This article was originally published Jan. 28.
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"Let's not get ahead of ourselves," Jim Cramer warned viewers of his "Mad Money" TV show Wednesday.
He said that while the government's plan to created a resolution trust type "bad bank" is indeed the solution to the financial crisis he'd been hoping for, there are still a lot of unanswered questions.
Cramer said it was clear by today's action that the rally in the financials was spilling its enthusiasm and optimism into the rest of the market. But he wondered whether that optimism was warranted. He also wondered what Obama's vision is for the bad bank.
If we've learned anything from Obama's actions over the last few weeks, it's that there will be no more handouts from the government, he said, adding everything comes with a price.
He wondered what types of assets the new bad bank will accept and what it will not accept. Will the banks which sell these assets get off scott free, or will they be paying for the government's assistance for years to come?
Cramer reminded viewers that we've been here before, in the 1980's, during the S&L bailout. Back then, he said, all the financials rallied on the news of the Bad Bank, even the ones who couldn't participate in the bailout.
Cramer predicted the same thing will happen again this time, with stocks like
all rallying for no good reason.
Cramer: Buying This Stock on Weakness
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Cramer said history may repeat itself again, as it did in the 1980's, when all of the early rallies gave way to huge selloffs in the years that followed.
He said many people forget that it took banks years to recover, and that shareholders were strapped with huge burdens for taking the assistance.
According to Cramer, there are only two banks worth owning. They are
, both of which he owns for his
Action Alerts PLUS portfolio.
"These are only two who don't need any help," he said.
Spice Up Your Portfolio
Investors looking for a great recession stock should look no further that spice maker
, said Cramer. He talked with president and CEO Alan Wilson to get the story.
Wilson said McCormick is in a great business, offering everything from ingredients to spices, and selling to everyone from restaurants to consumers. He said the company has products that cover every price point and benefits from that diversity.
Wilson confirmed that sales in Europe were weak over the last three months of last year, but noted that he now sees that market stabilizing. He characterized the stronger dollar as being a "headwind" for the company because McCormick's sales is overseas.
Wilson also elaborated on the company's "McCormick Science Institute," which studies the health benefits of the company's products. The results, he said, were very promising and showed that adding more spices to your diet can improve your health.
Cramer said with McCormick now 10 points off its highs, he'd be a buyer of the company. McCormick currently trades at just 13.7 times its earnings, when historically the range is between 11 times to 35 times its earnings.
A Steel Stock to Own
In a second interview, Cramer spoke with Dan Dimicco, chairman, president and CEO of
, which beat earnings estimates by 25 cents a share on Monday.
Cramer talked with Dimicco about recent negative comments by
CEO about Obama's stimulus plan.
Dimicco called the comments alarmist, and said with the taxpayers footing the bill for the stimulus plan, the jobs created should stay in America. He said he doesn't advocate erecting trade barriers, but instead simply enforcing the laws already on the books.
Dimicco also said Obama's stimulus plan doesn't go far enough. He said the country needs lasting investments in its infrastructure, including a lot more than just roads and bridges.
When asked about how Nucor was able to stay profitable while cutting its production in half, Dimicco said Nucor is unique in that it has very low fixed costs. He explained that most of the company's costs vary with the shifts in supply and demand. Even the company's salary model is performance based, he said, and fall significantly as demand falls.
Cramer told viewers not to chase Nucor after its big run this week, but said if there ever was one steel stock to own, Nucor would be it.
Am I Diversified?
Cramer talked with callers to see if their portfolios have what it takes to survive a tough market. The first caller's portfolio included
Hudson City Bancorp
Cramer said Caterpillar and Deere are two industrials and said "no" to the portfolio. He said to sell Caterpillar and keep Deere.
The second caller's top holdings included
American Oriental BioEngineering
Cramer said this caller has a great portfolio.
The third caller had
as their top five stocks.
Cramer said this portfolio was diversified.
Cramer was bullish on
Research In Motion
He was bearish on
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At the time of publication, Cramer was long JPMorgan Chase, Wells Fargo, Hewlett-Packard and Goldman Sachs.
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