Jim Cramer's Mad Money, 4/4/08: Cramer Vindicated

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program,Friday April 4. Click on a stock ticker for more analysis.

Homebuilders’ Tax Break

Cramer called the $6 billion rebate for homebuilders “outrageous and immoral” since the sector caused the current mortgage crisis, and will most likely use the money to build more homes, a move that will further depress the housing market. Instead, the government should be paying homebuilders not to build until the crisis passes, and thinks Congress is under pressure from the housing lobby, since the sector was not included in the stimulus package; "This is the same Congress," he said, "that refuses to help the hard working homeowner by allowing the Federal Housing Administration to back home loans and help keep people in their houses." Cramer urged viewers to write their elected officials and protest the tax rebate.

CEO Interview: Fred Hassan, Schering-Plough (SGP)

Fred Hassan appeared on Mad Money again on Friday to discuss further the fallout from the controversy over SGP’s anti-cholesterol drug, Vytorin. SGP announced $1 billion cost-cutting measures and a 10% reduction in staff following the debacle, although Hassan says business is still strong overseas and the lowering of the company’s estimates by analysts was a “natural emotional reaction” to the non-scientific negativity of the doctors on the panel; “Patients should stay on their meds," he said. "There is no science behind these few, vocal critics." Hassan added that SGP has the second highest number of potential drug approvals between now and 2012, and the company has $15 billion in sales from other products. Hassan denies rumors that SGP will be taken over. Cramer commented, “I think there’s a lot of upside here,” he said, but added. “I think it’s grossly undervalued, but remember – I’ve been wrong.”

Dividend Stocks: Dow Chemical (DOW), Permain Basin Royalty Trust (PBT), World Wrestling Entertainment (WWE), CPFL Energia (CPL), HCP (HCP) In a low-growth environment with falling interest rates, high-dividend stocks are the way to invest, but not all dividends are created equal. Cramer choose five companies which offer high, secure dividends and seem likely to increase these yields in the future. Dow’s 4.2% yield makes up for its lackluster financials, and the fact that it is levered to the “real” economy with 65% of its business overseas makes it a safe dividend stock. PBT offers a high 9.8%. However, since it is not taxed at the normal rate of 15%, Cramer would save this for a 401k or IRA to defer tax payments as long as possible. This is also true of HCP, a healthcare REIT with a 5.2% yield. WWE’s yield is 7.8% and half of its revenues are generated overseas. Finally, Cramer returned to Brazil to recommend CPL, which is the largest utility company in the country and keeps expanding. Further growth should lead to an increase in its 5.9% dividend.

Mad Mail: Bear Stearns (BSC)

Cramer received an e-mail from Peter in Illinois, the famous viewer who asked if his money was safe in Bear Stearns. He confirmed that Cramer was recommending keeping money in the bank but not in the stock; “My question was specifically about the assets that were in my different accounts. It had nothing to do with the equity BSC.” Peter said. When another viewer asked whether he should invest in smaller or larger value stocks when starting out, Cramer advised, “The first $10,000 in an index fund. You have to learn how the stock market works…the most important thing you need to know is, until you’ve done the homework, unless you have the time and inclination – one hour per week per position – mutual funds, mutual funds, mutual funds.”

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Comments

[User 113428]

why did Cramers buy call on the website disappear then?

[cora]

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[PureTruthiness]

Vindicated? Cramer? Hardly. Find someone with a tape or a TIVO and watch carefully.

Cramer got an email from someone calling himself "Peter in Illionois." The email confirmed that he was the person who sent the March 11, email. He also confirmed that he was talking about several large accounts he held at Bear, and not about Bear stock. He apologized for all the controversy his March 11 email caused. That was as favorable as it got for Cramer. It wall all down hill from there.

Although Cramer did his best to hide it, the email and the telephone conversation were critical of Cramer and suggested that Cramer had given bad advice regarding whether to keep money in a Bear account.

After the apology, the email asked why Cramer didn't tell viewers how little SIPC covers. In his conversation with Cramer, Peter asked again why Cramer didn't tell everyone about SIPC coverage.

Cramer gave the expected gibberish that SIPC didn't matter because the Fed bailed account holders out. Peter said, "Yes, but what if they didn't? With accounts this large . . . ." Cramer cut him off and said, "But they did." Peter said again, "But suppose they didn't. SIPC . . . ."

Cramer nearly jumped out of his skin cutting Peter off. Unfortunately Peter didn't persist. What can you expect from some money manager or private banking and asset management client who has several large accounts at an investment bank that is rumored to have liquidity problems, and is dopey enough to email Cramer the Clown to find out what to do?

At least Peter smartened up enough to realize that Cramer's advice was terrible and would put his large accounts at risk. Peter's second communication was aimed at criticizing Cramer, not vindicating him. It is a testament to Cramer's skills of persuasion that he could make the email and phone call seem like a vindication. Now if only his friend Spitzer was as good a lawyer. He'd have convinced us he flew the bimbo down to Washington for secretarial work.

[cora]

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[NormanLepoff, M.D.]

The facts cannot be changed! Who knows how much Cramer paid this guy to try to save face. The bottom line is that Cramer is a poor stock picker and it is best to avoid him, his books and his show.

[CedarStrip]

Took a close look at PBT.. article says dividends secure & likely increasing, in past years dividens have increased, but so far this year monthly dividends have decreased ..

[Ginger]

I've made a lot of money following Cramer's advice. I don't understand what all the whining is about.