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?
David Swensen has led Yale's endowment to phenomenal results since taking charge in 1988. According to the New York Times, his advice for individual investors is simple: "use index funds, exchange-traded funds and other low-cost instruments, and stick to your long-term asset allocation -- even when the markets are in tumult."
What's interesting about the Times interview is that Mr. Swensen decided to use it as an opportunity to take some shots at Mad Money host Jim Cramer: "There is nothing that Cramer says that can help people make intelligent decisions. He takes something that is very serious and turns it into a game. If you want to have fun, go to Disney World."
Mr. Swensen sure did manage to come across as an aristocratic snob. But I'm actually inclined to agree with him to a certain extent: I would never follow Cramer's stock picks. I think he gives way, way too many tips. But I do watch Mad Money regularly because Jim Cramer is a really smart guy and has been down in the trenches of money management. Some of his broader ideas are useful, and let's face it: his is one of the few really entertaining shows on CNBC.
On yesterday's Mad Money, Jim Cramer offered his "Mad Money Manual" -- a guide to how to watch the show inspired by the criticism of his stock-picking track record leveled by the press.
The show is actually a recap of an episode from May, but I missed that one so I'll opine on it now. According to TheStreet.com's recap of the show:
In a given week Cramer said he might recommend a dozen stocks, excluding the ones in the "Lightning Round." But just because Cramer says he likes a stock, doesn't mean that viewers should go out and buy it.
Nor does it mean that if people buy that stock they will absolutely, positively make lots of money, Cramer said. "That's not how this game works."
Cramer stresses the importance of doing your own homework, but here's the problem with that advice: Can the Average Joe with a 10-inch TV and Yahoo! Finance really expect to uncover something that hedge fund legend Jim Cramer has missed?
On last night's MAD MONEY on CNBC, Jim Cramer made a review of "alternative energy stocks" he recommended earlier this year since his coverage of the green-tech picks back in April based upon a Massachusetts court ruling that was going to be a homerun for the sector. He gave a pretty large list that was in reality just a review of many stocks that benefit either directly or indirectly from "greener" movements. Here is the "full list" of his eight stocks he reviewed tonight, and there are several more from call-ins.
His Top Pick in the group is MEMC Electronic Materials, Inc. (NYSE: WFR) as it has an arms merchant business model for the solar market. It makes wafers for solar panels and is too good to pass up. He said it's cheap and he thinks out of all green stocks that this one is still bargain.
You might want to know that MEMC already has a $16 billion market cap, but the forward growth rates in this part of its business are hard to argue against. This movement in "green" strategy has just recently helped the stock get back above levels seen in the late 1990's. Keep in mind that this one also produces wafers for the global semiconductor industry, so it isn't a pure-play in the sector. This one closed up big with the sector today at $74.74, but shares traded up 3% in after-hours after-hours trading to what will be a new high.
A couple of 24/7 Wall St. comments in the alternative energy area:
An even more interesting analyst call in alternative energy today was where Lazard Capital called Capstone Turbine Corporation (NASDAQ: CPST) as a potential double to $2.50 per share. This one has been around forever and used to be considerably higher.
Two UC Santa Barbara Grad students analyzed Jim Cramer's picks on his show Mad Money and reached an unsurprising conclusion. From the Economics Blog on Portfolio.com: "Mid- and large-cap post-pick excess returns are generally of the correct sign, though the magnitude of these returns is relatively small. Where Cramer displays the most ability is with small-cap stocks, in both his caller and non-caller picks"
This is consistent with the overall trend of money managers being most able to create alpha when investing in small-caps. Given Cramer's limited time for researching any one stock, and the vast quantity of research already done on almost every large-cap, how can anyone expect him to identify ideas that aren't already conventional wisdom and priced into the stock? Markets are just too efficient at that level for superficial analysis to yield much in the way of results.
But in small-caps, research is much more likely to yield an edge.
Perhaps most interesting, the students found that Cramer's picks generated the most excess returns when he made small-cap sell calls.
