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Cramer's 'Mad Money' Recap: Do Your Homework

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NEW YORK ( TheStreet) -- Ignore the calendar and do the homework. That was Jim Cramer's advice to his "Mad Money" viewers Tuesday as he explained that trading based solely on what month it is is a total waste of time.

Cramer said that these seasonal and monthly patterns grab people's attention and seem to be perfectly logical, but in reality, they're totally bogus and only work until they don't.

The old adage that October is the most dangerous month for stocks no longer applies, said Cramer, and he outlined five reasons why.

First, back when these patterns first emerged, the U.S. was in charge of its own destiny. But that's no longer the case, as the U.S. economy is forever linked to the well-being of China and Europe. Do the same patterns still hold true in the middle of a European financial crisis? Probably not.

Second, these patterns never met a Federal Reserve willing to keep interest rates low by any means necessary. That changes the dynamic for all stocks, said Cramer.

Next, there's Apple (AAPL), a stock which he owns for his charitable trust, Action Alerts PLUS . Cramer said the markets have never seen a company with a $650 billion market cap or one with so many other companies' well beings tied to it.

Fourth, there are the banks and the tech stocks. The banks used to be a great place to invest, said Cramer, but not in an environment where they now trade on the latest news from Congress. Likewise with technology. Tech stocks used to trade based on the strength of the PC, but now that past history is worthless.

Finally, Cramer noted that hedge funds and high-frequency trading has also changed the game for the individual investor. Thus the notion of "sell in May and go away" and other such patterns only offer a false sense of security.

Executive Decision

In the "Executive Decision" segment, Cramer spoke with Jim Prokopanko, president and CEO of fertilizer giant Mosaic (MOS), a company which delivered a 15-cent-a-share earnings miss on an 18% drop in revenue amidst problems delivering its products to customers. Shares of Mosaic responded by falling 3.7% on the news.

Prokopanko said that every year the world needs to feed 74 million more people, and the fastest way to accomplish that is by increasing the yield on every acre of farmland, which is done through fertilizer. He said the difference between today's rise in crop prices and that of 2008 boils down to risk tolerance.

Back in 2008, dealers stocked up big on fertilizer as soon as crop prices rose, but today they're waiting to the last minute, which has kept demand tepid so far. "Farmers will be planting for maximum yield next year," Prokopanko said.

As for the rest of the world, Prokopanko noted that India's decrease in subsidies for fertilizer has cooled demand in that country, but he expects demand to return as the shock factor wears off. China has adequate fertilizer supplies, noted Prokopanko, but that weakness is being offset by growth in the rest of Southeast Asia.

Turning to his company's lackluster operating performance this quarter, Prokopanko said that many of Mosaic's problems were transient, such as low water levels on the Mississippi River followed by disruptions from Hurricane Isaac. Mosaic has dealt with those issues, he said, and will be able to deliver its products better going forward.

Prokopanko also addressed the rising price of ammonia, a base chemical for fertilizer. He said ammonia prices are set by natural gas prices, and since the U.S. imports most of its ammonia, those prices are being set outside the U.S., where gas prices are far higher.

But that's about to change as over 10 million tons of ammonia capacity is now under construction here in the U.S. and will be online over the next three to four years.

Cramer said that Mosaic, a company with $3.6 billion of cash on its balance sheet and an excellent dividend, remains a growth stock worth considering.

Winning Despite the Analysts

When analysts disagree, investors win, Cramer told viewers, as he looked into two differing analyst opinions on Costco (COST), a stock that's up 19% so far this year.

Cramer noted that last week, analysts at Bank of America (BAC) raised their targets on Costco and the next day Bernstein reiterated its bearish thesis on the stock.

According to Bank of America, Costco is expected to have a strong holiday season and see a boost in its revenue thank to increased membership fees. The firm gave the stock a $110 price target. Meanwhile, Bernstein felt the stock's current rally is likely to fizzle as the chain continues to cut prices in order to take market share.

So who's right? Cramer said he's siding with the bears, as much of Bank of America's expected good news is already baked into the share price. He said that the bull case from Bank of America only affords investors 10% of upside, which is not enough given that Costco shares trade at 20 times earnings, but only have a 12% growth rate.

Selling near twice its growth rate, Cramer said that Costco is priced for perfection and if it stumbles in the least, investors will be hurt.

That's why Cramer said he sold his position in Costco for Action Alerts PLUS back in June at $92 a share and would only be a buyer under $90 a share.

Lightning Round

Here's what Cramer had to say about callers' stocks during the "Lightning Round":

Nokia (NOK): "No, no. Nokia's symbol stands for Not OK. I will bless a trade in Research In Motion (RIMM). "

Cellcom Israel (CEL): "Please do not touch it. That's way too risky for me."

Windstream (WIN): "I was not convinced they're going to do well. I'll take a pass."

Annaly Capital (NLY): "I like Annaly but I've switched to American Capital Agency (AGNC)."

Off the Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Tim Collins over the health of the real estate investment trusts, or REITs, using the chart of the iShares Dow Jones US Real Estate ETF (IYR), which is up 12.9% so far this year.

Collins noted that the daily chart of the ETF shows it getting pummeled over the past few weeks, creating the beginning portions of the dreaded head-and-shoulders formation. This alone would not be cause for alarm but the index also failed to recapture its former ceiling of resistnce, signaling the bulls may have indeed given up. Collins said the $65.50 level remains key for this chart.

The weekly chart didn't fare much better, as the wedge pattern of the ETF is showing a rounded top pattern, just as it did in the summer of 2011 right before a giant collapse. Collins felt that if the stock could hold the $63.50 level on this chart, it might avoid a similar fate.

Cramer said Collins' research made him take pause and he advised viewers to be patient and wait for a pullback before pulling the trigger.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer opined on the news that Google (GOOG) surpassed Microsoft (MSFT) in market capitalization.

Cramer said that while the news itself isn't tradable, it is indicative of larger issues. He said that Microsoft will forever be linked to the PC, a business that's now in decline.

Investors buy tech stocks for growth, he reminded viewers, and Microsoft won't have a lot of it going forward outside of its new product cycle. Also, Microsoft will never be "cool" in the eyes of the younger generations, something that will eventually haunt them as business IT departments get inundated with younger recruits.

As for Google, it has momentum and is loved by the younger demographics. The company also has a solid mobile strategy. Those are just a few of the reasons it deserves a higher market cap than Microsoft.

In Closing...

In his closing comments, Cramer said he remains bullish on Sprint Nextel (S), despite the stock's weakness on the MetroPCS (PCS) takeover announcement.

--Written by Scott Rutt in Washington, D.C.

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC Universal or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.

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