Throw Everything At It - Cramer's Mad Money (10/1/08)

by: SA Editor Joan Wickham October 01, 2008 | about stocks: BBT / BEZ / DE / HON / JOSB / KBR / PEP / PG / VRTX / WMB / XOM    

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Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, October 1.

We Need to Throw Everything We Can At It

To all the naysayers of the $700 billion bailout package, Jim Cramer told them they're "dead wrong." He told the viewers that we need to throw everything we can at the financial crisis. Cramer is in disbelief over the, well, nihilism he’s hearing from market pundits these days. Rate cuts don’t matter. Buying mortgages won’t work. It’s too late for a stimulus package. "Tell us what will work," he asked those opposed to the bailout plan. Listening to them, you’d think the world was going to end tomorrow and there was nothing we could do about it. But that’s not how Cramer sees it. In fact, “these people are dead wrong,” he said, adding that such talk was “economy-destroying analysis.” He believes we should be throwing everything we can at this problem: rate cuts, tax cuts, rescue plans, home loans, you name it. “We can’t print money fast enough,” he said. And Wednesday’s rally in financials is proof that this stuff works.We’ve been here before, though. The U.S. didn’t do enough to stop the Great Depression, and we could find ourselves there again if we take the same approach. Not only does Cramer think we have to do anything we can to avoid a similar fate, but it would be “heartless and punitive not to try.” "There will be plenty of time for subpoenas later," he said.

Criminally Undervalued – KBR, Inc. (KBR)

Cramer said he understands that it might be difficult for investors to think about stocks at a time when they're worried about losing their jobs or their home, but he feels the market now represents a great value for the long term. He said Monday's sell-off was a clear sign to sell stocks, but Tuesday's was a sign to buy them. Cramer said he's taking the middle ground, staying defensive with consumer stocks and high dividend stocks while looking for real bargains amidst the rubble. Cramer said there is one company that's so criminally undervalued he can hardly believe it. That company is KBR, and he said he's "never seen a company so cheap in my life." After hitting a peak of $43.25 earlier in the year, the stock now trades at just $15.13. Cramer said the decline in price is not due to the fundamentals, but rather to fears that a Barack Obama presidency will hurt business, as well as hedge funds being forced to liquidate their positions to cover redemptions. With a $15 billion backlog, KBR's paltry $2.5 billion marketcap just doesn't make sense, he said. Furthermore he said the company has $9 per share of cash on its balance sheet, and trades at just 7.5 times its forward earnings, or just 3 times earnings if you back out the cash. Cramer said that while infrastructure and energy may be out of favor on Wall Street, it's still very much in favor in the real world. The company continues to secure new business and grow its backlog. Market rules state a company can’t sell itself for two years after a spin-off or IPO. Cramer noted that in April, 2009 KBR will be eligible to sell itself, making it a prime takeover target for a multitude of companies. Giving KBR the same valuation as previous deals, Cramer said the stock could fetch as much as $55 a share. Even when more conservative numbers are applied, Cramer said the stock would fetch a $33 price target and a 118% gain in the stock.

Am I Diversified ?

Portfolio One

  1. Exxon Mobil (XOM)
  2. Honeywell (HON)
  3. Proctor & Gamble (PG)
  4. Pepsi (PEP)
  5. Williams (WMB)

Cramer said he liked the portfolio except for the two oil companies with Williams and Exxon. He suggested selling Exxon in favor of a defense stock or a healthcare company.

Portfolio Two

  1. Baldor Electric (BEZ)
  2. Vertex Pharma (VRTX)
  3. John Deere (DE)
  4. Jos. A Bank Clothiers (JOSB)
  5. BB&T (BBT)

Cramer said he's not a fan of Joseph A Bank, but called the portfolio perfect if a better retailer were added in its place.

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This article has 12 comments:

  •  
    Oct 01 11:59 PM
    The word Cramer is bad news. Wasn't DOW supposed to hit 15000 last year, ooops, we are under 11,000 10 months later. This is what is wrong with the system, guys like Cramer are still around, babbling. Ultimately, DOW will hit 15,000, may be this year or 10 years from now, and he will be saying told you so. Cramer - Get a real Job...
    Reply | Link to Comment
  •  
    Oct 02 08:16 AM
    Cramer is a good fellow. He always has an edge in the Market.
    Investors need advice now not next week. His advice is as good
    as any in the WSJ. Assuming you only have so much to spend!
    Reply | Link to Comment
  •  
    Oct 02 08:59 AM
    The Bailout Bill is a joke. Over 100 billion dollars have been added. And these are real dollars, not just guarantees that might not end up being actual expenditures. Cramer has turned into a pimp for Wall Street banks.

