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Worst Downgrades - Cramer's Stop Trading! (9/5/08)

by: SA Editor Joan Wickham September 05, 2008 | about stocks: AIG / APA / APC / HD / LEH / MA / MER / POT / PVH / RIG / SHLD / UNP    

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Recap of Jim Cramer's comments on Stop Trading! Friday September 5.

Unemployment Rises - Apache (APA), Transocean (RIG), Mastercard (MA), Potash (POT), Union Pacific (UNP)

The market rebounded after an early decline due to a higher-than-expected unemployment number. Cramer attributed the gains to an end in redemption-covering stock sales by hedge funds. Investors in underperforming funds want their money back, Cramer said, so managers have been selling their holdings to raise the necessary money. Hedge funds usually have five days to return money, and “that finished today.”  

Cramer said “You saw all these names bottom today,” pointing out Apache, Transocean, Mastercard, Potash & Union Pacific. Cramer said, “because…the selling’s done to return the money.” But that “doesn’t mean that we aren’t fundamentally in trouble,” Cramer said. “There are fundamental problems with every one of those stocks,” so this isn’t a reason to buy. He just wanted to offer a reason to the market action Friday.

Downgrades - Merrill Lynch (MER), American International Group (AIG), Lehman (LEH)

Cramer called the downgrades of Merrill Lynch and American International Group “two of the worst calls that I’ve seen in a long time.” He has little doubt that there are more write-offs coming from Merrill, but the company raised capital enough for him to think it’s a buy at $22 or $23, though he said that probably won’t happen. And AIG, in addition to Lehman Brothers is usually a stock that declines ahead of others when there’s bad new, like today’s unemployment. But neither stock is down. In fact, Cramer was going out on a limb here, he named Lehman his “screaming buy” for the last couple of hours of Friday trading. It “can’t get any worse there,” he said. “If that Dick Fuld does not do something this weekend, he name is mud.”

Don’t Trade the Hurricanes - Anadarko Petroleum (APC), Apache (APA)

Cramer reiterated his warning against trading hurricanes. He believes that natural gas, which has fallen much further and faster than oil, is trying to decouple from it. “Natural gas is trying to put in a bottom,” he said, at about $6 or $7. Anadarko Petroleum is buying back stock – something he always likes – and Apache is “right.”

Retail OK - Sears Holdings (SHLD), Home Depot (HD), Phillips-Van Heusen (PVH) and Urban Outfitters (URBN)

Cramer did see areas for optimism. "We've got to stop being so negative about retail, about banks, about housing," he said. "Those are all up, but people think they're down." Sears Holdings is down after a critical article in The Wall Street Journal, but not as much as Cramer thinks it should be. “That tells me it’s OK.” But look at Home Depot, Phillips-Van Heusen and Urban Outfitters. “Why aren’t these down if retail’s so bad?” Cramer asked.

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This article has 4 comments:

  •  
    Sep 06 08:34 AM
    Looks like Cramer has bought some consumer stocks.
    Reply
  •  
    Sep 06 12:33 PM
    How anyone can doubt that Cramer is in the back pocket of financials like Lehman, after cheering them on, day after day, is beyond me. Ospraie, 20% owned by Lehman I've read, sells off on redemptions and there's Cramer, ignoring that fact, but saying their something fundamentally wrong with a company like RIG. Are they making too much in contracted day rates, signed years in advance? Is the forward P/E too ridiculously LOW? The Chinese idle 2M factory workers and 230 plus factories from July 17th until the completion of the paralympics (Sept. 16th), and the industrial world ends with people like Cramer trying to throw commodities under the bus, to slow it's path directly at his financials. I love the 300 days until a housing bottom even more than last year's prediction that the DJIA would hit 14,548. That's priceless. It's twice that.
    Reply
  •  
    Sep 06 02:13 PM
    Cramer's just trying to defend his precious bottom call on the financials from July--good luck with that. And what makes him so sure the hedgies are done with liquidations? Sure, he has some roots and contacts within that world, but tell me any of these sharks are going to share any kind of valuable information with a human bullhorn like Cramer and I have a few financial stocks I'll sell you real cheap named Fannie and Freddie.

    I'd guess a technical sucker bounce here, then seriously lower through October--all this manic bottom picking is making me nauseous. NO one knows how many more hedge funds and/or banks are going to blow up over the next few months, and Doug Kass's recent bottom call is so hedged that it's virtually meaningless, at least without a time context.
    Reply
  •  
    Sep 06 11:49 PM
    I read a Cramer article over the weekend in which he engaged in a rare exercise in honesty about this "Sodom and Gomora" financial market but these moments don't last long with Cramer. I am sure he'll be back into his best cheerleader attire on Monday. Even Gross has given him a big tick of approval for his tireless efforts at keeping the SS Titanic afloat.
    Reply
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