Cramer's Mad Money - A Great Idea Whose Time Has Come (and Gone) 7/30/09

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

Sell Block: AutoNation (AN), Carmax (KMX), Penske (PAG)

While it is always a good idea to read the news headlines for new investment ideas, it is important to be sure the news is still fresh; "No idea, no matter how good, can make you money,” Cramer said, “when somebody else, or a lot of somebodies, have gotten there first. Sometimes you’re just too late to the game.”

The government's "cash for clunkers' plan (an offer of a $3,500 to $4,000 rebate for trade-ins of old cars for environmentally friendly autos) got underway on July 24, but the news was out more than a month ago. As a result, the stock has already jumped from $25 to $31, up 400% from last year, and Cramer says there is at most only another $2 of upside. What about Carmax and Penske? Only 3% of CarMax's business is new cars and Penske deals with luxury autos which surpass the price limits stipulated by the government's plan. Cramer would trade in AutoNation for another stock.

A Kinder, Gentler Fuel: KinderMorgan (KMP) CEO Richard Kinder

Cramer has long touted natural gas as the bridge fuel between oil and alternative energy. Natural gas is the answer to keeping the U.S. competitive while cutting down on emissions. However, Obama's cap and trade bill is a threat to natural gas companies and may hurt American businesses. Richard Kinder says he's "fed up" with the government's attitude toward natural gas, which fulfills 25% of the country's energy needs while solar and wind provide just a fraction of a percent - hardly valid energy alternatives for the near future. Kinder said if coal comprised 35% rather than 50% of the country's energy, carbon emissions would be reduced by 10%. Kinder added the U.S. has plenty of natural gas reserve; natural gas is easily transported and will also fuel job creation.

2009=1929?

Looking at the charts, there seems to be a somewhat frightening similarity between 1929-30 and 2009-10. Contrary to popular belief, the Depression didn't start with a stock market crash that brought the economy straight down, but there was a 46% rally in the Dow that lasted 147 days. Following this rally was a two year period of staggering declines that robbed the Dow of 85% of its value. The Dow has currently rallied 46% in 145 days. Could we be headed to another Great Depression?

Cramer says there are sufficient differences between 2009 and 1929 to allay fears. Banks had not yet collapsed then, the Federal Reserve was raising interest rates whereas today, rates are going lower. In 1929, the Smoot Hawley tariff was destroying trade and the White House thought the answer was to balance the budget rather than to stimulate the economy.

In 2009, "systemic risk has been taken off the table," says Cramer, banks are starting to recover and Washington is focused on stimulating the economy. In addition, government programs like Medicaid, Medicare and unemployment insurance are safety nets that didn't during the last crash.

Kudos to Fred and Danny

Cramer praised Schering Plough's CEO Fred Hassan who has seen Schering's stock price rise 75% since 2003, double the rate of its closest competition.

He also noted the Hospitality Index (inspired by Danny Meyer's thesis that companies that value their customers perform well regardless of the economic situation) is dramatically outperforming the S&P 500.

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