Cramer's Mad Money - 5 Forces Driving the Market (3/16/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday March 16.

5 Forces Driving the Market, Fannie Mae (FNM), AIG (NYSE:AIG), Freddie Mac (FRE), Citigroup (NYSE:C), Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Research in Motion (RIMM), Amazon (NASDAQ:AMZN)

For the fifth anniversary of Mad Money, Jim Cramer discussed 5 forces that are driving the market and are changing the rules of investing.

1. The President. No one really cared what President George W. Bush had to say about the market, because times were good, and Wall Street was less vulnerable to the whims of the White House. However, in the past year and a half, speculation concerning President Obama's announcements have bordered on obsessive, for good reason. The government has much more power than it did five years ago. It now owns two of the three major U.S. carmakers; AIG (AIG), the world's largest insurance company; Fannie Mae (FNM) and Freddie Mac (FRE), major players in mortgages; and a third of Citigroup (C). Cramer predicts the next 1,000 points in the Dow are directly dependent on what will happen with healthcare reform.

2. Apple (AAPL). Just five years ago, Apple, Research in Motion (RIMM), Google (GOOG) and (AMZN) were distinct companies, but now Apple and Google stole thunder from Research in Motion with their phones and the iPad will give Amazon's Kindle a run for its money. Of all of the stocks in this space, Cramer thinks Apple is the best play, and he calls Steve Jobs "the Henry Ford of the 21st century."

3. China. Five years ago, predictions abounded that China would be a major economic force, but these prophecies had yet to be fulfilled. In the past few years, China has stepped up to the plate and has been changing the game. The American economy is more levered to the fortunes of China than many would care to admit.

4. Energy. The U.S. has been a major importer of oil, but now it is one of the world's leading natural gas producers. Cramer has often lamented the fact that the U.S. still chooses to buy foreign oil while Europeans rush to buy American natural gas assets and the U.S. may end up exporting its most valuable commodity, which would come in handy at home.

5. Dividends. While dividends were always important, those who knew how to make the most out of yields bore the recession more easily than others. Cramer has often urged viewers to look for "accidental high yielders," stocks whose dividend rate goes up as the stock price falls. Those who collected dividend income from these stocks as they recovered and sold them high ended up making 64%. The lesson: unless a stock has the growth of an Apple, don't buy unless it has a strong dividend.

3 Obama-Proof Speculative Plays, Ford (NYSE:F), Bank of America (NYSE:BAC), Sallie Mae (NYSE:SLM), Citigroup (C), Huntington Bancshares (NASDAQ:HBAN), Qwest (NYSE:Q)

Cramer has always emphasized the importance of having some speculative stocks in every portfolio, and recently he has been successful with quality stocks under $10. He recommended Ford (F) at $4, and now it is up 237%, Bank of America (BAC) jumped 468% from its $3 level and Sallie Mae (SLM) which was at $6, climbed 107%.

He sees a similar pattern with Citigroup (C), Huntington BancShares (HBAN) and Qwest (Q). Money managers don't want to go near these stocks because they feel they are too risky. However, none of these stocks is very much affected by the Federal Reserve, the President's proposals or China. Cramer would buy any of these stocks. "Speculation in defense of profits is no vice,” Cramer said. “In fact, it’s a virtue.”


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