Cramer's Mad Money - Paul Krugman Is Wrong (8/10/09) 52 comments
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Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday August 10.
Krugman Is Wrong: Coach (COH), True Religion (TRLG), ON Semi (ONNN), Skyworks (SWKS), Tellabs (TLAB), International Paper (IP), Aluminum (AA), Ford (F)
Cramer took issue with Paul Krugman's thesis that the economy is just getting worse more slowly and not getting better. He said Krugman takes the academic, top-down approach and is assuming the only reason the Dow has been performing is because of government intervention. Cramer advocates the "bottom-up" approach of looking at earnings reports and CEO statements. He observed the government is not buying pricey Coach handbags, or $400 True Religion jeans or Apple's iPods; the consumer is responsible for the rallies.
The government is not responsible for the mobile internet revolution, represented by rising stars such as Tellabs, Skyworks and ON Semi. Banks are up, some as much as 50% and commodities like Alcoa are strong.
While investors equate being bearish with playing it safe, it may well mean missing a 45% gain since March.
Everyone Knows It's Wendy's (WEN), Yum Brands! (YUM)
Cramer says Wendy's is “the next big fast-food stock to make its move to higher territory," and the chain Zagat's rated as the best overall in the country is expanding its breakfast menu and growing overseas. While breakfast orders comprise an average of 22% for other chains, Wendy's morning orders are a mere 2%. Wendy's is rolling out new breakfast offerings in the next year and is expanding in Saudi Arabia and Singapore with its double-branded, Wendy's and Arby's, stores. Domestically, Wendy's has large real estate holdings which will increase in value as the economy recovers. Cramer says Wendy's is a buy.
The Right Healthcare Stock for the Right Time: Emdeon
Cramer says the market is at the beginning of an "IPO landslide" as private equity firms have been waiting for the right opportunity to take their offerings public. However, not all IPOs are created equal; Cramer likes Emdeon because it specializes in healthcare information technology and cutting medical costs, issues that are of special concern to President Obama.
Emdeon handles e-payments, records and e-prescriptions and is the "cost-control player" in the sector. Cramer prefers Emdeon even to Allscripts and Cerner. The company has room to grow; while 80% of bills from doctors are electronic, 80% of insurance companies still handle their paperwork the old-fashioned way. Emdeon has already made profitable acquisitions, and while many IPOs have significant debt, the company's balance sheet is clean. The IPO should be between $13.50 and $15.50; Cramer would buy at this level and cautioned against paying more than $17.50 for the stock.
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This article has 52 comments:
When these two indicators disagree, I get totally confused.
I do not feel sorry for Kramer. Krugman is a top adviser to Obama and the Chicago gang, and Kramer voted for Obama. When you drink the Kool Aid, don't complain,Cramer.
On Aug 11 11:41 PM Ryu Mei Co wrote:
> Oh I remembered last year very well and those stocks that were highly
> recommended by Cramer. Krugman knew the market was failing while
> Cramer kept entertaining viewers to buy Bear Stern, Lehman Bro, or
> stocks that tanked! Booyah Suckers! Krugman may not be a wallstreet
> experts, but he is an Nobel winner economic prof. for crying out
> loud and why shouldn't we pay more attention to Krugman more?
And NO his show is not entertaining, and YES it's way more fun bashing the guy.
This is because we (the bashers) are not brain dead morons who listen to idiots with massive egos on CNBC and race out like sheeples to follow their (garbage, ramped up) stock picks.
Just for you though,
Picture a large yellow caterpillar truck, with horns blaring, bells ringing, lights flashing, Cramer wearing a party hat whilst blowing a whistle and dancing with Becky quick!
FEEL BETTER NOW?
On Aug 12 03:43 AM BGRT wrote:
> It's kind of hilarious to read all this Cramer bashing. His show
> is supposed to entertain people but I guess some of you just find
> more fun in bashing the guy. Interestingly enough, his last CAT call
> was almost dead on. He said buy at low 30s (I think it was 32) back
> around June and that's where it bottomed.
PAUL KRUGMAN. EVERYONE HAS THE RIGHT TO VOICE THEIR OPINION.
