How will we know when things have thawed? Everyone's looking at LIBOR and I can't blame them as that indicator of lending from one bank to another bank is crucial for the way the system is supposed to work. It's a good thermometer for certain, but I don't want it to overstay its welcome, because there are other "true" indicators out there besides just LIBOR. I am looking at something else: takeovers. On Monday, we saw Waste Management (NYSE:WMI) pull its bid for Republic Services (NYSE:RSG) , a smart idea as WMI had dropped so precipitously despite reporting better-than-expected earnings that one had to question if it was worth doing it. More important, though, getting the money was proving to be possible, but difficult. This situation also prevailed in Altria's (NYSE: MO) buy of UST (NYSE: UST) where Goldman Sachs said, "Don't bother, wait," even though the integration of the two is crucial for Altria's growth.
Now I expect deals to be done if the banks are for real about lending.
Further, the endless margin selling has created tremendous bargains for well-capitalized companies to buy other companies that have brimming order books but are being kept down because of hedge fund redemptions. How can some company not want to buy a Trinity (NYSE:TRN), for example, which has been virtually cut in half even though both presidential candidates are pro-wind? Or how about a Foster Wheeler (NASDAQ: FWLT) or a Joy Global (NASDAQ:JOYG) or a Terex (NYSE: TEX) betting that if there is credit there will eventually be a revival?
I don't care about near-term weakness. We all accept that you should buy a Lowe's (NYSE: LOW) or a Masco (NYSE: MAS) or a Black & Decker (NYSE: BDK) when things are "bad" knowing they can get "good" one day. Surely, some large corporations must see it that way, and yet they just can't borrow to make it happen. If that changes then we know we have another reason to buy stocks than just their "P/E-cheapness," which hasn't worked at all of late.
I could see that many projects will still be canceled and that energy and minerals will be hard-pressed to rally given the global slowdown. The radical scale-back at Freeport (NYSE: FCX) and BHP (NYSE: BHP), coming just a few months after expansion was all that could be talked about, is a true sign of how bad things have gotten so fast.
The new rescue plan doesn't buy up houses or make the defaults less if there is double-digit unemployment. But if there is lending, the strong should be buying the weak, or the stocks that have been forced down to levels that represent a severe recession, and we will see whether that happens as it makes all sorts of sense in every industry from pharmaceutical and food to mining and oils.
That's what is worth watching for.
At the time of publication, Cramer was long Altria, Foster Wheeler and Freeport-McMoRan. Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
Editor's note: Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details.
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Reader Comments (Page 1 of 1)
10-15-2008 @ 11:21AM
beachpaul said...
Comrade Cramer, we have already been taken over.
10-17-2008 @ 12:17AM
Alice J Stack-Mullahy said...
Dear Mr. Cramer,
I have tryed to get this letter out to the public...PleasDear Presidential Candidates:
Please take a few moments out of your Very Busy time schedule, to read this letter. It is of, Great Importance to Every American; just like Joe the Plumber.
In 1998 when I first went to start a Business, I needed to find out exactly what the average price markups for Products were here in the US. And, this is what I found! I am passing my findings on, since I BELIEVE in; Fair Play and Equality, things this Country, I thought were built -on, I hope it helps...Good Luck! CEO's Incomes, must be put in there Proper Perspective, NO matter what company they represent!...
The basic Middle Class Tax Payer/persons, are the ones, making less and paying out more, as we all know. I'm married to a white collar worker, in the PC field. We're lucky to even take, a vacation once a yr, no less see $480 Million Income ( what we All could do with that! LOL ). In most corporate America, with our "FAIR TRADE ACT" as it is written today...Anything bought Wholesale from other Countries and Re-sold Retail, in this Country, is marked- up at a Greedy 119.8% Plus MARKUP, and its YOU, ME and Our Families, that are paying the price. It's a shame that when you have a Business, All Manufactured Products can be bought for no more than 23%-28% Markup ( Wholesale) from Manufactures over seas ...then it Retails here, in the USA for 119.8%+...( And, People think their getting a good deal when things go on Sale...( "NOT"! )... After that, the other 91.8% or higher goes into our Corporations pockets..( so, they don't loss) . And, this is Why, America, is paying the prices today "GREED my Friends, GREED" !.
