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Cramer's 'Mad Money' Recap: Finding Market's Eternal Sunshine

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

People need to know where to look for a bull market, Jim Cramer told viewers of his "Mad Money" TV show Monday. Right now, the place to be is in food, drug or telecom stocks, he said.

Even though the current subprime loan problem looks pretty bad, every time there has been a crisis in the market, the Fed has cut rates, Cramer said.

A crisis, he said, gets the Fed's attention and causes it to "slice and dice" rates, which in turn takes stocks higher.

If people get "spooked out," they will miss the "Fed rate-cut nirvana," he warned, urging investors to take a longer-term view.

All markets around the world are not linked, even though they may act like it, he said. Japan is down "big" because the yen has gotten too strong against other currencies. But contrary to popular belief, "this is not bad for American companies," Cramer said. "Their pain is our gain."

Coca-Cola (KO Quote), whose worst market is Japan, should now "make more money when it repatriates its yen," he said.

In addition, the lack of working-class loans gives the Fed another reason to cut rates, Cramer said. And when the price of commodities comes down, it will be "great," he said, "unless you own those commodities."

Although Cramer stressed that he doesn't want market-players to be in the commodity sector, he said it will be a good thing when they come down because it will cause the Fed to cut.

Cramer told viewers not to hold their breath for all stocks to go down. Companies with big buybacks, which are defensive and have growth which is not dependent on U.S. GDP growth, are the plays that should do well here, he said.

Last spring, the telecom, food and drug stocks did well, Cramer said. "That's where you want to be. That's what's bottoming."

House Rules

The investment banks, or "the house," want investors to get back to the table, he said. Therefore, for a short time -- for the next week or two -- the market should tilt the odds toward the customers, or the people who buy stock, and issue initial public offerings (IPOs) at prices below ordinary levels, Cramer said.

"This makes it a great time to make money in IPOs," he said. When everything is "working" in the market, IPO issuers want people to pay more. But now they are offering IPOs at a discount, said Cramer, and investors should take advantage.

In particular, he believes that two stocks about to come to the market -- BigBand Networks, which should trade under the symbol BBND, and Sourcefire Networks, which should trade under FIRE -- should be priced below levels.

BBND is a play on the triple play (Internet, cable and phone service), and it services the telco players and the cable companies, Cramer said. It is one of the "ultimate" arms dealers and "gets the wind no matter what," he said.

The midpoint of BBND's price range right now is $11, Cramer said, whereas, ordinarily, it would be priced higher. Plus it is "growing faster than Cisco (CSCO Quote)" and is worth more than $14, he added.

Further, as Morgan Stanley(MS Quote) and Merrill Lynch(MER Quote) are the lead book runners for BBND, market players should try to do some trades with them to get in on the deal, Cramer said.

Although Cramer said he doesn't like FIRE as much as BBND, he still considers FIRE an IPO that should be priced to move. It is set to go for $12-$14, and he believes it's worth about $16.50.

If people can get in at a reduced IPO price, they should get in, Cramer advised.

Cramer likes these IPOs and believes they will price for less than they should "because bankers want to lure people back into the casino after last week's carnage."

People think the subprime lending crisis is "the end of the world" and that "bankruptcies are running rampant," Cramer said. But when people default on their debt, while it's a problem for some, it's an opportunity for others, he said.

Right now, the bull market is in the companies that make money off of defaulted consumer debt, said Cramer, and one such company is Portfolio Recovery Associates (PRAA Quote).

The company repossesses everything, including houses, he said. It buys defaulted debt on the cheap and makes money from that. Moreover, Portfolio has the experience and discipline to get people to pay, Cramer said.

However, "the stock has been a victim of panic," he said. The shorts are all over PRAA even though there is nothing to justify their positions. Cramer said he would take this as an opportunity to buy PRAA.

While he doesn't feel that investors necessarily have to get in and buy it tomorrow, Cramer recommended that people get in before the shorts get squeezed and realize that bad credit is good for the stock.

Playing Defense

Ceradyne (CRDN Quote) CEO Joel Moskowitz joined Cramer on the show and said that the company does not have complete procurement for the Department of Defense.

During Ceradyne's conference call, the company stated that "there would be another major request for a proposal that has not come out yet."

"It is our understanding that will be a five-year requirement," he continued. "That's the biggest we would ever see."

Further, despite Wachovia's worry that Ceradyne's peak margins can't get any better than they are, Moskowitz said they can. He said that the company's yields are improving and that he anticipates that they will continue to creep up with margin improvement.

Cramer said he remains bullish on the stock.

To view Cramer's interview with Joel Moskowitz, please click here.

Lightning Round

Cramer was bullish on Savient Pharmaceuticals (SVNT Quote), Express Scripts (ESRX Quote), Alcoa (AA Quote), Optium (OPTM Quote), Level 3 Communications (LVLT Quote), Bank of America (BAC Quote), Lamson & Sessions (LMS Quote) and Medtronic (MDT Quote).

Cramer was bearish on CVS (CVS Quote), Cyberonics (CYBX Quote) and JPMorgan Chase (JPM Quote).

For more of Cramer's insights during the Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by clicking here.