I DIDN'T AGREE WITH CRAMER WHEN HE MENTIONED
A HALF DOZEN TIMES ON HIS T.V. SHOW THAT HE RECOMMENDED TO BUY "MRNA".
BY THE END OF THE YEAR THE STOCK LOST HALF ITS VALUE. SO MUCH FOR BEING WRONG.
NO ONE IS PERFECT AND 'MRNA' IS AROUND $1.53 FROM $20.00. OH OF COURSE ITS A NEW COMPANY NOW, AFTER THE EMBARRASSMENT SET BY MANAGEMENT, AND CEO WAS REPLACED TOO.
NOW IN 4-7 YEARS THEY MAY GET AN APPROVAL,
AND WITH FRESH NEW SHAREHOLDERS WHO WEREN'T LEFT WITH A FINANCIAL DISASTER, THEY ALL CAN DREAM OF THE RICHES THAT MAY OR MAY NOT COME. NEW SHAREHOLDERS ARE EXCITED, 45 NEWS ANNOUNCEMENTS SINCE JUNE 1ST., BUT PRICE STILL ABOUT THE SAME. COMPANIES NEED SHAREHOLDERS LIKE THIS, BECAUSE THAT'S HOW THEY SURVIVED THE FIRST 25 YEARS AND ACCOMPLISHED ABSOLUTELY NOTHING.
AND DO NOT LOOK AT THE STATS, OR THEIR BALANCE SHEET, BECAUSE SHAREHOLDERS ALWAYS SAY IT DOESN'T MATTER. YEA RIGHT!
I could name a couple of others that could replace the Oxi-Clean guy when it comes to hawking the idea that we are now "moving in the right direction" without paying attention to what is happening on Main Street and the side streets.
The economy is far from being "turned around" especially when you factor in real estate - which has NOT bottomed out or stabilized. Not when a condo conversion building sells for a nickel on the dollar on W. 57th Street.
Not everything can be gleaned from reading a chart. You have to get out of your offices and see what's going on with consumers.
And for those that think the consumer is going to "spend us out of this recession"??? LOL. You are sadly mistaken. All those people have been laid off or are now underemployed.
Cramer is a devote` to monetarism ... thinks Bernanke saved the world. However nothing could be further from the truth. The Fed is bankrupt. So, too, is Treasury. The nation that cannot produce wealth enough to service its mountain of liabilities is doomed. THAT is what last year's panic was about. THAT was its fundamental basis -- its reason for happening at all. You cannot paper over structural imbalances, pretending financial liabilities built up in the process continue to have legitimacy. The Shempster, however, thinks otherwise.
If you need further proof that Cramer's macro view is sheer fantasy, go to a Congressional town hall meeting. The rage you will see is incompatible with any "bottoms up" analysis pretending some semblance of similarity to days gone by is possible moving forward.
I hope that he disappoints them.
On Aug 12 03:43 AM BGRT wrote:
> It's kind of hilarious to read all this Cramer bashing. His show
> is supposed to entertain people but I guess some of you just find
> more fun in bashing the guy. Interestingly enough, his last CAT call
> was almost dead on. He said buy at low 30s (I think it was 32) back
> around June and that's where it bottomed.
Neither Krugman denies the inflexion point is to come.
Don't agree with the prophets of Wall Street. Cramer should read Dr. Mandelbrot about real world.
Bob the bear
I've heard him give conflicting advice on stocks and in general; he swings from one direction to the other with the market.
No doubt he can afford to be wrong.
Krugman is too bullish by far.
Quick, label me a "perma-bear" so you don't have to listen to the following:
Nothing has been fixed.
We have only delayed the inevitable.
People without jobs, or working fewer hours, and being taxed more spend less or don't pay their mortgage and bills.
We saved the banks and insurance companies but not the average citizen.
That whiplash of reality will come around, sooner or later, no matter what Paul Krugman or Jim Cramer say.
On Aug 11 06:47 PM DrBenway wrote:
> I wish Cramer would say that Krugman is right then I could rest assured
> that they were both wrong. Cramer is an excellent common stupidity
> indicator while Krugman is an excellent academic stupidity indicator.
>
>
> When these two indicators disagree, I get totally confused.
