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NEW YORK (
) -- In a rare somber moment on his
TV show, Jim Cramer issued a stern warning his viewers that "those who forget history are condemned to repeat it."
He said while his job on "Mad Money" is to offer hope and opportunity, it's also to issue caution when warranted, and today is one of those times.
Cramer was of course talking of the meteoric rise of the social network
, which debuted today at $45 a share and soared to $122 a share before settling out at $94. He said this lightning bolt of an IPO has made a mockery of the capital markets and this sort of deal is the enemy of the individual investor.
Cramer said the investment bankers that brought this deal public knew exactly what they were doing, using the same tactics employed during the dot- com bubble of 2000.
He said only a sliver of stock, just 7.84 million shares, were brought to market, a fraction of what was needed to satisfy demand. This led to mutual funds and others to bid the stock up in the open market, artificially inflating the price far beyond where it deserves to be. "These guys knew exactly what they were doing," he explained.
But just as in the dot-com bubble, Cramer said this story doesn't end well. He said LinkedIn now sets a precedent, and a plethora of deals will now be headed down the pike, all employing the same tactic, each deal being worse than the last. "We are playing with equity fire here," said Cramer, "and that equates to portfolio arson."
Cramer said the regulators are looking the other way, leaving the venture capitalists, the only ones to make money on these deals, to jump for joy.
Cramer said he's seen this game before, as he founded
right in the middle of the dot-com bubble, and was there to pick up the pieces. "There were 300 companies that went public between 1999 and 2000," said Cramer, "only a handful are still around today."
Cramer's bottom line: The LinkedIn deal was not good for the markets, and it certainly isn't good for your portfolio. "It's all downhill from here," he concluded.
Accelerating Revenue Growth
In the "Executive Decision" segment, Cramer spoke with Marc Benioff, chairman and CEO of
, a stock that's up 500% since Cramer first spoke with Benioff in November, 2008.
Benioff announced that Salesforce has become the first cloud computing company to reach $2 billion in revenues and has just completed its ninth consecutive quarter of accelerated revenue growth. He said Salesforce has fundamentally changed the way companies autoamte themselves.
Benioff went on further to say that whether its an open platform, or a mobile platform or a social one, the cloud is apart of them all, which is why Salesforce.com has been around for 12 years and boasts over 100,000 customers. Perhaps most impressive is that Salesforce.com uses shared infrastructure, allowing its 100,000 customers to use only 2,500 servers.
Among the big wins for Salesforce this quarter was
Bank of America
, which previously invested $100 million in a competing system. Benioff said Bank of America can now "throw all of that technology away" and utilize the Salesforce platform.
Benioff noted that the problem with older, legacy systems is that the projects are often never completed. "They never get them working," he said, which is why Salesforce is so appealing.
Cramer called Salesforce.com a terrific company, and one of only a few that have accelerating revenue growth.
Yum's on Top
Continuing his "Mad Money Restaurant Guide," Cramer looked into international growth players, including
. Cramer said all of these companies are terrific companies, but only one can offer the best value internationally.
Cramer said Starbucks has one-third of its locations overseas and plans to increase its international store count by 7% this year. He said Starbucks has a visionary CEO and is up 117% since he first recommended it. However, Cramer said he's worried that the brand may not be as strong as some others, and the stock, trading at 24 times earnings with an 18% growth rate, may not be as good a value.
The same goes for Dominos, which has 47% of its stores overseas, with overseas stores outperforming their domestic counterparts. Cramer said the Dominos brand just isn't as well recognized as the big boys, plus the stock doesn't pay a dividend.
Of the remaining two, Yum! and McDonald's, Cramer gave the edge to Yum!, a company he called the king of the emerging markets. Cramer said Yum! just operates in better countries than McDonald's and is trading at just 19 times earnings with a 13% growth rate compared to McDonald's at 16 times earnings with only a 10% growth rate.
Cramer said all of these are excellent stocks, and he'd be a buyer of all four on a pullback, but when it comes to international growth potential, Yum! Brands comes in ahead of the rest.
In the Thursday "Sell Block" segment, Cramer reminded viewers that the pros are not as smart as you might think. Case in point, the curious case of
After reporting a truly awful quarter and cutting forecasts, no less than 17 Wall Street analysts cut their price targets for the company. This was after the stock plunged $5 a share on the news. "Thanks for nothing," mocked Cramer. "Shouldn't the analysts have seen this coming?"
What's worse, Cramer said the analysts are taking HP's "excuses" seriously, totally failing to acknowledge that the company lacks leadership and direction. He said no other company blamed Japan for component problems, and no one else seemed to have weakness in their service divisions. "This is not how research should be done," he said.
The analysts also got it wrong with Dell, with no less than 10 analysts raising their targets for Dell after the company reported blow-out numbers with operation income up 60% and gross margins at their highest levels since 1992.
Cramer said CEO Michael Dell has orchestrated a miraculous turnaround at Dell, focusing on the enterprise and not consumer PCs. He said these results are sustainable, but Wall Street probably won't realize that until next quarter.
Hewlett-Packard belongs in the Sell Block, said Cramer, while Dell is now a buy, buy, buy.
Cramer was bullish on
First Niagara Financial
Nordic American Tanker
He was bearish on
Margin Requirements for Oil
In his "No Huddle Offense" segment, Cramer said now is the time to raise the margin requirements to trade oil, our most precious commodity. He said we can't live without oil, yet no one seems to have learned the lesson from 2008, when oil spiked to $145 a barrel on the heels of rampant speculation.
Look what happened to silver, said Cramer. The margin requirements were raised and the price fell back to reasonable levels. The same could happen with oil. "What's wrong with making the margin requirement for oil the same as it is for stocks, 50%?" he asked. He said the worst that will happen is brokers will make a little less money.
It's possible that nothing will happen, but he said an effort has to made be made to try to protect the economy and the American consumer.
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer was not long any stock mentioned.
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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