peep from the consumer protection authorities.

I have no doubt that Donohoe’s ongoing desperate attempts to recover his performance bonus will bring another reduction in revenue for Q209. No amount of petty 99c promotions is going to lift listing numbers sufficiently to offset the damage being done to this once-greater company by this latter-day Captain Morton (no jokes about potted plants, please). Where are you Mr Roberts when we so desperately need you?

The real question is, are the stockholders going to let this turkey survive yet another Xmas?

Donahoe clearly is a skilled company dismantler; any attempt by him to stop the rot at eBay is: too little, too late, too greedy, too arrogant. He apparently thought he had an impregnable monopoly and that they could do whatever they liked: how wrong he was; and apparently, they still don’t understand that it is the welfare of the customers that counts, not that of the good captain and his executive officers.

Actually, I doubt that he is even skilled in “wrecking” companies. If I was him I would be using all my MBA skills to offload PayPal to the credit card companies because the more successful the “clunky” PayPal becomes (?) the more likely the credit card companies will add a like card/terminal-less dialogue to their portal (and they will do it properly), and that my friends will be the end of PayPal outside of the mandated Donahoe-ever-shrinking eBay marketplace.

For anyone that is interested, a detailed case study of another instance of blatant shill bidding on eBay, “hidden bidders”, the abuse of eBay’s proxy bidding system, and a detailed comment on eBay’s disingenuous attitude thereto, at www.auctionbytes.com/f...

Jun 10 02:56 PM

[Patricia013:]

I'd like to know what flavor of Kool Air Cramer is drinking and did they at least send him a case of it for his comments? His turnaround from "that hapless company" to his present take was so quick you would have gotten knocked over by the wind if you were anywhere near him! Sad....very sad because a lot of people buy or sell on what people like him say. Cramer forgets that when Donahoe took over Ebay's stock was at $33.00 a share! You cannot hide the one year decline no matter what Kool Aid flavor you're drinking!

Philip Cohen - you and I basically agree on almost everything Ebay ;-)

Jun 11 03:52 PM

[Patricia013:]

Oh...I forgot to add BOO-YAH!

Jun 11 03:54 PM

[Philip Cohen:]

But, Patricia, you still accept, at face, value eBay's given reasons for the introduction of "hidden bidders"; whereas I accept nothing they say at face value, and will always believe that the purpose of “hidden bidders” was always primarily to obscure all but the most blatant of shill bidding, and I believe that my case study establishes that beyond any doubt. And, I have further developed my comments thereon, specifically on the way eBay presents the data that is supposed to enable buyers to protect themselves from such criminal activity (still at www.auctionbytes.com/f...)

Jun 12 12:19 AM

[Patricia013:]

Philip - no....they never said that hidden bidder ID's was to protect second chance offers - at least not to my knowledge. As usual they claimed it was for the "bidder's safety". I agree with you that it does improve the environment for shilling - but still state its main use was to save second chance offers. Shill bidding was always there - practically from day one. Ebay generally ignored it but they couldn't ignore the losses being suffered openly by scamming second chance offers. Either way makes sense but you chose to believe it was just to shield schillers. Ebay never thought to shield schillers from the beginning up to the time hidden ID's went into effect ;-)

Jun 12 12:40 PM

[Philip Cohen:]

Patricia,

Fraudulent SCOs were effectively stopped dead in their tracks by eBay’s blocking of access to users’ direct email addresses. “Hidden bidders”, on the other hand, serves no purpose other than to lessen the transparency of the auction platform thereby effectively obscuring any but the most naive and blatant of the shill bidding, that is undoubtedly now running rampant, so that eBay does not have to waste any of their valuable resources doing anything about it. Unprincipled, unscrupulous, disingenuous (or, if none of these, simply stupid) …

Then what more could one expect from a turkey such as “Noise” Donahoe who, at this stage of the game, can have only one thing on his mind: saving his skin (forget about the above-the-table “performance” bonuses, for him they are forever gone, I suspect).

And you all thought that we had left all such unprincipled “robber barons” behind in the twentieth century. Not so. Their descendants are alive and well and tinkering with eBay. Which then begs the question, where are those consumer affairs regulators whose job it is to protect we simple consumers from such greedy men as this?

And, for anyone who buys on eBay, a detailed case study of a classic instance of blatant shill bidding (undetected by eBay) and the abuse of eBay’s proxy bidding system—all exacerbated by eBay’s introduction of “hidden bidders”—and a detailed comment on eBay’s disingenuous attitude thereto, at www.auctionbytes.com/f...

