Cramer's Mad Money - It's the Economy, Obama! (7/8/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday July 8.

General Electric (GE), Bank of America (BAC), Citigroup (C) JP Morgan Chase (JPM), Caterpillar (CAT), General Motors (GM), Verizon (VZ), AT&T (T)

Obama is revisiting the same kind of anti-business rhetoric that was hurting stocks early in the year, and while energy reform and universal health care are worthy goals, they can wait until the recovery, according to Cramer. Some of Obama's proposals are actually crippling business; AT&T and Verizon are being investigated for anti-trust violations, Obama plans to strengthen unions and to tax offshore corporate profits. Obama's three priorities should be: keeping the stock market robust, creating jobs and making homes affordable. The last of these three has been accomplished, unemployment may take some time to be resolved, but the stock market can ill afford anti-business legislation.

The Obama index of stocks Cramer created to track the President's performance consists of: General Electric, Bank of America, Citigroup, JP Morgan Chase, Caterpillar and General Motors. The index has dropped from 100 to 96. While this might not seem dire, Cramer warned that Obama's new initiatives might send the index and stocks in general on a downward trend.

Baldor Electric (BEZ)

With the increasing likelihood that Obama's cap-and-trade legislation will pass, Cramer urged investors to look for companies that may benefit from tightening restrictions. A law requiring more energy efficient engines in cars is likely to take effect in 2010, and Baldor electric expects to see increased sales for 75% of its motors. Sales are already up 22% last quarter while sales for regular motors increased only 7%. Management guided down and predicts a 20%-25% decline for the quarter. However, these low expectations are already priced in and could create an upside surprise if orders continue to increase. Cramer emphasized Baldor Electric is a play on climate-change legislation, and if for some reason these restrictions don't pass, he might not be as bullish on the stock.

The Futures Farce Will Go On

Cramer elaborated on Tuesday's rant during which he called the futures market a "farce." While good guys like Commodity Futures Trading Commission Chairman Gary Gensler sincerely wants to reform the system, the lobby holds so much congressional mindshare that changing the system might be almost impossible.

Cramer predicts the lobbyist will begin by reminding congressmen of their political debts and encourage them to oppose reforms. Academics from universities funded by donations from the lobby will publish studies asserting that the futures markets are too deep to manipulate. The media will disseminate these "studies." The powers that be will also claim that regulation caused the current problem, and will not provide a solution.

While the road is a hard one for reformists, the attempt to change the Futures Market must be made since oil is “a national imperative and an economic lifeline,” and must be traded fairly, said Cramer.

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Comments

[Spartacuss:]

The three things Obama should be focusing on? One being affordable housing?

Affordable housing is what has gotten us into this mess to begin with and more to come. You cannot make housing affordable, a house sells on the open market for what a seller and a buyer agree to. Second is simple, if you have to borrow the money, you cannot afford it. Why? Compound interest is why. Second, there is no gaurantee of income.

When I grew up during the depression, savings was everything, even your old shoe laces could be used for something. Credit was frowned on. In other words, it is credit and lots of it that is used to make housing affordable. Nothing down, no documents, no job, who cares, at least now the person has a home? For how long?

This country needs to get back on "pay as you go". If we did that there would be no need for quantitive easing and bailouts and guess what? prices would be going down instead of up and then housing gets more affordabable for those who work hard and save.

Like the Hungarian family that migrated to the US in the middle fifties, a family of seven. They had no money and barely spoke English. Within five years they bought the apartment building where we lived, and soon another one. How? Everyone in the family worked and every penney saved up as they lived on almost nothing so they could buy the apartment building and then with the rents coming in their income went up. By the time we left there they had a new car, fine clothes and a life, they earned it, every penny.

Jul 09 07:32 AM

[SJD:]

Amen Spartacuss, everyone wants something for free or earlier than they can afford it.

We may as well give the ountry back to the indians.

Jul 09 09:21 AM

[Sailorman:]

I didn't write this, but I could not have done it better. Cramer you are all wet and need to consider the investor not the system!

We the consumer are being ripped off by the banks, insurance companies, wall street, the health care and oil industries.

