Jim Cramer's Mad Money In-Depth, 1/23/08: Back from the Abyss?

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday January 23. Click on a stock ticker for more analysis:

Citigroup (C), TJX (TJX), CVS (CVS), Costco (COST), Guess? (GES), J. Crew Group (JCG)

Cramer declared a bottom in the market which returned "from the abyss." The fact that stocks are too cheap and oversold is another sign of a bottom, and Cramer would hunt for bargains among crushed financials and retail stocks. He recommends selling leaders and buying laggards, such as financials that have not cut dividends, and Cramer says Citi might have finally bottomed. He says the sellers are done in retail and he likes TJX, CVS, COST, GES and JCG. Cramer added that while he expects a pullback in the next few days, the worst is over.

Playing by the Book: IBM (IBM), DuPont (DD)

Cramer suggested preparing a playbook of must-buy stocks to purchase during the next pullback. He suggested investors avoid the mistake of hoping for a rise after earnings, as some did with Apple, but instead buying "twice-blessed" stocks which have already proven earnings. IBM recently beat estimates by 12 cents a share, has a $118 billion backlog, global growth and strategic acquisitions. DuPont recently beat estimates by 8 cents a share, has a generous 3.8% dividend, a strong buyback program and is a good candidate for an upgrade.

CEO Interview: Ron Hermance, Hudson City Bancorp (HCBK)

While some investors cringe when Cramer recommends "those horrible banks" he suggested buying HCBK up 10% on earnings. Ron Hermance discussed ways the Fed rate cut will benefit HCBK. Recently, the bank lowered mortgage prices; "We wanted to show the world we are ready to take on more." In addition, HCBK's liability costs are "heading south," it is refinancing loans aggressively and only reported $105,000 worth of writeoffs. Cramer would buy HCBK up to $20.

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[Victhom]

Meredith Whitney fears $70bn carnage on monoliners
By James Quinn, Wall Street Correspondent
Last Updated: 11:55pm GMT 30/01/2008

www.telegraph.co.uk/mo......



The high-profile banking analyst who triggered the resignation of Citigroup chairman Charles "Chuck" Prince is predicting investment banks will need to take further write-downs of $40bn (£20bn) to $70bn as a result of the current crisis in the bond insurance market.

The latest news and analysis on the credit crisis
Whitney raised fears about write-downs last year
Meredith Whitney, whose research note on Citigroup in late October triggered a $369bn sell-off in global equities after she warned of the bank's need to raise fresh capital, warns Citigroup will be one of the banks to be hardest hit by a collapse in the monoline sector, along with Merrill Lynch and UBS.

Ms Whitney, who now works for Oppenheimer following the boutique investment house's recent purchase of CIBC World Markets, warns: "Among the myriad of negatives that surround financial stocks today, we see no issue more critical than the fate of the monoline insurers."

Major monolines - such as MBIA and Ambac - risk losing their triple-A credit ratings as a result of having to pay out on guarantees connected to bonds that contain defaulting sub-prime mortgages.

She estimates that Merrill, Citigroup and UBS hold more than 45pc of the entire market risk associated with the monolines.

However Speaking at a banking conference in New York, Merill's new chairman and chief executive John Thain pointed out that the bank's net exposure to collateralised debt obligations (CDO's) hedged by monolines is around $3.5bn. However, he said that if monolines "disappeared from the face of the earth", which he doesn't expect to happen, Merrill will owe around $6bn.