Jun 13 05:24 PM

[Patricia013:]

"Fraudulent SCOs were effectively stopped dead in their tracks by eBay’s blocking of access to users’ direct email addresses."

Told you before, all the phony SCOs I got came right thru Ebay's own message system.

Jun 14 01:07 PM

[Philip Cohen:]

Oh Patricia, and were you taken in by any of these scam text messages?

I believe that anyone who is taken in by a scam SCO “text” message that comes via the eBay messaging system from a registered eBay user who is clearly identifiable as not being the seller, is an idiot. Such a person’s mental defect should not be eBay’s problem, and I have no doubt that they would agree with that premise.

I’ll say it again, “hidden bidders” has nothing to do with fraudulent SCOs. The only purpose served by “hidden bidders” is to obscure all but the most naive and blatant of shill bidding: what the consumer cannot see, eBay does not have to worry about.

eBay is a most unscrupulous, devious, disingenuous organisation ...

Spend 10 minutes and read my case study at www.auctionbytes.com/f...
I think that I have therein demolished all of eBay’s disingenuous “spin”.

Jun 15 06:17 AM

[Bob C:]

Patricia and Philip,
Don't know if this will help settle the issue, but here is a link from Jan. 2007 about SMI's, with a link for FAQ's.

www2.ebay.com/aw/core/...

I really liked the statement:
"I'd like to acknowledge the concerns we've heard from some members who believe these changes may encourage shill bidding (the act of using friends or alias User IDs to bid on a seller's own listing to artificially increase the bidding level.) First, let me make it very clear that shill bidding is not tolerated on eBay."

Jun 15 04:55 PM

[Bob C:]

PS:
I joined eBay in 1997, and back then a members id was their email address.
I never had a problem, and didn't pick a "user name" until forced to do so.
A couple of my early feedbacks came from sellers that I furnished info to about their item, to help it sell better.
Any member could leave another member feedback, good or bad, even with no bidding or transaction taking place.

Jun 15 05:13 PM

[Philip Cohen:]

Hi Bob,

I don’t need to be able to see the look on you face to know that you quote that statement with tongue firmly in cheek.

I have analyses a number of eBay’s disingenuous statements at:
www.auctionbytes.com/f...

Further, I always refer to eBay users as “users”, for to refer to them as “members”, as eBay does, is to imply that the organisation is run for some benefit of those “members”—it is not: No action taken (or not taken) by eBay management has anything to do with benefiting or protecting eBay users (buyers or sellers): eBay’s every action (or lack thereof) is purposed solely towards desperately attempting to improve the appearance of eBay’s bottom line by whatever means necessary—undoubtedly more to do with the protecting of executive performance bonuses (or jobs) than with any direct consideration for shareholders—and if at any time there appears to be some benefit to eBay “users”, that will be purely coincidental.

This arrogant eBay management clearly think that their “users” are all stupid. Well the chicken are now starting to come home to roost; I look forward to the Q209 comparison between eBay and Amazon.

The real question for me is, can this “turkey” Donahoe possibly survive another Xmas?

Jun 15 05:32 PM

[Philip Cohen:]

How can the management of a company, whose reason for being has been so enjoyed by so many for so long, become so despised by so many of those same people—and still survive? Not much longer, I suspect.

John (aka “Noise”) Donahoe, surely, you've done enough damage to eBay, please take the “golden parachute” and offer your executive services to Intel—although where Intel gets the idea that you have any ability, I cannot imagine.

Jun 15 06:08 PM

[Patricia013:]

"No action taken (or not taken) by eBay management has anything to do with benefiting or protecting eBay users (buyers or sellers): eBay’s every action (or lack thereof) is purposed solely towards desperately attempting to improve the appearance of eBay’s bottom line by whatever means necessary—undoubtedly more to do with the protecting of executive performance bonuses (or jobs) than with any direct consideration for shareholders—and if at any time there appears to be some benefit to eBay “users”, that will be purely coincidental."

Ebay gains or loses nothing on shill bidders - the item still sells and generally for even more money (and a higher FVF) - they could care less about shillers. Now second chance offers was quite a different story. Ebay users became afraid to use second chance offers - sellers were putting right in their listings that there would be no second chance offers and if a bidder got one it didn't come from him! That is what prompted the hidden bidder ID's. As said above the loss of FVFs on second chance offer is why Ebay came out with hidden IDs and for really no other reason.

As for me falling for one of those scams....no. Yet many people STILL fall for the nigerian scam and look how long thats been around in its various forms. ;-)

Jun 21 08:29 PM