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Cramer's 'Mad Money' Recap: Jan. 6

Scott Rutt

01/06/09 - 08:25 PM EST

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"Global capitalism just might be saved by Chinese communism," Jim Cramer told viewers of his "Mad Money" TV Show Tuesdays.

He said that country's economic stimulus plans could lead the whole world out of its financial woes.

Cramer said the Chinese are pulling out all of the stops, doing everything in their power to create jobs and save their economy. The reason why, he said, is necessity.

He said the Chinese communists cannot afford the country's economy to get any worse without risking widespread protests and civil unrest. To stay in power, they have to get the economy back on track, and fast.

So far the Chinese have cut interest rates five times in efforts to stimulate growth. They've also announced over $600 billion in stimulus packages, including a $40 billion telecom package to upgrade the country's infrastructure. That plan, said Cramer, should be a win for Qualcomm (QCOM Quote).

Why do these moves in China matter? Cramer said because the trend is the only bullish thesis our markets can rally around.

He said this catalyst has resulted in a huge rotation out of names like Merck (MRK Quote) and McDonald's (MCD Quote), and into names like BHP Billiton (BHP Quote), Joy Global (JOYG Quote), Eaton (ETN Quote) and Freeport McMoran , a stock which he owns for his charitable trust Action Alerts PLUS.

"The Chinese are giving us a reason to like the stocks that need a strong economy to work," said Cramer.

Cramer: Dow 30 in '09 Playbook, Part II

Eaton's New Look

Cramer checked in with Eaton (ETN Quote) chairman, president and CEO, Sandy Culter, for an update on that company's outlook since his last appearance on Nov. 14, 2008.

Since then, shares have risen 27%, despite the company lowering 2009 guidance last month.

Stockpickr

Cutler confirmed that demand for Eaton's goods did decline dramatically in the fall, but said the decline was not unexpected given the global liquidity crisis. He said the damage is clearly evident in the markets and he doesn't expect manufacturing to pick up for another six to nine months.

Cutler said Eaton's strength, however, comes from the rebalancing of its businesses. Seventy percent of the company's sales are now derived from electrical, hydraulic and aerospace products, with 55% of sales coming from international sources. Likewise, the company now has an even mix between early, mid and late cycle businesses, he said.

Cutler also credited the company's aggressive cost-cutting measures for some of its success. Eaton now has a strong balance sheet, said Cutler, with $125 million in cost savings this year.

Cramer said "no more selling for Eaton," and re-recommended the stock.

Shortsighted Downgrade

Cramer recommended telco giant Verizon (VZ Quote) as the second among his top five stocks in the Dow Jones Industrial Average.

Verizon shares took a 6.2% tumble after an analyst recently downgraded the company from neutral to underweight, lowering their expectations for the company by 12% and giving Verizon a target price between $27 to $32 a share.

But Cramer called the downgrade short cited and characterized the thesis behind it as flawed. He said the market is in love with the cyclical stocks and with competitor Sprint (S Quote) imploding, Verizon is taking sizable market share.

Cramer said he's also a fan of Verizon for the Blackberry Storm, a new smartphone which sold out in just hours. Cramer said he's still a fan of Blackberry maker Research In Motion as well.

Cramer discounted the notion that Verizon's FiOS service affords the company lower margins. FiOS, he said, is also taking sizable market share in the areas where its available and is a boon for the company.

Verizon's dividend is safe, said Cramer, and he's a fan of its 5.8% yield. Verizon is not cyclical as many people think, said Cramer, and he's a buyer.

Losing Pounds

Cramer talked with Ken Powell, chairman and CEO of General Mills (GIS Quote), a stock which he owns for his charitable trust Action Alerts PLUS, to find out more about the company's business and its renewed sponsorship of the NBC program "The Biggest Loser."

Powell said that January is weight loss month at General Mills and the company recently announced its "pound-for-pound" program which donates 10 cents for every pound lost at the Website to the nation's food banks. He called "The Biggest Loser" program a terrific partner to helping the company promote a healthier lifestyle.

On the business front, Powell said General Mills just announced a great second quarter and he's happy that the company grew its margins. He said he's happy with how the business plan is unfolding at General Mills.

Cramer said he's still a fan of General Mills, and its long 110-year tradition of paying its dividend.

Lightning Round

Cramer was bullish on Wells Fargo (WFC Quote), American Ecology (ECOL Quote), Copart (CPRT Quote), Hartford Financial Services (HIG Quote) and Travelers Companies (TRV Quote).

Cramer was bearish on Goodyear Tire & Rubber (GT Quote) and ISIS Pharmaceuticals (ISIS Quote).

Check out the latest edition of "Cramer's Take on Top-Searched Stocks" on Stockpickr.

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

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