Driven By Fear - Cramer's Mad Money (9/17/08)

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Includes: AIG, BAC, CEG, CHK, CSCO, DRE, ESLRQ, ETH, GG, GIS, KSS, PG, PNRA, RATE, SHLD, XOM
by: Joan Wickham

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, September 17.

Fear, Not Facts Driving the Market

"Fear, not facts or fundamentals, is what's driving this market," Jim Cramer told viewers. He warned that while the selling might not be over, investors will miss some opportunities of a lifetime if they stay too negative. The fear in the markets today reminded Cramer of the great market crashes on 1987 and 1990. However, citing President Franklin Delano Roosevelt, he told viewers that the only thing they need to fear, is fear itself. He said that while everyone is worried about the system and have no confidence in the system, ultimately the system will emerge again. In times like these, said Cramer, it's wise to return to the fundamentals and look for solid companies with good long-term outlooks. "We are not a bankrupt country with bankrupt companies," he said. "Keep your powder dry and wait for the opportunities to emerge." Cramer reminded viewers that after the crash of 1987, every stock on the most active list before the crash was higher a year later. He said that today is likely not the bottom for this market, but there will be a time to buy again soon. "Don't stay negative forever," he said.

Better Off Today - American International Group (NYSE:AIG)

"We are better off today than we were yesterday," Cramer told viewers. Despite the market's huge sell off, he took a moment to talk about what went right today. Cramer said that the surprise bailout of American International Group is big news for the markets. Yesterday, he said, we were worried AIG was going under. Today, we know it's going to be OK. Yesterday, we were worried about other banks failing as a result of AIG. Today, another one of the market's 'black holes' has been filled and we don't have to worry as much. Now that the danger of AIG’s failure is off the table, we don’t have to worry about the mortgage insurance policies the company held. Cramer also said the SEC's announcement of new rules against relentless short selling is big news for the markets. He credited Chairman Christopher Cox with making a good first step to undo the damage caused by short selling and urged the Chariman to go one step further and reinstate the uptick rule, which requires a stock to tick up in price before it is sold short.

Stabilizers - Ethan Allan (NYSE:ETH), Sears Holdings (NASDAQ:SHLD), Panera Bread (NASDAQ:PNRA), Bankrate (NYSE:RATE)

Cramer reiterated that today is not the bottom for stocks and said some companies like Ethan Allan, Sears Holdings, Panera Bread and Bankrate could rally as the market begins to stabilize and the new SEC rules take effect.

Great Company, Great Quarter - General Mills (NYSE:GIS)

Even on bad days, there are still great companies reporting great quarters, said Cramer. He spoke with Ken Powell, chairman and CEO of one such company, General Mills, about the company's quarter and its future outlook. Powell said General Mills delivered another one-two punch with their focus on productivity and strong innovation. He said that the company's productivity offsets inflation and its strong innovation and brand building also helped protect margins. Powell dispelled rumors that consumers are "trading down" for generic brands. He said the only trend General Mills has seen is people making few trips to restaurants and more trips to the grocery store. Regarding international sales, Powell said General Mills is only in the third inning of its growth strategy. With only 25% of the company's sales coming from abroad, Powell said there is still a long runaway in front of the company. Powell characterized General Mills as a safe, resilient company that is enjoying broad-based success.

Am I Diversified?

Portfolio One:
Exxon Mobil (NYSE:XOM)
Goldcorp (NYSE:GG)
Chesapeake Energy (NYSE:CHK)
Proctor & Gamble (NYSE:PG)
Kohl's (NYSE:KSS)

Cramer said Chesapeake and Exxon were two energy plays and advised selling one and picking up a healthcare or staying in cash until the market volatility calms down.

Portfolio Two:
Constellation Energy (NYSE:CEG)
Duke Realty (NYSE:DRE)
Cisco (NASDAQ:CSCO)
Evergreen Solar (ESLR)
Bank Of America (NYSE:BAC)

Cramer said this portfolio had too much speculation with Evergreen and Constellation. He recommended selling Constellation for a defense stock.

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