On Aug 12 09:00 AM Etoile Brilliant wrote:
> When did Arafat win the Nobel Prize for Economics - I must have slept
> through that one?
Also, he's a Keynesian economist. So it's for that reason that he believes the Stimulus won't cause inflation because it is only off-setting corporate borrowing. Whether you believe that or not is up to you. But there's soooo many haters on here. The man wins a Nobel Prize, predicts the upcoming crash and writes a pretty damn good column every week and yet he's a signal of "academic stupidity". He should never be in the same column as Cramer's "Crap Picks".
Also, if the "consumer is driving the recovery" so to speak, why is consumer spending and consumer sentiment STILL underwater? What's really creating the 'rallies' is Goldman and its Deep Blue supercomputer jacking up volume right up until the closing bell. In other words, it's profit-time, baby - if you have the cash (and the computers)
On Aug 11 07:19 PM dsrtwriter wrote:
> I agree with Dr. Benway. When Cramer says Krugman is wrong I get
> nervous, but since I know that Krugman is much more a Marxist oriented
> economist, it is necessary in the Krugman/Rahm Emmanuel world for
> continued economic downspin,so as to further empower government.
>
>
> I do not feel sorry for Kramer. Krugman is a top adviser to Obama
> and the Chicago gang, and Kramer voted for Obama. When you drink
> the Kool Aid, don't complain,Cramer.
How flawed is such a statement and the thinking behind it? Very!
First of all most of the people who were bearish also missed losing 55% of their portfolio up until March (still being ahead by 35%) and most that I know, including me, caugh this rally early and only got out after a 20% or more runup.
The worst part of this thinking, of course, is that it's based on fear, the classic tool of a bear market. Folks, you'd better get in on this rally before it's too late...HURRY! HURRY! HURRY! Fear-based investing is always a bad idea. The only worse idea I can imagine is listening to Cramer the clown.
IMHO the Fed did the right thing, but the Obama-Administration has a lot more to do, like bringing our troops home, universal health care,regulate the financial markets and overhaul the tax system.
Speaking of the Fed, wouldn't it be better to have inflation rather sooner than later and maybe even really high inflation in order to get the underwater home values back up and it would be a tremendous help for the deficit, wouldn't it ? I guess a few years of 20 to 30 % inflation actually would help a lot.
As for :"hyperinflation," Germans from the 1920s remember needing wheelbarrows to carry enough cash to make their purchases. By destroying the middle class, the inflation indirectly (much later) led to Hitler.
On Aug 12 11:33 AM petra wrote:
> Let me add my two cents here. 95 % of the posts here are still expecting
> a depression, or should I say betting on it, because I think you
> guys are all shorts. You might be right, but it is perverse trying
> to make money by hoping companies go bankrupt and millions more become
> unemployed. Having said that, I agree the economy isn't back to normal,
> whatever normal was or is or should be, but we turned the corner
> and now a slow but steady healing process has started.
> IMHO the Fed did the right thing, but the Obama-Administration has
> a lot more to do, like bringing our troops home, universal health
> care,regulate the financial markets and overhaul the tax system.
>
> Speaking of the Fed, wouldn't it be better to have inflation rather
> sooner than later and maybe even really high inflation in order to
> get the underwater home values back up and it would be a tremendous
> help for the deficit, wouldn't it ? I guess a few years of 20 to
> 30 % inflation actually would help a lot.
Not to mention, I did not know that the fed was given the right to tax me via inflation at a 20-30% rate per year on my current income as well as everything that I have saved in the past.
On Aug 12 11:33 AM petra wrote:
> Let me add my two cents here. 95 % of the posts here are still expecting
> a depression, or should I say betting on it, because I think you
> guys are all shorts. You might be right, but it is perverse trying
> to make money by hoping companies go bankrupt and millions more become
> unemployed. Having said that, I agree the economy isn't back to normal,
> whatever normal was or is or should be, but we turned the corner
> and now a slow but steady healing process has started.
> IMHO the Fed did the right thing, but the Obama-Administration has
> a lot more to do, like bringing our troops home, universal health
> care,regulate the financial markets and overhaul the tax system.
