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NEW YORK (TheStreet) -- Don't be paralyzed by fear, Jim Cramer told his "Mad Money" TV show viewers Thursday as he explored the root cause of something that has professional money managers "freaking out."
There's been a huge surge of buyers for the 10-year Treasury bond recently, he explained, and that has money managers and fixed income professionals running scared. Why? Cramer said it's because increased bond buying traditionally means two things, both of them bearish for stocks.First, the increased bond buying means the demand for money is weaker than expected, something that's already confirmed by record low mortgage rates and commercial loan volume. People simply aren't borrowing money, he said, and in the minds of money managers that signals trouble ahead, which means sell stocks. Second, bond managers fear a spike in bond prices could signal another pending economic disaster because the same pattern emerged in 2008 right before Lehman Brothers failed. Cramer thinks this bond buying just doesn't make sense because the U.S. government is horribly in debt and there are clearly far better places to put one's money than in Treasurys. Instead of panicking, Cramer suggested using the professionals' confusion to seek out great stocks trading at a discount. Cramer recommended high-yielding dividend stocks including Honeywell (HON), 3M (MMM) and United Technologies (UTX), three companies that while having some European exposure, are still solid bets thanks to their high yields and great management. "Stop and think, which stocks are worth more as bond yields head lower" and buy those names on the cheap, Cramer concluded.
When Breakups Are GreatCorporate breakups are great places to be, Cramer reminded viewers, as two recent spinoffs, Post Holdings (POST) and Beam (BEAM) have proven. That's why Cramer went bullish on another breakup story, McGraw-Hill (MHP). McGraw-Hill has announced plans to split itself into two companies by year's end, a financial ratings company and an educationally-focused publisher -- think textbooks. In so doing, the McGraw will make itself more appealing to Wall Street, said Cramer, as it unlocks value for shareholders. Cramer said the problem with McGraw-Hill today is one of valuation. How do you value a fast-growing financial ratings agency and a slower-growing textbook publisher when they're part of the same entity? By splitting up the businesses, the Standard & Poor's ratings business can easily be compared to rival Moody's (MCO), while the publishing arm can be compared to that of Pearson (PSO).
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