Cramer's Mad Money (1/6/09) China Saves the World

Includes: BB, ETN, GIS, MCD, MRK, QCOM, S, VZ
by: Miriam Metzinger

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Tuesday January 6.

China Saves the World: Qualcomm (NASDAQ:QCOM), McDonald’s (NYSE:MCD), Merck (NYSE:MRK), BHP Billiton (NYSE:BHP), Joy Global (JOYG), Eaton (NYSE:ETN)

Although in the past Cramer has been dubious about trusting Chinese stocks, he thinks Chinese Communism will actually save Western Capitalism. China is saving itself because it cannot afford a further decline and is throwing money at its problems; the Chinese government has cut interest rates five times and has a $600 billion stimulus package, which includes $40 billion for telecom (this is good news for Qualcomm, Cramer observed.). Why does this matter to the U.S? Cramer says the China trend will be a huge catalyst that will move investors out of stocks like McDonald’s and Merck and into more cyclical stocks such as BHP Billiton, Joy Global, Freeport McMoRan and Eaton.

CEO Interview: Sandy Cutler, Eaton (ETN)

Sandy Cutler, who last appeared on Mad Money in November 2008, discussed Eaton’s progress. The stock has risen 27%. Cramer wondered if it is time to take profits or if Eaton is worth holding. In spite of the rise in stock price, the company lowered guidance and had a challenging fall because of the global liquidity crisis; Cutler doesn’t expect business to improve dramatically for another 6 to 9 months. However, 55% of Eaton’s business is overseas and cost-cutting measures are having a positive effect. “No more selling for Eaton,” said Cramer, praising the company’s clean balance sheet.

Another Dow Favorite: Verizon (NYSE:VZ), Sprint (NYSE:S), Research in Motion (RIMM)

On Monday’s show, Cramer discussed his favorite Dow stock, Hewlett Packard. On Tuesday, he discussed his second favorite, Verizon, which fell 6% on a downgrade from neutral to underweight with a target price between $27 and $32 a share. Cramer thinks this downgrade was unjust and is based on false assumptions. Cyclical stocks are actually doing well, and Verizon’s main competitor, Sprint, is performing poorly. The Blackberry Smartphone sold out in just a matter of hours, which is also good news for Verizon’s partner, Research in Motion. While not everyone is in love with FiOS, Cramer said the service is taking market share and is benefiting Verizon. Cramer likes the company’s high 5.8% dividend, which he says is quite safe. Even if there were some truth to the downgrade, he notes a drop in the stock price to $27 would lift the dividend to 6.8%.

The Biggest Loser: General Mills (NYSE:GIS) CEO Ken Powell

No, General Mills is not a loser, nor is its CEO Ken Powell, who appeared on Tuesday’s program. Powell discussed General Mills sponsorship of the NBC program “The Biggest Loser” and its “pound-for-pound” program which donates 10 cents to Feeding America (the largest food bank in the U.S.) for every pound lost by visitors to the company’s website. General Mills’ fundamentals are sound “even in this tough commodity environment,” said Powell, who reported growing margins and a great second quarter. While a strong dollar could hurt General Mills overseas, the company has a strong enough domestic business to weather the storm. Cramer endorsed General Mills and pointed out its century-long tradition of paying its dividend.

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