So perhaps the strategy for people looking to profit from watching Mad Money is to short small-caps where Cramer's pounding the "Don't buy it!" button.
Barron'scover story on Jim Cramer this week is a perfect August cover: beach reading about whether Cramer is a good stock picker.
Cramer and I went to college together and I was a board member at TheStreet.com (NASDAQ: TSCM), so I am not unfamiliar with Jim's career.
The Barron's piece starts out by saying the viewer of Cramer's show Mad Money would only have made 12% on Cramer's picks over the last two years. The magazine uses a firm called YourMoneyWatch to determine that. It tracks Cramer's stocks from when he tells viewers to buy them up until he says that they are "sells." In a chart, Barron's shows Cramer's performance against the two year advances of the Dow at 22% and the S&P at 16%.
Cramer has a wide following. His Mad Money show has 138,000 viewing homes according to Nielsen. Several hundred thousand more people read him through products at TheStreet. He is written about in the press several times a month, so Cramer is almost certainly the most widely followed stock guru in the country.
The cover story on this week's Barron's is likely to get attention for a long time, and may even serve to drive down the price of TheStreet.com (NASDAQ: TSCM), Jim Cramer's company. Journalist Bill Alpert takes a look at the track record for Cramer's picks on his show Mad Money.
According to Alpert, "a comprehensive and careful review of his stock picks by Barron's finds that his picks haven't beaten the market. Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by YourMoneyWatch.com, a Website run by a retired stock analyst and loyal Cramer-watcher."
I would never dream of buying any stock based on Cramer's recommendation, and here's why: Warren Buffett, one of the greatest investors in the world ever, has often said that he can only find a few good investment ideas per year. All you need is a few in your life to do well. How about Jim Cramer? He gives a few stock picks per show, five days a week, and then gives dozens more buy and sell calls on the Lightning Round each week.
This flies in the face of what most people understand about the markets. We can argue about the extent of their efficiency (Burton Malkiel would argue that nearly every stock is perfectly priced all the time) but the idea that anyone, even a guy who bites heads off of bears, could find so many market inefficiencies each day is absurd. If Cramer can do that, how come almost no one can beat the market? Cramer makes it too easy -- except, according to the Barron's report, he doesn't really. He just pretends to on TV.
"Fed Chair" James Cramer enjoyed taking credit for yesterday's announcement that the Fed had eased its Discount Rate. But today's Barron's takes him to task for trying to keep Mad Money viewers from measuring the extent to which his stock picks underperform the market indices.
Cramer has accomplished many things. He managed a hedge fund, started TheStreet.com (NASDAQ: TSCM) which survived the dot-com bust, he writes columns for New York magazine, and he provides a unique blend of entertainment and stock touting on CNBC.
But Barron's analysis of his stock picks over the last two years suggests that you would have been better off buying a low-cost stock index fund. Barron's cites an analysis by YourMoneyWatch.com that analyzed his stock picks between 7/28/05 and 8/17/07 -- finding that Cramer's picks lagged the general market averages. Specifically, his picks were up 12%, the Dow Jones Industrials Average rose 22%, the S&P 500 gained 16% and the NASDAQ was up 14%.
Fed Chair James Cramer -- or was that Ben Bernanke? -- announced that the Fed was cutting its discount rate 50 basis points this morning.
If you have not watched James Cramer's tantrum about interest rate cuts, view this clip. I heard about this rate cut as I was driving this morning at 8:30 -- NPR reported the Fed had cut the rate by half a percent to 5.75%. The important thing here is that the Fed cut the Discount Rate -- which is largely symbolic since it is a rate charged only to qualified banks -- not the one that Cramer was ranting about. That rate, the Fed Funds rate -- which affects rates that consumers pay on various types of loans -- remains at 5.25%.
Cramer sounded ecstatic on CNBC this morning. He predicted that today would be the biggest point move in history. Now, he said he "loves" Bernanke. Yesterday's goat is today's hero.
