Cramer's Mad Money: Ron Insana Is Too Bullish (7/9/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program. Thursday July 9.

A Look at Insana's Bullish Calls: Pfizer (PFE), Microsoft (MSFT), Disney (DIS), Bristol-Myers Squibb (BMY), Time Warner (TMW), Verizon (VZ), Cisco (CSCO), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Huntington Bancshares (HBAN), JP Morgan (JPM), U.S Bancorp (USB), Hovnanian (HOV), Toll Brothers (TOL), Lennar (LEN)

Ron Insana has been a respected name in the investment world for 25 years. Cramer credits Insana with calling the end of the 1998 bear market and praised him for his work on CNBC. However, Cramer thinks the former Street Signs host's calls have been too bullish; Insana predicts the market is about to go up big and he is rejecting defensive stocks, even strong companies such as Microsoft, Disney, Bristol-Myers Squibb, Pfizer, Time Warner and Verizon in favor of banks, housing stocks and insurers. While Cramer agrees with Insana about getting rid of Microsoft and Pfizer, even committed bull's portfolio should contain some defensive stocks Bristol Myers and Verizon, both yielding over 6%.

Cramer also disagrees with Insana's characterization of Cisco as a defensive stock and thinks it will be one of the first beneficiaries in a recovery. He also would hold onto Disney, which is likely to benefit from lower gas prices. He does, however, agree that banks should be bought and approves of Insana's financial picks: Bank of America, Citigroup, Wells Fargo, U.S. Bancorp, J.P Morgan. Cramer thinks Huntington Bancshares in particular will report "spectacular" earnings.

While housing may have bottomed, it may take some time before homes start to appreciate in value. Balance sheets of most companies still need to be repaired before these companies can be bought, and Cramer thinks the best housing play right now is Home Depot.

Recovery in China: Alcoa (AA)

Consumer confidence, job-building, production and consumption are growing at a rapid rate....in China. Alcoa reported a less-than-expected loss thanks to the company's letting go staff in the U.S. and investing in China. “Alcoa’s earnings report could be at least an excellent predictor of what’s to come,” Cramer said. “I don’t really believe what I’m seeing.” China is for the first time becoming a major consumer as well as a producer, and its auto build rate will exceed that of the U.S.by the end of 2009. In addition, consumer confidence is up 113% in China. Cramer thinks it is sad that the Communists are being more market savvy than the capitalists and Obama is concentrating more on health care, cap and trade and anti-trust obsessions than job creation and the economy. Cramer would buy defensive stocks, preferably with exposure to China.

Eureka Moment: To the Regulators Go the Spoils

One reason financial corruption goes unnoticed until the Bernie Madoffs of the world finally cause scandals is the SEC regulators are overworked and underpaid. There just isn't the incentive to catch crooks, and the talent goes to Wall Street not to government offices. “Instead of having people leave the SEC to work in the world of finance,” Cramer suggested “we could have hedge fund managers leave the private sector to make more money at the SEC.”

Cramer's plan is inspired by a strategy employed by the British Navy; those who nab pirates get a good portion of the booty. If regulators were rewarded with a slice of ill-gotten gains from the likes of Bernie Madoff, there would be fewer cheaters out there, and since the criminals are forced to "pay" the regulators, the government would actually save money.

CEO Interview: Zan Guerry Chattem (CHTT)

While Chattem beat analyst expectations by $1.26 a share, The Street said the uptick was due to stock buybacks and cost cutting measures rather than real growth. Cramer noted that sales have increased a mere 4% year-over-year and asked the CEO if just better is good enough. Guerry countered the criticism by saying the sales of the company's top brand names were strong. When Cramer asked if consumers might prefer private-label brands given the weak economy, Guerry said customers are always going to prefer quality. Cramer was convinced by Guerry.

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Comments

[ain't no fo...:]

There is one reason I watch this shill for a certain newly anointed "bank holding company" every once in awhile.

I keep waiting and praying for the day I see the U.S. Marshalls come on the set, slap the leg irons on him and haul him off on securities fraud charges.

That is when I will know the recession will be over.

Jul 10 08:45 AM

[107Sid:]

Here he goes again! For years he has used CNBC to shamelessly promote his "The Street dot com" business. Back when he was a frequent guest, rather thand an employee of CNBC it seemed he would tout it at least once a week, which was the key enabler of the grzowth of his business. Every since CNBC has provided him with a regular platform, he has continually raved about the wisdom of his Street dot com contributors. Insana is just the latest example.

Jul 10 10:55 AM