Jim Cramer's Mad Money In-Depth: 1/30/08: Mr. Guillotine

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday January 30. Click on a stock ticker for more analysis:

Altria (MO), AT&T (T), Verizon (VZ), Costco (COST), Urban Outfitters (URBN), Wachovia (WB), Washington Mutual (WM), Bank of America (BAC), Citigroup (C), General Motors (GM), Ford (F)

The Fed has redeemed itself with its 50 point rate cut, said Cramer, who called Fed Chairman Ben Bernanke "Mr. Guillotine" of rate cuts. "I believe the Fed averted a national systematic bank failure," said Cramer and said before long, it will be a good time to go shopping for a house. Cramer made many recommendations, including MO, T and VZ for their generous dividends, COST, URBN, WB. WM, BAC, C, GM and F.

Rick Goings, chairman and CEO of Tupperware (TUP)

Cramer touted TUP, up 75% since his initial recommendation in 2006. The company 's stock rose 5% on a great earnings report and has a 2.5% yield. He declared TUP's beat of 13 cents a share over modest estimates of 80 cents a share the biggest beat of the year so far. In addition, TUP's use of sales representatives means the company will benefit from unemployment if a recession is on the horizon. Goings said TUP does well when times are hard and 40% of its business is with beauty products. He added with 70% gross margins, raw costs are not a concern. Cramer would buy Tupperware.

AT &T (T), Verizon (VZ), Sprint (S)

AT &T and Verizon have been judged guilty by association with Sprint, and have declined because of Sprint's loss of 100,000 subscribers, even though Verizon has seen an increase of 1.9 million subscribers and AT&T's subscriptions have risen by 2.7 million. "You just can't get enough of AT &T and Verizon," Cramer says adding T is a better bargain under $35. However, he cautions investors to be aware of Sprint's next quarterly report, which could bring VZ and T down again.

Mad Mail: JP Morgan (JPM), Wachovia (WB), Walgreen's (WAG)

Cramer suggested buying JPM and WB even though bank stocks might continue to be weak. He told another viewer WAG's business is poor and it has no upside.

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Comments

[HarMegiddo:]

Mr. Schill = cramer
crammers buy the banks with "wreckless abandon" on monday seems to be another one of his doozies.
this clown has cost people more money than 9/11. i can see the sand running out on his hourglass.

2008 Jan 31 09:25 AM

[Norman Lepo...:]

I agree with you, HarMegiddo.

2008 Jan 31 03:30 PM

[Norman Lepo...:]

One claification. Cramer may be able to ride an upturn in the market if it occurs. This is the only way his show can survive and he can sell his books. As far as actually picking stocks and beating the market, his picks are awful.

2008 Jan 31 03:35 PM

[Victhom:]

Two Billionaires Concur: Sell the Banks
posted on: January 31, 2008 | about stocks: IEF / SHY / TLT Print Email Financial speculator and billionaire, George Soros states in his FT.com commentary: “the current crisis is the culmination of a super-boom that has lasted for more than 60 years.” In June’s Higher Rates Reflect Default Risk we described the end of the last credit boom:

In 1928, the U.S. Treasury Bond similarly broke out of the channel and rose to a higher yield. This coincided with the end of ‘easy’ money which forced the deleveraging of the economy and concluded with the financial crisis of 1929-1932.

Compare the two Treasury Bond Yield charts below. In 2005-2006 higher bond rates “broke out of the channel” and inflicted damage on the housing market. This marked “the end of ‘easy’ money.” Similarly since 2006, there has also been a flight to quality.



(Chart above from Longwaveanalyst.com)



George Soros explains what happens next:

If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.

As we described last June, we expect 10 year Treasury Bonds to be sold for cash in the panic, just as occurred at the end of the last credit cycle. Billionaire investor Julian Robertson agrees. As he revealed to Fortune, the biggest bet that Robertson has in his own portfolio at the moment” is “long the price of two-year Treasury and short the price of the ten-year Treasury."

Printing Money to Avoid Immediate Banking Collapse

According to the Federal Reserve Board website, U.S. non-borrowed bank reserves have gone from $37B to $199M (nope, that’s not a typo) in the last month. We have been discussing this with Sitka Pacific Capital’s Mike ‘Mish’ Shedlock for the last two weeks. He concludes:

Banks in aggregate have now burnt through all of their capital and are forced to borrow reserves from the Fed in order to keep lending.

Simply put, the U.S. banking system has no reserves. In addition, the FDIC has recently begun modernizing large-bank insurance rules. We hope this is a wake-up call to everyone as to the extent of the credit crisis. Bank account balances should be used only for transactions. Instead cash should be held in the form of U.S. Treasury Bills at a conservative brokerage or trust. Under the mattress is also perfectly acceptable (your parents or grandparents had to do it!). For investors, we advised last year to sell the banks. Banks will be soon forced to sell assets (yes, even 10 year Treasury Bonds) at deeply discounted prices to pay depositors.

2008 Jan 31 07:24 PM

[Victhom:]

Copy that part JIM??? LOL

According to the Federal Reserve Board website, U.S. non-borrowed bank reserves have gone from $37B to $199M (nope, that’s not a typo) in the last month. We have been discussing this with Sitka Pacific Capital’s Mike ‘Mish’ Shedlock for the last two weeks. He concludes:

Banks in aggregate have now burnt through all of their capital and are forced to borrow reserves from the Fed in order to keep lending.

Simply put, the U.S. banking system has no reserves. In addition, the FDIC has recently begun modernizing large-bank insurance rules. We hope this is a wake-up call to everyone as to the extent of the credit crisis. Bank account balances should be used only for transactions. Instead cash should be held in the form of U.S. Treasury Bills at a conservative brokerage or trust. Under the mattress is also perfectly acceptable (your parents or grandparents had to do it!). For investors, we advised last year to sell the banks. Banks will be soon forced to sell assets (yes, even 10 year Treasury Bonds) at deeply discounted prices to pay depositors.

2008 Jan 31 07:33 PM

[HarMegiddo:]

you're absolutely right Doc. it's easy to throw out names when the market is bullin'. just pick some top name and momentum will do the rest. if he doesn't cause the momentum himself.
the problem comes when there is volatility (which has been heavy for the last 6 months), by the time he has made a call, the market has already changed its mind and reversed.
i think he is also crazy recommending the homebuilders to his "retail crowd" right now. they can make money, but you better have nerves of steel. he will get them in high, they will make a big pullback and all his drones will have to sell at a bottom again with a 15-20% loss.

2008 Feb 01 02:41 AM

[HarMegiddo:]

oh, i also wanted to note, that on wednesday, after the Fed decision, cramer was on cnbc at about 3pm. the market was starting to climb. he comes out all pumped up, he says the market is going to" ramp into the close". he basically said to buy anything.
its safe to say the days highs came 10-15 minutes later and the market then reversed more than 150 points only to close the day in the red.
my favorite stock is ISRG, cramer put a sell on it the other day, well it was up 8% today and 15% AH. i love a cramer triple sell!!

2008 Feb 01 02:52 AM