'RealMoney' Radio Recap: Stocks at Work

Stocks are working now more than he thought possible, James Cramer said on his "RealMoney" radio show Friday.

Why? First, as long as the aftermath of Hurricane Katrina continues to dominate the headlines, the Federal Reserve may not be in a position to raise interest rates lest it appear "heartless" or "insensitive," said Cramer.

Second, the consumer may be stronger than we thought. Tech stocks are rallying, being driven by cell phones and big-screen TVs. The casual dining sector seems to be OK, as evidenced by "astounding" numbers reported by Brinker International (EAT Quote) and strong results at McDonald's (MCD Quote). It only makes sense if the consumer is buying big screen TVs that they're also still eating out, said Cramer.

Finally, insurance stocks are rallying despite huge payouts from Hurricane Katrina. The reason, Cramer said, is the industry has fewer players now and will be able to raise prices.

"Maybe I should have been more bullish," Cramer said. "I didn't think it could be that strong."

A caller asked about Encysive Pharmaceuticals (ENCY Quote). Cramer said it was an "interesting" speculative play, but he was concerned because the company had yet to make money.

Another caller asked about a good price at which to buy Valero Energy (VLO Quote). Cramer said a huge amount of the nation's refining capacity was taken out by Hurricane Katrina but that Valero was not hurt badly. Had the hurricane not happened, Cramer believes Valero's stock would have topped out by now. However, because of the hurricane and because Valero's acquisition of Premcor is coming along better than expected, he now believes the stock will go to $150. He would buy half a position now and half later if the stock falls further. Valero traded at $114.38 Friday afternoon.

In response to a question about Petro-Canada (PCZ Quote) ahead of its stock split, Cramer said he would be a buyer. Even though stock splits don't create value, the animal spirits are running "wild" in oil and gas, said Cramer, and he thinks the split is "going to be good." In general, Cramer said, smaller oil and gas stocks are "screaming buys" right now.