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Cramer's 'Mad Money' Recap: Sept. 11

Scott Rutt

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"This market has been at the mercy of hedge funds gone wild," Jim Cramer told viewers of his "Mad Money" TV show Thursday.

But that situation changed abruptly today when "the hedge funds panicked and some companies started fighting back," he said.

Cramer called today's 370-point swing in the Dow "insanity." He said it was clear that the hedge funds, who often think alike, were betting on a market collapse as worries about Lehman Brothers (LEH Quote) and Washington Mutual (WM Quote) continued.

However when that theory failed to materialize, said Cramer, the market turned volatile after the funds frantically covered their positions.

Up until now, there has been little push back from companies, which are often smaller than the funds that trade them. But today, he said, two companies did fight back against the onslaught of selling and naked short-selling.

The first was mining equipment maker Joy Global (JOYG Quote) which has seen its stock price cut in half, from $90 a share to just $44 a share, amidst the voracious sell-off in the commodity markets.

Its stock fell from $63 a share to just $51 a share after the company reported a quarter where orders increased 139% from the year ago period.

Today, however, Joy Global announced that it was buying back two-fifths of its capitalization, or $2 billion worth of stock, between now and 2011. Cramer said the company finally had enough of the selling and could almost take itself completely private if its stock keeps falling.

He said it was remarkable for a $5 billion company to commit $2 billion worth of capital towards saving its stock.

Cramer also tipped his hat to CSX (CSX Quote), whose embattled CEO Michael Ward won a proxy battle with hedge funds to keep his job. CSX today reported a better-than-expected quarter and was up 10.7% today.

The Black Hole

When things get bad enough, a single company can bring down a sector or even the entire market. Cramer called this his "black hole" theory and said there are a bunch of black holes in the market.

He singled out AIG (AIG Quote), Washington Mutual (WM Quote), Citigroup (C Quote) and Lehman Brothers (LEH Quote) as the black holes in the financial sector, along with General Motors (GM Quote) and Ford (F Quote) in the auto sector.

"These stocks could simply vanish," he warned.

Cramer said the markets simply cannot have a meaningful advance until all of these black holes are filled. He then outlined his plan for fixing all the financials in one foul swoop, while acknowledging the plan could cost upwards of $1 trillion.

Cramer said first the federal government must step in and give these companies 30 days to raise capital or be taken over. If the companies fail to do so, the bad loans get transferred to a resolution trust, while the good assets get sold to the highest bidder.

Next, Cramer said the Federal Reserve must lower interest rates by 50%, a number which may seem unheard of now, but mirrors that of where rates were just 5 years ago.

Finally, Cramer said the government must then take advantage of the low rates, along with the millions of loans it would own, and refinance and restructure as many as possible to save both homeowners and the economy.

Sell Block

Cramer re-sentenced Legg Mason (LM Quote) and its CIO Bill Miller, sending them straight to solitary confinement for their second offense.

Cramer first put Mason into the sell block on Jan. 3 at $73 a share. Nine months and 32 points later, he said Miller and the firm still haven't learned their lesson.

Cramer noted that one of the firm's largest holdings remains that of Freddie Mac (FRE Quote). Mason still owns over 79 million shares of the failed mortgage lender.

Cramer also faults the company for other abysmal choices, including the failed Bear Stearns, Countrywide Financial (CFC Quote), Washington Mutual (WM Quote), AIG (AIG Quote), Quest (Q Quote), Sprint Nextel (S Quote) and Eastman Kodak (EK Quote), all of which are down huge on the year.

Cramer called Miller a "one-man wrecking crew," adding he expects the exodus of capital from the firm's funds to accelerate.

He advised swapping into a stock like T. Rowe Price (TROW Quote), a money manger which has performed well and has a growing asset base.

Mad Mail

In this segment, Cramer told a viewer that he's taking another look at Owens-Illinois (OI Quote) after the stock has pulled back to just eight times its earnings.

Cramer told a second viewer that he expects a resurgence in retail, and while Best Buy (BBY Quote) is good, Urban Outfitters (URBN Quote), Lowes (LOW Quote), Home Depot (HD Quote) and Sears Holding (SHLD Quote) are better.

Finally, Cramer told a third viewer that he's not a buyer of ConAgra (CAG Quote). Instead he prefers Campbell's (CPB Quote) after it recently reported a great quarter.

Sudden Death

Cramer was bullish on Discovery Holdings (DISCA Quote) and Nucor (NUE Quote).

He was bearish on Longs Drug Stores (LDG Quote).

Lightning Round

Cramer was bullish on Anadarko Petroleum (APC Quote), Chesapeake Energy (CHK Quote), XTO Energy (XTO Quote) and First Solar (FSLR Quote).

He was bearish on Novo Nordisk A/S (NVO Quote), ingli Green Energy (YGE Quote), Take-Two Interactive (TTWO Quote) and eBay (EBAY Quote). P/>Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

Read more of Cramer's Mad Money Lightning Round insights.

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