This article was originally published Feb. 18
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Jim Cramer used today's meandering markets to catch his breath and separate fact from fiction.
He used his "Mad Money" TV show on Tuesday to cut through the confusion of what he called the top 10 market myths.
Myth No. 1: Stocks are cheap. Cramer said stocks might "appear" cheap on a price basis, but on a price-earnings basis, they're anything but inexpensive.
Myth No. 2: The automakers only need an additional $14 billion to survive. Cramer said any notion that the U.S. automakers can get costs under control without breaking the unions is just plain false.
Myth No. 3: The banks are hoarding money. "Of course they are," said Cramer. He said they would be hard put to make loans while the collateral is losing value.
Myth No. 4: There's nothing we can do about the mortgage problem. He said this is false. Using the playbook from the 1980's, he said banks can adjust the principal due on their bad loans.
Myth No. 5: Nationalizing banks will work. What works in Sweden will not work here in the U.S., he said, but forbearance, a notion he's advocated for weeks, will.
Myth No. 6: The mortgage insurers are viable. Cramer said no one but the mortgage insurers can possibly believe this myth.
Myth No. 7: Warren Buffet is doing great. Cramer said while Buffet owns a lot of stocks, he's playing for the long term, while regular investors may get hurt following his lead.
Cramer: Long-Term Look at CAT
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Myth No. 8: Inflation is the problem. Cramer said nothing could be further from the truth. He said this is the worst deflation he's ever seen.
Myth No. 9: The problem with the SEC is the institution itself. Cramer said this is categorically false, and placed the blame solely on the shoulders of former
Chairman Chris Cox whose failed policies ushered in much of today's financial collapse.
Myth No. 10: Everyone's doing everything they can. No one seems to have a plan, said Cramer, except
Chairman Ben Bernanke, whom he says is the only one who's had a change of heart and is now truly doing everything in his power to save the economy.
Cramer talked with Sean Boyd, CEO of
, a stock which on Jan 27 he said not to buy and instead to wait for a pullback. Since then, shares of Agnico have risen 3.4%.
Boyd said the company has five new mines coming online in the next few years, and the timing couldn't be better, given the record price of gold. With much of the big capital expenditure behind them, Boyd said production costs going forward will be going down as these new mines come online.
Boyd said the drain on fourth-quarter earnings was due to a drop in byproduct prices, mainly zinc and copper. However, he said, going forward, the percentage these byproducts will be less as more gold is produced.
Finally, asked what the company plans to do with all of the cash it will be generating from its new mines, Boyd said Agnico, with its long track record of paying dividends, is likely to return any extra cash to its shareholders in the form of increased dividends.
Cramer told viewers that not everything that goes up is a bubble, and he feels that gold should be a part of everyone's portfolio. He said he's a buyer of Agnico.
Off the Charts
In this segment, Cramer took a hard look at
to see if this company's chart and its fundamentals have what it takes for the toughest of markets.
Cramer said according to the chartist, IBM looks good. The company sold off big in October on large volume before hitting its low in mid November. Since then the stock has been showing signs of strength, trading above its 50-day moving average, with peaks continually hitting its resistance line.
On a fundamental basis, Cramer said there's only one reason to own IBM: its earnings. The company recently beat Wall Street estimates by 23 cents a share. IBM is in the business of saving other company's money, said Cramer, with 80% of its revenues coming from software and services.
With a $170 billion backlog, Cramer said the outlook for IBM looks strong. He also likes the company's 2.1% dividend yield and its stock buyback program. He said he'd be a buyer of IBM on any weakness and especially if it fell under $90 a share.
Am I Diversified?
Cramer evaluated the portfolios of callers. The first portfolio included:
Procter & Gamble
Cramer said this portfolio has enough diversification to make the grade.
The second caller's top holdings included:
Bank Of America
Cramer cut right to the chase and said both Citigroup and Bank Of America need to be sold in favor of a drug company or biotech and a diversified industrial.
The third caller had
Procter & Gamble
as their top five stocks.
Cramer said this portfolio was diversified.
Cramer was bullish on
United States Steel
He was bearish on
Delta Air Lines
Check out the latest edition of
"Cramer's Take onTop-Searched Stocks" on Stockpickr.
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At the time of publication, Cramer was long Bristol-Myers.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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