>
> Speaking of the Fed, wouldn't it be better to have inflation rather
> sooner than later and maybe even really high inflation in order to
> get the underwater home values back up and it would be a tremendous
> help for the deficit, wouldn't it ? I guess a few years of 20 to
> 30 % inflation actually would help a lot.
As far as I know, Mr. Cramer does not have any qualification of any sort to perform economic or financial analysis; whereas Dr. Krugman has a Ph.D. in Economics and won the Nobel Prize in Economics in 2008.
I read in Wikipedia that Mr. Cramer does have a Law Degree from Harvard.
I also read the following: "On February 29, 2000, about one week before the historic all-time high of the NASDAQ Composite index, Cramer delivered his "The Winners of the New World" speech at the 6th Annual Internet and Electronic Commerce Conference and Exposition in New York. In this speech, Cramer recommended 10 stocks and went on to say "I wouldn't own any other stocks in the year 2000". By 2009, all of the mentioned companies have either gone out of business, have been taken over by competitors or trade at fractions of their 2000 stock price".
Here is the 2000 article, in case you still want to buy these stocks:
www.thestreet.com/fund...
On Aug 12 09:00 AM Etoile Brilliant wrote:
> When did Arafat win the Nobel Prize for Economics - I must have slept
> through that one?
On Aug 12 01:07 AM Robert Intriago wrote:
> For the same reason we did not pay attention to Arafat, another Nobel
> winner.
Graham Summers posted an article at kitco.com giving technical reasons for a Nasdaq correction. Check it out.
www.kitco.com/ind/Summ...
On Aug 12 08:44 AM Bernard Thomas wrote:
> Market timing in general is a road to ruin. The pros can't do it
> enough of the time to be successful, what makes anyone here think
> they can do it. Market timing is a fools game like trying to go to
> Vegas to strike it rich.
Poor Cramer has to fill a half an hour a day making predictions, that's like a baseball player having to bat every inning five days a week. Of course, there are tons of strike outs.
I really miss Wall Street Week with Louis Ruckheyser (sp?).
Actually for those with a leftist orientation, you need to know that people who take a conservative position are not "haters". That label is getting really old. Paul Krugman is not at all stupid, but there is a reason that Economics was once called "Political Economy". The Keynesian set of theory constructs reflects a sociopolitical orientation very different from Frederick Hayek. Who is "right" depends upon one's view of government as either the parent or the servant of the people.
Krugman, from his writings, clearly believes that the people need a government acting as the parent.
At least for the balance of 2009, the federal government of Barack Obama may allow some of us the freedom to disagree, even with economic policies and health care issues.
Next year, who knows?
As for inflation, I was talking about 1970-1980 with double digits inflation not the Weimar republic with tens of thousands. By the by this wasn't the reason led to Hitler. Hitler came into power because of Versailles and the reparation and the hopelessness to solve that matter or the only way out of it was to drive the country into poverty.
But let's not discuss history here and I think we are on the same page anyway.
On Aug 12 11:43 AM Graham and Dodd Investor wrote:
> There is a saying in (American) football that "you can only take
> what the other team gives you." If the other team is a market that
> is overpriced relative to an anemic recovery, going short is not
> "perverse," it's wise.
>
> As for :"hyperinflation," Germans from the 1920s remember needing
> wheelbarrows to carry enough cash to make their purchases. By destroying
> the middle class, the inflation indirectly (much later) led to Hitler.
>
He doesn't even make for a good joke.
What a pathetic individual.
What makes me sick is how many people lose sight of what kind of trader Cramer is. He is a momentum trader plain and simple. He will never understand financials, that is why he recommended Countrywide so many times on the way down. But he is a great market movement reader and has a great nose for a bull run. That is how he made his money over the years. Just take the good parts of him and don't listen to his blind spot areas. Or just short anything he is long about for financial reasons.
On Aug 11 09:44 AM Novice Trader wrote:
> Another example of why I ge frustrated with Cramer... not 1 or 2
> months ago, a caller asked about WEN and he responded with a strong
> sell.... Same with AA and C.
