Cramer's Mad Money - 6 Reasons the S&P 500 Will Reach 1200 (9/8/09)

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

In spite of doomsayers, Cramer thinks the S&P 500 is headed for 1200. Technician Dan Fitzpatrick has pointed out a bullish double head and shoulders pattern, and thinks the S&P could even see a 24% increase at 1272. Cramer discussed six fundamental reasons to show why the chart is telling the truth:

1. Takeovers: Usually, a week before Labor Day is slow for the market, but last week, there were four major takeovers or bids for takeovers. If stocks were overpriced and poised for a decline, there wouldn't be so many deals on the table.

2. Money is flowing. Many investors who were on the sidelines for a while are jumping back into the market. The renewed activity will mean strong year-over-year numbers.

3. Leadership is Broadening. While banks, oils and tech stocks were in the lead last spring, healthcare and transports are on the move, and the news of economic activity in general is good; "This kind of broad-based leadership is a huge positive," says Cramer.

4. Housing bottomed. Cramer says his prediction of a June 30^th housing bottom indeed came true and pointed to a decline of sales in summer and the beginning of a reversal. The damage has been contained, or at least, cannot get any worse, according to Cramer .

5. Firings have stopped. While many companies streamlined their staff as a way of cutting costs, Cramer thinks this trend is finished. While it is uncertain when companies can afford to start hiring again, Cramer thinks they probably have stopped letting people go, and unemployment will not be plaguing the market for much longer.

6. Retail is stronger than expected. While critics were decrying back-to-school sales, they were not as weak as the media presented them. Cramer thinks diverse retail stocks such as Tiffany (TIF), Kohl's (KSS), Gap (GPS), Coach (COH), Williams and Sonoma (WSM), Jones Apparel (JNY) and Aeropostale (ARO) are undervalued, given the attitude toward retail.

Mad Mail: Comcast (CMCSA), Time Warner (TWX)

A viewer asked Cramer what he thinks of a new service put out by Time Warner and Comcast that allows subscribers to see television shows over the internet. "Nothing at Time Warner or Comcast can be run by clowns," said Cramer, but he added that the FCC rules need to change to allow companies to expand their ownership. The possibilities look good, but there might not be an immediate effect.

The ABCs of Options: CEO David Fisher, OptionsExpress (OXPS)

While Cramer has avoided discussing options on Mad Money because of the complexity of the subject, options trading is quickly becoming a more popular way of investing. The number of active, private investors buying options has increased 7% over the past year and is expected to continue to grow.

David Fisher said merely a decade ago, options were considered to be only for Wall Street insiders, but nowadays, anyone can trade options, since they are a solid protection even in difficult markets. The average options investor is older, around 50, and is not out for a gamble, but wants real returns on investments. Fisher says 60% of his business is in options, 20% in futures and 20% in stocks, but with only 10% of options traders using optionsXpress, his company can reach many more investors, particularly those who are new to options trading and need expert advice.

XTO Energy (XTO) CEO Bob Simpson

Natural gas could be the solution to the country's environmental and energy problems. If natural gas were used instead of coal or oil, emissions would be reduced by 50%, and while wind and solar are cleaner than natural gas, it will take decades for these technologies to advance enough to compete with less-clean energy resources. What is stopping natural gas, which is a plentiful, efficient transition fuel? Coal is the enemy number one of natural gas, and spends four times as much money lobbying Congress. Coal has friends in high places: railroads, which get paid generously for hauling coal, and utilities, which are 59% fueled by coal.

The fact that natural gas is still profitable, even at record lows is a good sign. Bob Simpson said the company was smart and pre-sold its production for the year back when prices were much higher. Even with natural gas at $3, XTO has pre-sold 40% of next year's output at $9. Simpson thinks Washington will finally see the light with more information on the benefits of natural gas. He also thinks the price of the fuel will recover as the supply continues to shrink.

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Comments

[Paul Price:]

Remember last fall when Cramer put out the 'worst case scenario' for all the DOW stocks with things like DuPont at $1.30/share to scare people?

Where is his mention now of "any money that can't be left alone for 5 years should NOT be in stocks" ?

Sep 09 08:59 AM

[bgbrown125:]

If your opinion doesn't change with this market, then you are a foolish investor. Change is the only constant out there.
Thank you Cramer for your opinion (that is what it is - one professional's opinion).

Sep 09 09:45 AM

[winnersdon'...:]

it's difficult to sit back, and take what this administration and congress are doing to this country.
No meaningful legislation pertaining to NG will be placed on the Congressional front burner until they've aligned all their ducks.
Anyone who reads SA knows what i'm referring to without me defining "the game" played in Washington.
As an investor in NG for all the right reasons, it's unfortunate we as a nation must suffer for all the wrong reasons.

Sep 09 11:02 AM

[JS Partners:]

Take note of the contango on Natural Gas. Prices will surely rise to over $5 by the end of the year as the December contract is already $4.75. However, natural gas companies are already selling into the future which is why we have such a problem with oversupply and storage - because everyone is taking delivery later on in the year.

Sep 09 12:54 PM

[JS Partners:]

The other problem with natural gas and what I see to be the main problem that holds it back against oil and coal is that you have to think about the transportations network.

As much as one would like to believe that nat gas has a good infastructure I do not agree. There are improvisations with transporting liquefied natural gas - but in general it is harder to do then moving and transporting solids like coal and liquids such as oil. Unfortunate because I fully agree that emission levels would drop if more companies switched over to gas.

Sep 09 12:59 PM

[JS Partners:]

Sorry - One final mention!! My very first brokerage account was with Optionsxpress and they are fantastic. They have a brilliant education center and a top class trading platform. Fundamentals are all very good with p/e at 13.64 and unlike ETFC, they have no debt.

I think with the VIX so much lower and option premiums down, more people will be attracted to buying options and DART's (daily average revenue trades) will rise. Good company and good prospects in my opinion.

Sep 09 01:58 PM

[Road Runner:]

Yes - Cramer does "cherry pick" what statements from his past he wants to remind people about. That "if you need your money in the next 5 years, you need to get out" statement of his last fall was irresponsible.


On Sep 09 08:59 AM Paul Price wrote:
> Remember last fall when Cramer put out the 'worst case scenario'
> for all the DOW stocks with things like DuPont at $1.30/share to
> scare people?
>
> Where is his mention now of "any money that can't be left alone for
> 5 years should NOT be in stocks" ?

Sep 09 02:41 PM