Cramer's 'Mad Money' Recap: Annaly Mea Culpa

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"If a company needs to borrow money from a bank or a broker, its stock need to be sold," Jim Cramer told viewers of his "Mad Money" TV show Friday.

He then proceeded to beat himself for a recent recommendation of Annaly Capital Management (NLY Quote), a stock which he owns for his charitable trust, Action Alerts PLUS, and which is now down a staggering 27% from its high.

Early on in the credit crisis, Cramer proclaimed that no one should own a stock that needed to borrow money from either banks or brokers.

Shortly thereafter, however, he said he went out on a limb and recommended Annaly on the premise that it could withstand the credit crisis. "I thought Annaly would be the exception," said Cramer, "but I was horribly wrong."

"There's a lesson to be learned from my mistake," he told viewers as he returned to one of his mantras in his book Real Money. "Never let conviction trump discipline," he said.

Cramer explained that he mistakenly thought Annaly would be immune to credit problems because the company only invests in "safer" federally backed bonds from such agencies as Fannie Mae (FNM Quote).

However with questions now circling about the solvency of Fannie and other government-backed agencies, Annaly's ability to borrow has now been crippled.

Cramer also said that with banks growing increasingly conservative in their lending and brokers out of money, Annaly will not have the ability to raise enough money to meet its earnings estimates. That, in turn, may cause the company to issue more stock, which could drive the share price even lower.

"The bottom line," Cramer said, "is that I was wrong ... there are no exceptions to the rule."

The Last Momentum Player Standing

"It's better to be safe, then right," Cramer told viewers, referring to his call on Salesforce.com (CRM Quote).

On Jan. 9, Cramer reported that Salesforce was both upgraded by an analyst at UBS at the same time it was downgraded by Goldman Sachs. Cramer sided with the analyst at Goldman Sachs, and recommended selling Salesforce.

According to Cramer, Salesforce was priced for perfection in January, and that if the company did not delivery stellar earnings, he predicted the momentum investors would abandon the stock. "If anything went wrong, people were going to get hurt," he continued.

Instead of being a disappointment, Salesforce posted what Cramer called "the best upside surprise of 2008." He then welcomed Marc Benioff, Chairman and CEO of Salesforce.com, to the show to discuss the company's strong performance.

Benioff said Salesforce's software and business model is different from anyone else in the industry because it offers a subscription-based software model. He said the company's customer base is expanding rapidly and includes such large companies in the financial services sector as AIG(AIG Quote) and Citigroup(C Quote).

Cramer called Salesforce "the last momentum stock still standing."

Turning the Corner

For "Speculation Friday," Cramer featured Blockbuster (BBI Quote), a stock which he said investors should consider a lottery ticket at just $2.76 a share.

Cramer initially got behind Blockbuster back on Nov. 6, 2007, then put the company in the "Sell Block" on January 25, 2007 after a 48% gain. Since then, Cramer has advised staying away from the company, especially after its CEO resigned in March.

"There's reason to believe that Blockbuster has finally turned the corner," said Cramer. The company just reported earnings of 26 cents a share, when the Street was only expecting 18 cents a share. But due to the horrible market, Blockbuster's stock has fallen lower than where it before it reported its earnings.