Personally I don't read any of Cramer's stuff, opened this page by mistake and couldn't help but wonder where his ego and rants might be now that the market has begun it's long climb back. I wasn't disappointed, same old, same old. Maybe one day he will find my web page where sanity rules. Probably not...
www.mutualfundwealth.com/
On Aug 12 11:32 AM dividendmachine1 wrote:
> Like cramer or not,unlike krugman he has actually MANAGED and made
> big money investing
>
> Krugman is what is wrong with america,he is a condesending ,elitist
> who is the opposite of those who built america and have fought to
> protect it
>
> Im glad imbeciles like krugman spew their idiotic asinine behavior
>
>
> I have achieved financial independence and my newsletter that i write
> for one the largest internet news agencies has more than doubled
> since the market rallied as I said it would
On Aug 11 07:50 AM Robert Intriago wrote:
> As a general rule I do not agree with Cramer. He is right about Krugman,
> but for the wrong reasons. Krugman forgets that is not the stimulus
> that saved the economy, only 20% has been used and for transfers
> to state budgets, it is the FED that saved the economy. Their flooding
> of the economy with liquidity and backing commercial paper saved
> us. I hope they withdraw it with the same efficiency to avoid inflation.
On Aug 12 05:26 PM Voice of common sense wrote:
> kramer is a total idiot. Anyone who listens to him deserves what
> they get; unless you do the opposite.
>
> He doesn't even make for a good joke.
>
> What a pathetic individual.
IF THE USA ECONOMY IS IN TATTERS AND WHEN YOU CONSIDER THAT WE ARE BANKRUPT.
IF YOU FURTHER CONSIDER THAT THE DOLLAR IS AND WILL CONTINUE TO LOSE VALUE AS IT CONTINUES TO BE PRINTED IN SUCH A MIND BOGGLING FURIOUS PACE.
WHEN YOU REALIZE THAT FOREIGN ECONOMIES DO NOT WANT TO CONTINUE TO SUPPORT OUR DEBT.
WHEN YOU ACCEPT THAT UNEMPLOYMENT IS NOT IMPROVING;HOUSING PRICES ARE STILL TUMBLING;FURTHER BUBBLES ARE READY TO BUST(COMMERICAL REAL ESTATE/CREDIT CARDS/ETC.).
WHEN CONSUMERS ARE NOT SPENDING.
WHEN YOU ACCEPT THAT THE VALUE OF THE DOLLAR IS BEING CRUSHED.
HOW IN YOUR RIGHT MIND CAN YOU BELIEVE IN A STRONG STOCK MARKET??
HOW CAN YOU IGNORE ALL THE HORRIBLE ECONOMIC FUNDAMENTALS AND THEN REALIZE THAT WE ARE UNDER ATTACK FROM WITHIN WITH AN ADMINISTRATION THAT SEEKS TO REDISTRIBUTE THE WEALTH.
PROBLEM BEING, THERE WONT BE TOO MUCH WEALTH AROUND TO REDISTRIBUTE.
IF YOU HOLD ONTO YOUR STOCKS, ALL YOU WILL DO IS LOSE YOUR WEALTH BECAUSE AS THE VALUE OF THE DOLLAR CONTINUES TO COLLAPSE, EVERYTHING ASSOCIATED WITH THAT DOLLAR WILL BE SURE TO GO THE SAME ROUTE.
TELL ME I AM WRONG AND EXPLAIN WHY!
RCSYES@AOL.COM
> First of all most of the people who were bearish also missed losing
> 55% of their portfolio up until March (still being ahead by 35%)
> and most that I know, including me, caugh this rally early and only
> got out after a 20% or more runup.
Oh, really? On March 9, you held a double-short position in the market via SDS (seekingalpha.com/artic...). On May 3, you still held SDS (seekingalpha.com/artic...). On June 15, you STILL held SDS (seekingalpha.com/autho...).
Between March 9 and June 15, SDS lost 51% of its value, and the S&P 500 gained about 35.75%. When, precisely, did you "catch this rally"? I mean, you were short the market -- double-short the market -- on the day it reached 666 and apparently didn't sell, since you thought "the market is overbought and weakening" on May 3.
Perhaps the SDS was a market hedge and you made more on other holdings than you lost on SDS. But to characterize this as "catching the rally" is complete hogwash.