Jim Cramer's Best Blogs

Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

• the trap of "cheap" stocks,
• managed care on the move, and
• a counterintuitive rally.

Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.

---

Stocks Are 'Cheap' -- But That Isn't Enough
Posted at 9:45 a.m., Feb. 2, 2009

You always need some sort of thesis, some worldview, to make you buy stocks. You can say, "With the amount of money being pumped in, something good can happen." Or you can say, "Stocks are cheaper than they have been in years." You can see Alcoa (AA Quote), Textron (TXT Quote), International Paper (IP Quote) -- great American companies in single digits -- and conclude, "You have to buy something."

And then you look at what's underneath: a stimulus plan that's stimulates next to nothing, not even Wal-Mart's (WMT Quote) earnings, it is that small; stocks of companies that no strategic buyer can afford to buy and the Blackstones (BX Quote) -- see that stock's price? -- aren't able to either, even though they claim they can; and the debt situation of all of these single-digit stocks, which require bankers and bond holders to show forbearance and let things roll until the economy gets better. The research is equally as negative, hence the downgrade down here of IP over at Goldman Sachs.

I keep coming back to this Textron quarter. They have so much money due that I don't see how they can justify saying it's not a problem. Textron reminds me of another lender that's been chronically short of capital: CIT (CIT Quote). If you follow the CIT route, then you know that means you need more capital and the equity market is the logical one to tap, hence why Textron's common stock is down to 9.

The aggressive shorts and the scared longs look at any company that has debt coming due or needs more credit, and presumes that the money will not be there.