MAD MONEY: CRAMER SAY STOCK WILL GO UP BUT ECONOMY DOWN?

Posted: August 22nd, 2007 | Author: Stock Pitcher | Filed under: Mad Money | 9 Comments »

Jim Cramer on Mad Money tried to explain the psychological shift going on in the market. While everything is still wrong and the problems of subprime still exist like H&R Block (HRB) tapping into a line of credit, American Home Lending (LEND) halting loans, and Lehman Bros (LEH) closing their mortgage unit. The news is all bad but the market is still up because the mental perspective is positive. It’s not what have you done for me – it’s what have you done for me LATELY. But he said “What I’m emphasizing is use the lesson I’ve learned, which is that don’t be so granular…Don’t look at Lowe’s and puzzle over why it is going up. Look at it and understand that we’ve flipped in the ways we look at things.”

Cramer stressed retail is “a fabulous place” to be when the Fed stops raising rates and starts cutting” and people can’t just look at can’t just look at the company,” like Lowe’s (LOW) because otherwise they’d be shorting Lowe’s which would be against the sway of the market. Cramer suggested Lowe’s and Toll Brothers (TOL) are now situations that have stabilized and could get better – not worse. But he stressed that people need to DO THEIR HOMEWORK but listen to the conference calls.

MICROSOFT TRADE:

On Sept. 25 release of Halo 3, the flagship franchise of Microsoft’s (MSFT) Xbox video-game system will be the “biggest video game event of the year” But not to be witty but Cramer believes Halo 3 will bring the halo affect to the X360 consoles that are killing PlayStation 3 but Cramer says the best play is GameStop (GME), the largest video game retailer in the U.S.

Whiles it’s already up 33% this year, this is “great season for tech” to come and because in video-game culture games are now a common part of society like a movie. Cramer suggested buying on any weakness after Thursday’s postearnings conference call as long as it doesn’t miss earnings otherwise forget it. So if it skyrockets after earnings or if earnings tank, then forget it. But if it works out then hold it as a short term trade until Halo’s release.

DOLLAR TREE TRADE:

“The psychology has changed, and stocks can once again go higher,” however, Cramer believes that the U.S. economy heading toward a recession. For this reason, Cramer believes “the world of the dollar store” is a good play because as slower times for “low-end consumers” generally call for “lower spending,” these consumers are more likely to curb spending with “inferior goods.” Cramer recommened Dollar Tree (DLTR) because it is the “best of breed” while it is still increasing store trafice and it’s one the move. It recently began accepting food stamps and debit cards for payment, thus widening its economic reach. Also to increase margins, Dollar Tree has also begun selling items that “cost more than a dollar,” (yes it’s an oxymoron but it works).

In terms of competition, Dollar Tree easily stands out from its two main competitors, Dollar General and Family Dollar (FDO). While Dollar General was recently taken private will close “underperforming stores,” Family Dollar already has twice the stores that Dollar Tree does so it can’t expand as much while Dollar Tree can. Cramer told investors to wait “at least five days” before they buy into Dollar Tree and DO SOME HOMEWORK. Yes this is all because of the Barron’s article. Barron’s should read his book.

MEDECO TRADE:

Medco Health Solutions (MHS)’s CEO and Chairman David Snow was on Mad Money and Cramer congratulated him on his company’s consistency. Medco, one of the world’s largest purchasers of generic drugs and largest mail-order pharmaceutical distributor, averages 6% growth per year, says Snow. In the end, Cramer said it’s a good long term growth because more generics are going on the market every years and see it as a long term play to 2012 as a type of baby boomer trade but he said watch the stock and buy when it goes down.

Lightning Round Summary

Cramer was bullish on Crocs (CROX), Precision Castparts (PCP), Goodyear Tire (GT), InterContinental Exchange (ICE), CME Group (CME), NYMEX Holdings (NMX), NYSE Euronext (NYX), Vector Group (VGR), Amazon.com (AMZN), Apple (AAPL), Google (GOOG), Research In Motion (RIMM) Reynolds American (RAI) and Altria (MO).

Cramer was bearish on Yamana Gold (AUY), CyberSource (CYBS) and True Religion Apparel (TRLG).

LIGHTNING ROUND HIGHLIGHTS:

Yamana Gold (AUY): “If you go through Yamana’s quarter, it is the only growth gold stock out there. It is making an incredible amount of money. … It also produces copper at the same time.” Cramer said he thinks everyone should have gold in his or her portfolio, but it’s not going to go up for a while. “Gold is not the right thing to buy in a deflationary spiral.”

Precision Castparts (PCP): “The bull market in aerospace and defense is back. Precision Castparts had a better quarter than almost every other supplier to the major airline companies. … Now that the Fed is on our team, all these bull markets are back in place, and Precision Castparts is a great way to play the aerospace and defense bull market.”

InterContinental Exchange (ICE): “I like ICE. … I like derivatives. I like commodies trading. ICE is good. … I am hopeful that the Nymex (NMX) merges with the New York Stock Exchange (NYX). It would be a terrific deal. … I like ICE, I like CME (CME), I like Nymex, and I like NYSE,” which Cramer owns for his charitable trust. “The only one of those that’s done really badly is New York Stock Exchange, but I’m stickin’ with it.” – Will the buyout of NMX help NYX? He just said he likes them all.

Goodyear Tire (GT): “I think Goodyear Tire had a major pullback, and the pullback is a mistake. Goodyear Tire is one of those companies … best of breed. I think I like the stock up to the $32, $33 level.” This is also a good global play as he makes tires for large vehicles as well.

Crocs, CROX, Precision Castparts, PCP, Goodyear Tire, GT, InterContinental Exchange, ICE, CME Group, CME, NYMEX Holdings, NMX, NYSE Euronext, NYX, Vector Group, VGR, Amazon.com, AMZN, Apple, AAPL, Google, GOOG, Research In Motion, RIMM, Reynolds American, RAI, Altria, MO, Yamana Gold, AUY, CyberSource, CYBS, True Religion Apparel, TRLG, Medco Health Solutions, MHS, Dollar Tree, DLTR, Dollar General, Family Dollar, FDO, H&R Block, HRB, American Home Lending, LEND, Lehman Bros, LEH, Toll Brothers, TOL, Microsoft’s (MSFT, GameStop, GME,

---