Dear Goldman Sachs,

I finally figured out how to prevent you from skimming more of my hard- earned money with your automated trading programs, armies of MIT math PhDs, and connections at the highest levels of world governments.

I took all my money out of the market.

I did a Sarah Palin - I just f'ing quit, is all.

I'm not going to try to beat you. I'm not going to try to co-exist with you, because I know it can't be done. It is impossible for any retail/small/individual investor to get a fair shake in a system where your software programs chug along all day figuring out how to take a penny here, a dollar there, half an account over in the other place. You win. You cannot be beaten. You are the perfect confluence of technology, accumluation of capital, financial innovation, corporate- government partnership, and a complete void of public or community interest. You are a vampire that cannot be killed or stopped.

So, just take it all from the remaining handful of people who are still trying to so-called "invest", and then go pay it all out in bonuses. I am in CDs, with a handful of options for fun. You drove me out of the market. I will never be back. Far as I'm concerned, you can corner every last cent of every last still-extant investor and then buy an island or a whole continent or something with the profits.

Just don't expect me to be back to play again in 2010 or 2015 or 2020. I'm out for good. Your business model is cannibalizing itself. You will be gone in 20 years because there will be no one left to skim. The last person will hand over the last share to you. Your computer program will identify one last peso sitting in some corner of some bar in Manila, and then you will execute a tricky trade to scoop it up at 1/10th of true value, and then there will be nothing left for you to do.

Jul 09 09:54 AM

[jackooo:]

Obama worrying about anti-trust with the telecoms is like re arranging the deck chairs on the Titanic...

Jul 09 11:40 AM

[sethmcs:]

Raise interest rates to 10%+ and housing will get real affordable......For those with cash.

Jul 09 05:56 PM

[jamookey:]

As usual most of the comments are more to the point than this article.One thing not metioned here is that large corporations are begging for universal health care.Health care costs are the biggest reason for GM's bankruptcy.Every other first world country and some third world countries provide a type of health care insurance for their citizens,but we in The great U.S.of A. are supposed to buy into the premice that health care for our people is socialism,well at least to hear the republicans tell it.

Jul 10 07:05 AM

[Dan in mpls:]

I love Cramer madly but Im not so sure his priorites are on point here. I cant see exactly why an increasing stock market it All that important to anyone but the brokers. Call me stupid but I thought one bought stocks to invest in a company and share profits in return. How bad would it be if they passed a law that once you bought a stock you had to wait 90 days to sell it? Wouldnt a lot of brokers have to get jobs creating something of use to society? Granted, churning money is useful but not as an end in itself. The government caused the housing mess by with FHA gone wild though I understand what he is saying about affordable housing - but this time housing will be affordable due to market conditons, not the generosity of the Federal govenment. And it bears repeating that the Governmet is not the best source of productive jobs. Though there is zero doubt that millions of bad paying jobs would be created by a 2 or 3 dollar an hour lowering of the minimum wage to bring it in line with employers ability to pay. After all, the wage a business pays has to be an amount less than amount of money an employer makes by hiring an employee to work for the day. Someone will have to explain to me how it is better for the economy for millions to sit home doing nothing when they could go out and earn some small amount of money but creating value at some job the Government wont allow them to work. I never could see what a living wage had to do with anything. If the Government is wild about living wages, they should be adding to the wages that some employer pays buy sending us all checks if we dont make much money. Oh, thats right, they do that now with the unearned income credit. Back to Cramer. The government isnt going to creat any jobs in the long run, its got to get out of the way and let me hire the help Id love to have if I could afford to hire it. Seven plus bucks an hour isnt the number in a small tourist town on the Mississippi. Not this year anyway.

Jul 10 08:23 AM

[Maxe Paul:]

It's about time someone in the administration investigated Cramer and the "farce" of the stock tipping "touts" who are complete morons.

You know the ones, always wrong, have conflicts of interest and lack disclosure. ie: JIM CRAMER!

Jul 10 01:34 PM

[wassercom:]

Obama isn't "re-visiting" any earlier rounds of anti-business rhethoric. He IS anti-business, pure and simple.

As for Cramer, he shows signs of being schizophrenic: heaping unfounded praise on Obama one day, then calling him a crypto-socialist the next. Which is it, JC?

Jul 10 03:28 PM