    Regional banks are doing business. The big car dealers that are in trouble are the ones that expanded too much. Let them fail.
    Reply | Link to Comment
  •  
    Oct 02 09:30 AM
    before i lost 150000 in the wachovia citi deal even though 95% of the stock was pd for in cash fidelity sold my shares five minutes after they resumed trading siteing it was to protect me instead of a margin call placed to me it closed higher by one dollar and by 10am next day 3.35 dollars mark cuban was on fox and said he bought 2 mill shares hes cleaning up! when i had a stock portfolio i wanted a deal now that i dont i hope paulson and his buddies on wall street get no deal let only the good banks take over let the govt seize the bad ones and sell housesand condos for fair value over time you dont really believe you live in a free country do you/
    Reply | Link to Comment
  •  
    Oct 02 11:48 AM
    The rescue-bailout bill has been loaded with pork in the Senate. Now it is up to the House to vote it down and try to let the market operate as it should. This whole thing has been fear mongering by Paulson, the ex-Goldman Sachs executive.
    Reply | Link to Comment
  •  
    Oct 02 10:55 PM
    I think its a pretty good long term investment. But I would wait just a little bit. I think it has more to fall.
    Reply | Link to Comment
  •  
    Oct 02 11:18 PM
    Sorry.......i was talking about KBR above. I am a supporter of the free market system. But with the mess we are in right now the people that just say let them fail are morons. People will lose the rest of their nest eggs, 401 Ks will evaporate, people will lose their jobs, things we must avoid. I think this bailout plan is horrible but I don't think we have a choice. What I do want is an effective bailout without all the extra crap that I have heard them trying to put into it. This pork has got to stop! If they need more time then its worth it to get the bill right. But the way the democrats and republicans have been its really hard to think they are able to do anything right. But again I don't think we have a choice. Both parties let us down AGAIN.....people need to start taking this stuff more serious. Barney Frank needs to go....Christopher Dodd needs to go......Chris Cox needs to go.......Bush will be gone.....Pelosi is a joke as is Harry Reid.....the Dep of Energy needs to go.....the guy who leads the transportation department needs to go.....not mentioning a whole lot more of the republicans and democrats in the congress and senate that act like they are looking out for us when all they care about is keeping their jobs and the power that goes with it. Until people stand up and start getting rid of these cockroaches these things will continue to happen. The people of this great country will continue to suffer because who is looking out for us?......not many I tell you that.
    Reply | Link to Comment
  •  
    Oct 02 11:20 PM
    Correction.....I meant the guy that leads the department of energy needs to go.
    Reply | Link to Comment
  •  
    Oct 03 03:19 AM
    i have a better idea than handing out billions of dollars to people that have already proved they can't balance their own checkbooks. let's suppose there are 380 million people in this country and the government gives each and every one a measly one million dollars. instead of giving it to the top teir and letting it "trickle down" let's let it trickle up. this would end a multitude of government assistance programs such as unemployment, child support from deadbeat dads,and welfair to name a few. all the while allowing people to buy the houses they have dreamed about, the retirement trat has been stolen from them etc.etc. etc. this as they spend them money it would "trickle up to bankers, insurance brokers and yes wall street. this plan is not foolproof but it would be cheaper and easier to fix and help those who had nothing to do with the original problem to start with. think of the money the government would save just on public assistance programs alone. just a thought. any other suggestions?
    Reply | Link to Comment
  •  
    Oct 06 10:29 AM
    Bill-p---

    I do believe your specialty might continue in the computer game sphere, or run for Congress, based upon your suggested craving, to give away individual American's earnings. Just a thought!

    Also, have you added enough zeros to your computation?

    Just a thought.
    of
    Reply | Link to Comment
  •  
    Oct 06 12:04 PM
    Jim Cramer is just another idiot Democrat that somehow made some money on Wall Street. He now spends his time, like a true liberal, trying to tell other people what to do with their money. The bailout bill that passed has NOT addressed the fundamental problem which is political interference in the free market system. Barney Frank, Chris Dodd, Franklin Raines and Jamie Garelick, for starters, should be placed in stocks (the old kind made of wood) in front of the Capitol so the public can urinate on them as they go in to beg for more money from the state. The coming inflation that a Jim Cramer-approved money prining mania guarantees will be a terrible sight to behold. Thanks, Jim! Great analysis!
    Reply | Link to Comment
  •  
    Oct 08 01:44 PM
    Just a comment on the sacred cow known as "the free market". There is no such thing, and never has been, here or anywhere. The capital markets must be "policed", just like the free society is "policed" to protect you from being mugged, robbed, burgled or murdered. As most of us have now learned the hard way, even a "free market" must be policed, and obviously heavily, because of fraud, cheating and breaches of fiduciary duty. The price of a security is predicated on the 'fiction' of an efficient market, i.e., one in which all relevant information is disclosed and available. Obviously, every possible abuse, from every angle, resulted in the credit default swap debacle. The system was set up to withhold information from the public, and permit originators to "take the money and run", which they did. The absence of regulation (really "policing") ennabled huge leverage on near worthless paper which nobody had the incentive to value -- until it was too late. I'm no economist, but the "free market" is always a ready victim for greed and corruption. That's what happened here. From the original homebuyer who bought a home on terms "too good to be true", to the mortgage originator, to the purchase of the mortgage-bundled securities, to the investment bankers, to the lobbyisits, to the Congress (republican and democrat alike), to the President, to the SEC, to the other so-called watch-dog agencies --- every one of them had an essential role in the credit crisis of today. The answer: Immediate and heavy government involvement in the fix -- whatever it takes. That includes re-casting mortgages based on current home values with fixed rate mortgages to create a floor on home prices -- the root of the whole pitiful business. Socialism? Just a label. We've had alleged 'socialism' for decades. Without it, you'd have elderly dying on the streets like in old Calcutta. Ask any Republican if he/she is unhappy with their Medicare, and instead would prefer to be saddled with a $ 400,000 hospital bill when they are 86 years old. Not a one would give it up. Getting health care is not the same as buying a car. Health care is not a commodity.
    Reply | Link to Comment
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