The Big Manufacturers and the Middle Men make the money! And, the American Citizens, pay, and keep paying!.. Yes, even you; PAY! Our Rents, Mortgages, Taxes, Schooling, Auto prices, etc, all show exactly, what I'm saying to be true! Since it all, has the "Domino Effect"... right down to the pencils ,your kids and grand kids , buy for school!
IT EFFECTS, EVERYONE in THIS COUNTRY... EVERY WALK of LIFE...NO ONES, IS EXEMPT !
Note: Bread 30 yrs ago cost 27 cents a loaf but with "costs" steadily rising over the years, we now pay for a Brand Name bread $2.49. Milk, is at almost $5.00 a Gal. (sad) and eggs 27 cents a doz. ( in my lifetime)...now $2.29 is about the country's Avg.COST.So, What gives, you say? This Country will "NOT" get back on track until Pricing is Adjusted, to meet our " Basic Needs"...
Take SS or people on SSI / SSD. Their cost of living increase, in their checks go up 4-8 % yearly, but the true cost of living, really rises 16%...(not even an equal percentage).mind ya ! So, Who pays the shortage? No one! They go with-out or a family member helps, them... which, also puts a financial strain on That, helper.
As a Citizen of the USA, I purpose, that the Citizens of These United States, write to their Congressmen/women. To Vote in/ on The Ballet a few Laws. to make REFORMS, as soon as, possible, on The "FAIR TRADE ACT". To Reduce the high, hidden Percent of 119.8% plus Markups, Charged by Companies to their Customers/ Clients and Consumers. Which will reduce the Asking Prices across the board, to a REASONABLE 60-80% Markup, for Products and Services, that We All USE, Daily.
Even "Temporary Reforms", would help, at this point! Since, this would put more Funds, back into our Governments' Economy/Financial Circulation. And, give the Economy a chance, to become more Equal, and Stable..And, it will allow more Buying Power, for every Citizen of the Country! Which would mean the Dollar would STRETCH FURTHER, for ALL !
And, make the CEO's of these Large Greedy company's; Reduce their Income... Not fire them!...But bring their income down and keep the Monies, in the Company's where it Belongs, so these Company's can run Self Sufficiently, without the Governments help! So, We The People... Do Not have to go; bailing out these Large Businesses, with funds, which we, at this time, Do Not have, and /or our Tax dollars. While "WE" give up our hard earned dollars, so CEO's can go on Vacations, Own Boats, and buy Designer Clothing for their kids, send their children to Private Schools, and drive Designer Cars, and live in Big Expensive Homes, etc.
Do the Math, my Friends, and see how much a $12.00 pair a shoes, Really costs, you! Now, Multiply that times Thousands of pairs of shoes coming into This Country and every product you use!!!
The Rich get Richer, and the Poor... Well, don't ask! You know the answer, to that question.... Let's start by emphasizing the word, " FAIR", in the words; of the LAW... FAIR TRADE ACT...
Just REMEMBER: ALL MEN ARE CREATED- EQUAL according to Our Great Constitution.. ( WHY NOT BUSINESS- MEN / WOMEN ) Remember, " THEY ", SET the PRICES ! You don't!
Well, Thanks for Listening!
May God Bless you and Our Great Country!
Sincerely,
Alice J Stack-Mullahy- A Texas Voter
10-17-2008 @ 12:42AM
Alice J Stack-Mullahy said...
This is a followup to my last letter..Isn't the name of the game...Keeping the money Flowing? How I see it, if more monies were in Our pockets, more people could do much, with their monies. Such as: Buy more Stocks, Saving Bonds,and have money for Retail Spending.Also, we'd be able to obtain better Credit; since there would be more money in the Consumers pocket, to PAY THEIR Bills on time. If Markups on Retail costs, were kept down,to 60-80% for the Larger Retailer. The Smaller Retailers,charging the same then could afford to do more in their New Business.Since everyone would be buying and selling at the same rate. It's a win -win situtation! More of OUR MONEY, to Circulate! Everyone's Money-YES?