Mad Money Recap
Cramer's 'Mad Money' Recap for July 21
Scott Rutt
07/21/08 - 07:53 PM EDT
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Jim Cramer credited SEC Chairman Christopher Cox with single-handedly saving the entire financial sector. Cramer told viewers of his "Mad Money" TV show on Monday that last week's announcement by Cox that short-sellers must borrow stock before being allowed to execute their trade was exactly what the financial stocks needed to be protected from the endless onslaught from short sellers. "These stocks have been held down artificially by shorts and rumors," he said. By enforcing the rules that were already on the books, the financial stocks were driven up by short covering, and are being kept up by good earnings. "The move levels the playing field between the longs and the short," said Cramer. He encouraged Cox to extend the enforcement of the rules to all stocks. Cramer again advocated the reinstatement of the uptick rule, which requires short sellers to wait for a rise in a stock's price before allowing them to sell and take the price lower. By requiring buyers to be present and before a short can occur, short sellers would lose the ability to endlessly take a stock lower, he said. Those oppose to the uptick rule contend that with bid and ask prices now just pennies apart, the uptick rule is irrelevant. They also contend that the prevalence of Exchange Traded Funds also makes the uptick no longer necessary. But Cramer argued the contrary, stating that even an uptick of a few pennies can help protect stocks from countless short-sellers.
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Fortress Banks
"We have emerged from one of the darkest times in American banking history," Cramer told viewers. He identified four banks that he said will still be standing after the dust settles from the recent turmoil in the financial sector. These "fortress" banks, he said, will survive to see 2009 and have the incredible opportunity to buy failing banks at bargain prices.
Biotech's Glow
Two week's ago, Genentech (DNA) fell to just $75.93 a share after a negative article in the New York Times raised concerns that the company's cancer drug, Avastin, was too expensive. Cramer advised buying Genentech after the news, and the stock is now up 23% since that recommendation. Cramer said Roche's bid to acquire Genentech confirms his thesis that biotech stocks are right for this market. With the U.S. dollar so weak, he said, it makes sense for European companies and others to acquire U.S.-based companies. Cramer said Forrest Labs (FRX) might appear be a tempting way to play the drug stocks, but advised against buying shares. He also advised against building a position in either ImClone (IMCL) or Genzyme (GENZ). Cramer instead recommended shares of generic drug maker Watson (WPI) as the next possible takeover target. Cramer said he likes the company for its 60 new drug applications pending at the FDA, and recommended buying shares on any weakness in the sector.More on the Uptick Rule
Cramer talked with Rep. Gary Ackerman, a Democrat from New York, about his support of for the reinstatement of the uptick rule. Ackerman said it's unbelievable that the SEC allows short sellers to sell stock without first waiting for support in the price. He called the practice "highway robbery." Ackerman said he's not a proponent of over-regulating, but does agree with Cramer that existing market rules should be enforced and not allow short sellers to "beat companies to death."