Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday, September 8.
Nationalized - Fannie Mae (FNM), Freddie Mac (FRE)
“The Treasury Department's plan to nationalize Fannie and Freddie is a game changer,” Jim Cramer told viewers. He said that a nationalized Fannie Mae and Freddie Mac are important to the markets and investors. Falling home prices have trapped the market in a vicious cycle. Cramer said this action was important because of it. These falling prices, in turn, led to foreclosures, which led to more falling home prices. The news today, breaks that cycle by slowing foreclosures and finally allowing home prices to stabilize.
Freddie and Fannie account for almost 50% of all of the bad loans, said Cramer. With the government now in control of those loans, there will be many more options available for homeowners to avoid foreclosure. The end result will be lower mortgage rates for everyone, he said. Cramer said the double-digit decline in home prices since 2005 is finally coming to an end. He reiterated his prediction that a bottom in home prices is just 296 days away.
Buy Banks - JPMorgan Chase (NYSE:JPM), US Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Wachovia Bank (WB-OLD)
Cramer said the time is now right to consider buying bank stocks. He reiterated buys on JPMorgan Chase, a stock which he owns for his charitable trust as well as US Bancorp, Wells Fargo and Bank of America. He added Wachovia Bank to the list. He said all of these banks will benefit from their strong deposit bases going forward as the sector and the markets begin to recover.
I Don’t Have Killinger to Kick Around Anymore - Washington Mutual (NYSE:WM)
Cramer returned to his “Wall of Shame” list of the worst CEOs to make a few changes. He removed Washington Mutual CEO Kerry Killinger, following his ouster this past weekend by the company's board of directors. Luckily for shareholders, Mr. Killinger, who Cramer described as “perhaps the greatest destroyer of value since Ghengis Khan,” got the boot over the weekend. He said this is a man whose stock dropped 82%, to $4.12 from $24, just in the time since Cramer added Killinger to the Wall of Shame. It was down from $34 a share a year earlier. Today, with shares down 85%, Cramer acknowledged the board for finally doing the right thing.
Cramer quickly filled the vacancy on the “Wall of Shame” with what he called the “Three Stooges” in the analyst community: Bruce Harding of Lehman Brothers, Marco Villegas of JP Morgan Chase and Bradley Ball of Citigroup. He said all of them had buy recommendations on Freddie Mac and Fannie Mae going into the takeover of the companies this week-end. Here’s what Moe from Citigroup had to say: “We expect shareholders’ interest to be preserved. Larry and Lehman: “Capital Reserves Better Than Perceptions,” he wrote. Yeah, right. Curly at JPMorgan labeled both Fannie and Freddie “overweight,” meaning buy, back on May 22. Even after the weekend’s big events, Curly still hasn’t made a sound. Cramer noted that of the 17 CEOs to have appeared on his Wall of Shame, 11 have since been fired or have resigned.
New Jersey Governor Jon Corzine
Cramer talked with New Jersey Governor Jon Corzine about what the takeover of Freddie Mac and Fannie Mae means to the markets. “I thought it was complicated,” Corzine said, “and I’ve lived in this world. I think this is very hard for people who are not involved in finance deeply, don’t understand securitization and a lot of those issues.” Corzine added the takeover of Freddie and Fannie was necessary but his gripe was that the government waited as long as it did. “This has got a lot of secondary implications,” Corzine said. “I think [they’re] going to be pretty hard on the system.” Corzine said the two failed entities were entangled in many issues and that the regulators should have moved earlier on many of the problems. He called the practice of using deferred tax credits as capital simply “unbelievable.” Corzine was cautious not to fault either CEO for the crisis. He said that a lot of people and lobbying in Washington were responsible for creating this situation. Corzine said homeowners heard some good news today, but cautioned that home price relief may not be visible until possibly next spring or later. Asked about the upcoming presidential election, Corzine said he felt the economy and housing prices would be a central issue in the upcoming presidential election. He said there are a lot of problems the middle class needs answers to and whoever has the answers will be elected.
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