Three Controlling Factors - Cramer's Mad Money (8/11/08)

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Includes: AIG, AMBC, AMZN, BAC, C, FMCC, FNMA, LEH, MBI, PCLN, SIRI, WFC, WMIH
by: Joan Wickham

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday, August 11.

“There are three stories controlling the markets right now,” Jim Cramer told viewers. He said falling oil prices, the rally in retail stocks and the continued rally in banking and financial stocks are behind the market rally.

Evidence of Financial Recovery - Ambac (ABK), MBIA (NYSE:MBI), Wachovia (NASDAQ:WB), Bank of America (NYSE:BAC), Fannie Mae (FNM), Freddie Mac (FRE), Lehman (LEH), Washington Mutual (NYSE:WM), Citibank (NYSE:C)

Cramer reiterated the bottom in the financial stocks on July 15. Since that call, many of the banking stocks are up, and up big.

  • Ambac was $1.70; now $4.19 a share.
  • MBIA was $3.90; now $8.70 a share.
  • Wachovia Bank was $8.90; now $18.60 a share.
  • Bank of America was $18; is now $33 a share.
  • WaMu was $3; now $4.08 a share. 
  • Citibank was $14; now $20 a share.
  • Incredibly AIG was $20; now $24 a share.
  • Even the troubled Fannie Mae is up from a low of $6.90 a share to $8.30 a share today.

WaMu may not have enough money. He said that despite continued losses at all of these companies, he doesn't feel the lows of July 15 will be tested again. He does believe that Fannie Mae and Freddie Mac will have to be bailed out. Cramer still expects hardships in both the financial and home building sectors and advised using caution in investing in them. He doesn't foresee a bottom in the housing market until late 2009, and he still expects to see at least one or two of the major home builders fail before the crisis is over.

Market Today – Amazon (NASDAQ:AMZN), Priceline (NASDAQ:PCLN)

The retail rally is very strong. Retail is being bought with conviction. 
Amazon is 12% to the upside.
Priceline is having a great day due to a Barron’s bounce.  The stock is up 6%.

Mel Karmazin - Sirius (NASDAQ:SIRI), XM Satellite Radio

Sirius Satellite Radio CEO Mel Karmazin discussed his company's future in the wake of the Federal Communications Commission's recent approval of its merger with rival XM Satellite Radio. Karmazin said the merger was well worth waiting for and he's looking forward to making his company's stock reflect the true value of the combined companies.

He defended his decision to raise $1.25 billion, seemingly at the last minute, to close the deal by saying that he had to play the hand he was dealt. He said his only concern was getting the deal done before additional challenges could be raised. Looking forward, Karmazin said that any notions of Sirius defaulting on its debt is ridiculous. The combined company has $2.4 billion in revenues and offers consumers the best deal in radio today, he said. In the future, he said, customers will have the option to subscribe to both services for just $25.90 a month, a “best of XM on Sirius” or a “best of Sirius on XM.”

Outrage of the Day – American International Group (NYSE:AIG)

In his “Outrage of the day” segment, Cramer recounted the Dec. 15 analyst meeting of AIG, where the company said it had low exposure to sub-prime debt and would not have to dilute its shares to cover losses. The company also estimated its total losses at just $314 million. Cramer called these statements shameful, stating that executives had to have known the losses would be significantly more.

 

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