Cramer's Mad Money: Bye-Bye Bonds (9/17/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday September 17.

Sell Block: U.S. Treasurys

Cramer put bonds on the Sell Block; 'I think the big run in US Treasurys has ended,” Cramer said. “It’s time for you to sell 10-year and 30-year” bonds." While this investment is usually considered to be a safe haven, Treasurys are not safe in the dawn of a recovery, which is always characterized by inflation. In addition, as inflation ramps up, the Fed will most likely raise interest rates which will bring Treasurys lower.

Where should investors flee for safety? Master-limited partnerships may have big dividends, but ultimately they are stocks and carry some risks. Money market funds are also not so safe. Cramer would opt for FDIC-protected CDs. Although the rates are low, "It is vital that you keep your cash in certificates of deposit for the next 18 months,” when rates will be high enough to attract investors back to the interest market. He recommends shopping around at several banks before settling on a particular CD.

Mad Mail: Pepsi (PEP), Altria (MO), Freeport McMoRan (FCX)

Cramer is not as worried as some about healthcare reform, because he thinks discussion will continue to be delayed. However, on a scenario of higher taxes, Cramer would buy defensive stocks Altria and Pepsi. Cramer told another viewer to hold on to Freeport. Concerning Yahoo, Cramer said, “It is so far behind the rest of the market that it’s playing catch-up. I continue to believe that Yahoo! plays catch-up to $20-$21. I don’t like the massive slamming of Carol Bartz. I think she’s trying to do a good job … let’s see what she does.”

Don't Believe the Bears: AutoNation (AN)

Cramer thinks the recent pullback is a welcome development and an opportunity to buy good stocks cheap. While the bears worry that government programs like Cash for Clunkers and the $8,000 home credit has cannibalized future sales, Cramer believes the reforms were needed to get the auto and housing industry moving. Many skeptics see the rise in buying as a one-time development, but Michael Jackson, CEO of AutoNation, says he has seen September sales that are "pretty much in line with the pre-Clunker trend line." In fact, the legislation solved the inventory problem that plagued the industry. Even though the special bonus for home buyers will end in November, Cramer thinks mortgage rates and house prices are so low that consumers will continue to buy.

CEO Interview: John Pinkerton, Range Resources (RRC)

Natural gas is storming back up, and has seen a 40% increase in the past week alone. Cramer predicts the fuel's price will double. John Pinkerton says natural gas needs better PR and Washington should understand how cheap and efficient a fuel it is. New technology makes drilling easier and even at $5, production of natural gas is profitable. Pinkerton discussed Range's strategy of selling low returning assets and putting the money into higher returning assets, a strategy which benefits the shareholder. He also discussed the benefit embracing natural gas will have on employment; the Marcellus shale fields in Pennsylvania could potentially employ 110,000 people; "Shale fields are complicated," said Pinkerton, "and it takes a lot of people to get it right."

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Comments

[Robert.from.Ct:]

I would NEVER follow Crammer again.......Last year he ranted that it was the year of natural gas........a slam dunk.........Natural gas dropped about 80 percent since his call........Shame on me for buying into his BS.....

Sep 19 02:57 AM

[User 488441:]

I agree....Crammer doesn't know anything about Canadian small caps or care.... and most plays in natural gas are Canadian small cap companies. Canada is the largest supplier of OIL & GAS to the USA not the middle east.

Sep 19 08:49 AM

[Biggonmv:]

Just because he was wrong once on natgas, don't think it's a given he won't get it right this time. How long can gas stay this low compared to oil anyway? It's bound to play catch up, and here comes the winter season to spur that inevitable move. though wrong last year, he's got a no-brainer call this time.

Sep 19 10:52 AM

[Ad Orientem:]

Cramer was wrong about last year. Big deal. So were 95% of the other talking heads. If your looking for an infallible oracle go to the Vatican. You won't find one on Wall Street. I have my issues with Cramer and I don't care for his aggressive trading style of investing. By nature I am a conservative long term investor. But while Cramer makes his share of bad calls he is also right a good deal of the time (several studies indicate that over the long term he has been right more often then not). He also is very upfront about bad calls and he owns them unlike most of the other talking heads. And of course he repeats ad nauseum that people need to do their own homework and not take his word for anything.

In this case I think he is dead on in his call about Treasuries. However I disagree with his suggested alternative safe havens. I would lean towards a diverse selection of high grade foreign debt and gold as a hedge against inflation. I like Japanese, Australian and Swiss denominated government and high high end corporate bonds. If you want to be a little speculative you could throw in some Brazilian bonds.

With the Dollar's death by a thousand cuts likely to continue for the foreseeable future, these securities should do well. And of course not having some gold in your portfolio right now is like driving without insurance.


On Sep 19 02:57 AM Robert.from.Ct wrote:

> I would NEVER follow Crammer again.......Last year he ranted that
> it was the year of natural gas........a slam dunk.........Natural
> gas dropped about 80 percent since his call........Shame on me for
> buying into his BS.....

Sep 19 05:01 PM

[Klugwannnabe:]

Diversify,diversify,di... three rules of investment.....and try to collect some dividends....anything over 6% is suspect.........Problem with US bonds is they don't protect against the fall of the Dollar,problem with foreign bonds is that what countries do not face inflation................ the long run,well managed companies with reasonable dividends with a stable international business probably provide the best compromise in a tough investment climate

Sep 20 10:23 AM

[Cramer #1:]

But sometime....Cramer is right....

How to Play the Weakness By Jim Cramer: Altria (MO) 7.8% dividend

By Jim Cramer

Ugly day. Ugly night. The time to be defensive is here. Especially because the selling is indiscriminant among the leaders: oil because
of the futures, banks because of home-sale chatter, and tech because of Research In Motion's disappointment and TheStreet.com's scoop about Verizon not supporting the Pre by Palm. I think you let things come in 3% to 5% and use the initial weakness to buy the defensives, as the market has collectively decided that copper and oil tell all and that
we are going back into hard times. Remember, I don't believe it, but that doesn't matter for now. I have been picking at Altria for Action Alerts PLUS, if you want to know how I am playing it. As for the mobile Internet tsunami, down 3%-5% should get you into some of the
ones I have repeatedly told you I like: Apple, Skyworks, Cypress,
Qualcomm and...Altria


Altria also is:owner of 27.37% of SAB Miller
Altria Relationship Agreement
Altria Group, Inc ("Altria") is the largest single shareholder in
SABMiller plc,holding approximately 27.37% of the issued share capital of SABMiller
plc,excluding treasury shares, as at 30 June 2009. Under the terms of
the Relationship Agreement entered into between Altria and SABMiller as
part of the Miller Brewing Company transaction in 2002, and amended, with shareholders' approval,in 2005 as part of the Bavaria transaction, Altria has the right to
nominate up to three representatives for appointment as non executive directors of SABMiller, subject to the level of its economic interest in SABMiller, and any disposals of shares in SABMiller are subject to orderly market arrangements.


This announcement is available on the company website: sabmiller.com

Name few companies in 2009 that raise guidance and boost dividend with
P/E of 9 and yield now at 7.8%??? Just try?? LOL

"Given Altria's strong year-to-date EPS performance, we are raising
our 2009 full year guidance for adjusted diluted EPS to a range of
$1.72 to $1.77, representing a growth rate of 4% to7%."

Sep 25 10:16 PM