Cramer's Mad Money - Citigroup Is the Next Chrysler (8/19/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday August 19.

Citigroup (C)

Cramer thinks Citigroup might be the next Chrysler, a company that also saw a comeback after hope had been abandoned. When the car company nearly went under in 1980, the government offered it loan guarantees in exchange for warrants to buy the stock in the future. With the government's backing, Chrysler invented the minivan in 1982, and the government saw a 280% return on its investment. Cramer thinks Citigroup, which is up 9% and of which 34% is owned by the government, will have a similar story. Cramer would follow the government's example and buy Citigroup.

Wal-Mart (WMT), Kohl's (KSS), Target (TGT), Home Depot (HD), Lowe's (LOW), Family Dollar (FDO), TJ Maxx (TJX)

Stop the presses! Cramer told his audience to view headlines with skepticism and says the media is getting the market completely wrong. One false assumption is that a decline in China is bringing down the U.S. markets, while only 15% of the S&P 500 is levered to China, and two-thirds of that portion has to do only with commodities and oil. Rumors of the weak consumer abound, but Wal-Mart, Kohl's and Target just reported strong back-to-school sales. The newspapers say Home Depot and Lowe's are suffering, and while this might be true for Lowe's, Home Depot just reported a great number. The press seems to favor recession stocks like Family Dollar and TJ Maxx, when Cramer's analysis of Family Dollar showed the stock is a sell and TJ Maxx just lowered guidance.

"Be skeptical," Cramer warned.

Brandywine Realty Trust (BDN) CEO Jerry Sweeny

While commercial real estate has been weak, some commercial real estate trusts have been seeing gains. Jerry Sweeny said the headlines do not accurately reflect what is really happening in the industry; tenants are becoming more optimistic and he believes he will see an upturn as businesses start to feel it is safe to expand once again. More companies are refinancing and are looking for properties. While he acknowledged that some commercial real estate trusts may go under, stronger ones will survive, and he feels Brandywine is in a position to thrive with a clean balance sheet and strong earnings. "If I tell you to get in on one of these secondary offerings, you need to listen!" said Cramer.

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Comments

[al s:]

Oh, Cramer is correct about Citi following Chrysler, but his timing is off. Citi will follow the 2009 model of the car maker and declare bankruptcy !!!

Citi has sold off its best revenue producing franchises/businesses and is still saddled with $1.5 Trillion of crap assets off the books. Look at Citi's competitive positioning compare to JP chase, Wells, BofA, even Capital One or TD, they are a third tier player now.
Let's see when Citi pays back the $45 Bil to uncle Sam, and we sure can expect common share appreciation with now 5.5 or so BILLION !!!!! common shares outstanding.
Yeah, stategically Citi is sooooo "well" positioned for success.

Aug 20 08:29 AM

[Drobezisi:]

As much as I hate to admit defeat (being a former and badly burned Citi investor), I'm more with Al S on this one than I am against Cramer. Citi's traditional brand strength and size (though both are diminished) could help it survive this (i.e. the general economic and its own specific) crisis, but I think it will be a long, hard and slow recovery for the franchise for a lot of reasons. Let's not forget that a significant part of Citi's revenues/profits have traditionally come from higher risk capital markets and investment banking businesses, which are either being sold off or are not going to contribute as much for the foreseeable future. As Al S says, they are burdened with a huge quantity of poor quality assets and the common stock is extremely diluted. Also, let's not forget that Citi periodically has gone through severe liquidity crises over the past twenty years that I can remember, and has had to rely on rescues by preferred investors many times, long before this current crisis. The problem this time: the only preferred investor that seems willing to step up to the plate this time is the US government, and only because it had to in order to help dampen the broader market crisis. Overall, I was more bullish on Citi than many in the market up through the first quarter, and got my rear roundly whipped for it; even now, I'm still tempted to believe there is a comeback story there, but I find it very hard to truly justify. As I said, I believe they will survive the crisis, but I think it will be a long time before the risk is compensated for by an interesting return. So why bother? Go for something with lower risk, a cleaner balance sheet and still paying a dividend, which can actually grow market share during the upcoming recovery, rather than shrinking to survive. By the way, where is Cramer's sustainable dividend mantra on this one???

Aug 20 09:23 AM

[ifuwish2:]

guys you both are stupid,,citi made money and will continue to do so,,not even you stupid comments will affect it,,anyone who has a brain or even a little brain knows it will go up..i bough in at .97 and everyone says not to and sell,, so who's smiling and who's not

Aug 20 10:03 AM

[Gary A:]

The Brandywine guy on and was in a funk. Cramer had to pull him out of it. If anyone saw this interview it did not support Cramer's crazy optimism. Not even close.

Aug 20 05:40 PM

[Maxe Paul:]

Cramer is right for once comparing Citi to Chrysler. So what happened to Chrysler? It went bankrupt and needed a bailout for the second time, i expect Citi to follow that trend.

Cramer says the media is wrong?
If that ain't irony then i don't know what is!

Aug 20 11:22 PM

[ebworthen:]

Cramer.

Hmmmm.

Entertaining guy.

Betting on financials at this point is playing craps; and the house keeps changing the dice. The house (FED) is happy for you to put your chips down on the table and the pretty lady will bring you a drink.

Aug 21 05:06 AM

[Avooch:]

Isn't Cramer the very embodiment of Graham and Buffet's "Mr. Market" character ?

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Don't Get Massacred !

[e-mail]

Aug 21 07:46 AM

[TeresaE:]

Kohl's is discounting everything and then discounting the discount to make a sale. Not exactly stellar reports.

Target is still struggling to find itself in this new world of no credit cards.

Walmart if gaining because Americans still don't realize that buying stuff made in China won't create the job they need to shop anywhere else.

Cramer is, as always, Cramer.

Aug 21 11:37 AM

[Mr. Ed, Jr.:]

"Citigroup is the next Chrysler"

What's the difference ?

Aug 23 11:46 AM