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Editor's Note: This originally ran on RealMoney on Jan. 10. Cramer holds Kmart in his Action Alerts PLUS portfolio.

"Kmart's decision to buy Sears Roebuck, however, gives new life to the Kmart bear case because integrating the two second-class retailers should prove difficult." --


, Jan. 10

Ah, at least I now know the bear case. Excuse me, but I thought it was the bull case!

I know that



become a real dog of late. But this reasoning from


seems dead wrong to me. Let's consider what would have happened if Eddie Lampert simply had let things run their course and kept Kmart independent. What could Kmart have become? What's the upside? He could have kept selling land and trying to turn the stores around and maybe he would make it, maybe he wouldn't?

With the



deal, suddenly you have growth that can come from picking the best stores of either player and then selling the real estate of the rest. With the Sears deal, you can have some economies of scale that otherwise always would elude Kmart.

Growth and economies of scale make the situation better, not worse, than before the Sears deal.

Ah, but the integration, is that going to be a problem?

I can go only with what my sources tell me. And my sources are making it very clear that so far, the integration spadework has been going extremely well.

It is true that the stock can mark time until the deal closes, but once the deal closes, I bet you will see a ton of institutional backing of the deal and a new set of surprises about earnings that will drive the stock higher.

Lampert's got doubters. He always has had doubters. But the idea that the integration is going to be difficult, more difficult than what he has accomplished so far, seems, well, far-fetched to me. The difficult thing was to bring Kmart out of bankruptcy and fix its balance sheet. The integration? My sources say that if the current integration work is any harbinger of what's ahead, the toughest work's already been done.

Kmart, the stock, says I am wrong. But Kmart, the company, tells me I am right.


thought that the original Kmart deal was too hard and was a sale. I said it was on target and was a buy.

Who's worth listening to, the guy who was right or the guy who was wrong?

P.S. One of the keys to successful investing is a smart portfolio strategy. So you might want to consider a

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At the time of publication, Cramer was long Kmart.

James J. Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made.

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