Markets have responded with jubilation this morning. But it remains to be seen how much of that jubilation is traders covering the short positions they put on after watching Asian markets tumble. The bigger issue is that the Fed obviously is scared of something big that we don't know about. It decided that the negatives of the rate cut -- bailing out Wall Street for its risky bets and taking the pressure off persistent inflation -- are dwarfed by something much worse.
.Tonight on CNBC's MAD MONEY, Jim Cramer tauted Reynolds American (NYSE:RAI) as a high dividend stock with a safe yield that out pays US treasury yields. Even with the 5.5% yield he thinks this dividend is not at risk like some other high yield stocks. He sounded like he even likes it better than Altria (NYSE:MO) as the smokeless tobacco is doing well.
I have noted before about defensive stocks being the way to go and those companies' products are the ones you eat, drink, smoke, and use for critical personal hygiene (toilet paper, tooth paste, deodorant... you get the idea). We noted the sector back on our own list we titled "Defensive Stocks For A Crummy Market" recently, although we had others. Defensive investing is what investors will flock to when they have to own stocks but want to be a bit more conservative than chasing the "New Four Horsemen of Tech" or want to go for less aggressive picks than say his TOP NINE STOCKS for 2007.
Tonight on CNBC's MAD MONEY, Jim Cramer said that tech is currently not in the "you gotta sell" boat during a crummy market. He said these are awash in cash and buying back stock left and right, Also, they have no mortgage and CDO exposure. He thinks that Intel Corp. (NASDAQ: INTC) is the one to own now with August usually the bottom of the chip cycle and heading into the fourth quarter. The stock is down over $2.00 from recent highs, is cheaper than and killing Advanced Micro Devices (NYSE: AMD), and sells at 21-times next year's earnings with a 12% growth rate that is accelerating. He thinks you should buy it this month.
I could argue this either way, but frankly I am not ready to kill the whole market. In a boxing match between Paul Otellini and Hector Ruiz, I'd bet on Otellini any day. If you believe that the PC-cycle is real then this one will work. Frankly, it is still the safer bet in chip and processor land. It is holding up pretty well for a crummy market and I think AMD has gotten itself into a borrowing pickle that it won't get out of until it can change its entire business model. Intel shares fell 3% with the broad market today to $23.92 and shares are up 0.2% after the Cramer tout here. Oddly enough, Jim Cramer didn't once mention any of his "New Four Horsemen of Tech" in this. This is one of the "Old Horsemen," but old horses know the tricks that young studs haven't learned yet.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Jim Cramer made a complete fool of himself on television yesterday. Erin Burnett of CNBC was trying to have a civil and informative conversation with him when he lost it. She wanted to discuss the already fragile credit markets when Cramer let loose a tirade that Federal Reserve Chairman Ben Bernanke was playing "academic games."
Wake up Cramer. The Federal Reserve rarely reacts to a couple of lousy weeks of trading in the markets. The Fed reacts to economic conditions and not volatile market conditions. Cramer shilled for some of his Wall Street buddies that are facing tough times. " I speak to them all day" he said. No kidding Jim. I am sure Fed boss Bernanke speaks to a few people too.
I speak to portfolio managers and trading desks all over the world on a daily basis. Yes, those that trade fixed-income paper may have a really crummy year and -- as is the Wall Street way -- jobs may be lost. We don't hear Cramer screaming and yelling when Wall Street is hiring en masse, just when it lays off people. Traders know how the game works: feast or famine. Traders prefer this, as the feast is quite often seven-figure bonuses. The famines can last a year and then they land with another firm as the feast is perceived to be arriving.
Cramer has passion, but in this case it was misguided. He allowed the rants of his trading-desk buddies to get to him. Cramer hurt his supposed objectivity, especially when he threw out the term "Armageddon." The word Armageddon was the trading-desk world mantra this past Thursday and Friday.
Does lululemon Athletica Inc. (NASDAQ: LULU) really feel like Under Armour Inc. (NYSE: UA)? The long and short of it is "NO, it doesn't." But there are many merits ahead, and the underlying "sport" of yoga has actually continued to grow in appeal to the masses. Yoga, it seems, isn't just for hippies anymore.
