Bear Market Rally - Mad Money Recap (7/16/08)

Stocks discussed in the in-depth session of Jim Cramer's Mad Money TV program, Wednesday, July 16.

 Bear Market Rally or Something Else? Wells Fargo (WFC), Intel (INTC)

"Is this just another rally in a bear market or has something changed," Jim Cramer asked viewers of his Mad Money TV show Thursday. He said that while some things did indeed change, not enough changed to offer a sustained market rally.

 According to Cramer, there were three causes for the Dow to soar 276 points. The first was Wells Fargo, which not only reported better-than-expected earnings, but also raised its dividend. Cramer said this showed investors that not all banks are in trouble. "Wells Fargo is a survivor bank that can go buy up the bad banks," he said. The second cause was oil prices, which are finding resistance at the $150 a barrel level. "This means consumers won't see gas over $5 a gallon," he said.   Finally, Cramer credited Intel for part of the market's rally with its surprisingly good quarterly results.

 Despite these positive notes, Cramer said the country needs his three-part plan to get the American Dream back on track.  For a permanent bull market, he said the country doesn't need a recession, a strong dollar or lower taxes.  Instead, he said, it needs the creation of a resolution mortgage trust to bail out the financial sector. With just a $300 billion bond issue of two-year notes, the federal government could buy all of the bad loans for around 70 cents on the dollar.  The next step would be to scrap ethanol. Cramer advocated repealing the Illinois/Iowa Corn Ethanol Mandate, which currently converts 30% of the nation's corn crop into just 3% of its energy needs. If this were done, there would be a 50% reduction in food costs.  The final step is to emphasize natural gas. He said that the U.S. has discovered huge amounts of natural gas recently and with gas 50% cheaper than oil, it's the cleanest, safest and most abundant fuel alternative.

With just the stroke of a pen, Cramer said the government could make natural gas the fuel of choice, create jobs and spark the entire economy.

 Back on Track - CSX(CSX) CEO Michael Ward

 CSX is Cramer's "favorite railroad stock by a mile".  CSX and incumbent CEO Michael Ward is a company under siege.  They have been in a battle with hedge fund TCI over control of the company's board. Cramer said it now appears that TCI has the upper hand, and CSX has lost the fight.  Cramer is "not happy with this outcome".  Despite the proxy fight, Cramer said he still likes the company's fundamentals, which are being driven by high demand, resulting in increased revenues in eight out of ten of the company's markets.  CSX is a long-time favorite of Cramer. It is currently up 186% since it was first mentioned on March 22, 2005. They had another fantastic quarter today.  Ward returned to the show to talk about the quarter and the continuing battle for the company's board of directors.  Ward said business is strong at CSX, with EPS was up 25% for the quarter and 75% of the company's key markets up on revenue. Ward said that housing does not take up as big a portion of the company's portfolio as it did previously.   Ward said the volume of coal shipments has not declined at CSX. He said export demand remains strong and domestic utilities will begin adding reserves of coal in the third quarter.  Regarding the battle with TCI, Ward said the hedge fund has indicated that if it is successful in replacing board members, it wants to work with existing management. Regardless of the outcome, Ward said he'll remain focused on creating shareholder value.  Cramer said he's sticking with Ward and CSX.   Rail story is driven by demand which is still going strong.

 A Retail Hero - Eric Wiseman, VF Corp's (VFC) president and CEO

 Cramer regularly takes the pulse of the American economy by talking to CEOs in consumer sensitive areas. Cramer says "another area of the economy that is consumer spend sensitive and everyone says has fallen off a cliff is apparel." In this regard, he talked with Eric Wiseman, VF Corp's president and CEO.  CF reported a better than expected quarter today.  Wiseman said the company raised both its revenue and earnings per share guidance yesterday. While the U.S. economy is spotty, VF remains strong because of its diversified portfolio of brands and its global reach, he said.  He highlighted several of the company's recent acquisitions as evidence of the company's successful strategy.  VF unleashed the potential of these companies.  Cramer told viewers that VF Corp has the longest running string of estimate beats in retail. Cramer said "This is a special apparel company – better than all the rest."  He called Wiseman a hero of retail.

 

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