On Friday evening's MAD MONEY on CNBC, Jim Cramer noted that Lululemon has many of the same characteristics of Under Armour. In his defense, this was more figurative than literal and he said there is not a hurry to buy it because it has run a lot already. The company has many store openings and even more coming in 2008, and Cramer is looking at it for accelerated revenue and accelerated earnings growth.
LULU is an odd call because there are actually very few reliable statistics on just how many people practice yoga. Many still believe that it's a bit strange or "out there," compared to other forms of exercise or stress-relief. When you look at the lululemon.com website you will understand why. If you have ever taken a yoga class, you will know why the stereotypes can instantly be debunked. LULU is going to be interesting to watch, mainly because of its stellar IPO performance. Cramer recently called Under Armour "The Next Nike!" but that won't be the case for LULU. Still, there is a growth story here, and one that investors are looking at. How it will do and if it manages its own growth is where the jury is still out.
Jim Cramer, the overly enthusiastic host of "Mad Money," became apoplectic just prior to the market's collapse on Friday afternoon on his CNBC "Stop Trading" spot. Cramer's ranting focused on the need for the Fed to drop rates to save humanity. It came across more that the Fed needed to drop rates to save Jim Cramer's portfolio.
The reality of the situation is if the Fed had to desperately lower rates, gold would be crashing, as was the case in the late 1990s. It is interesting looking back to what everyone was calling the Goldilock's economy then, and seeing that gold was saying otherwise. Gold proved to be correct. Remember that in 1998, oil sold for only $10 a barrel.
Today, the opposite is true: gold has formed a plateau in the $600 price range and oil demand remains strong, with its price approaching $80 per barrel.
All told, despite Cramer's ranting, liquidity is getting a little tighter and the Fed should begin dropping rates in October. I wouldn't worry too much, the sky is not falling despite what Cramer may say.
On tonight's MAD MONEY on CNBC, Jim Cramer said the best company he has in the food space is Chipotle Mexican Grill Inc. (NYSE: CMG). He says this is a regional to national story that beat estimates and raised guidance last night. Cramer noted that the stock hasn't even seen upgrades after a 12% gain today on the better performance and Cramer said he thinks Chipotle will go up Thursday again. He interviewed Chipotle's CFO on the show.
Cramer asked about food costs being up..... costs are higher and theirs grew 100 basis points, but they have food integrity and solid contracts. The rest of the P&L statement is very efficient and they can offset some of that. Cramer's concern is on the slowness of the original buildout and then changing to rapid growth..... CFO said they are growing based on real estate availability and the quality of managers they can get. Managers are coming from inside now and they can do better now than earlier. How do they incentivize managers? Elite managers are bonused on sales growth above expectations above plan plus they get $10K per group leader that gets turned into a manager. As far as feeling like a chain....CFO said he doesn't want it to feel like a chain and they want to personalize the experience.
Chipotle is on a tear, that's a fact. Shares climbed nearly another 2% to yet another high, above $100.00 after Cramer talked this up after-hours. My only concern here is that at $3.25 billion in market cap with 640 restaurants and 110 to 120 restaurants scheduled to open in 2007, the value here is pretty high. If the company beats 2007 estimates by 20% it trades at 50-times earnings. On a per store value assuming these all come online that generates a $4,276,315.78 value per store after the store openings, and as of today's 640 restaurants in operation assuming no add-ons you would have a franchise value per store of $5,078,125.00 per store. The good news for growth and speculative investors is that in all fairness, these cautionary metrics I calculated won't come into play for some time and there is an unbelievable amount of growth this chain can generate now that it is out on its own.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
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. 
Fed Chair James Cramer -- or was that Ben Bernanke? -- announced that the Fed was cutting its discount rate 50 basis points this morning..gif){kind=logo}
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
Before the bell: Wall Street headed higher; automakers, retailers in focus
