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NEW YORK (
) -- "The market is not, and cannot be, expensive based on the earnings we've seen," Jim Cramer told the viewers of his
TV show Monday, as he declared that the entire market is just too cheap given the fabulous earnings American CEOs are delivering.
Cramer said there are a million bear cases for why stocks should be headed lower, but valuation just isn't one of them. He said that strong earnings reports, especially ones where companies beat expectations and raise guidance, are the building blocks of a bull market, and that's exactly what we've seen.
Just about every sector in the
is participating, said Cramer. In health care, an industry supposedly crushed by reforms, Cramer said companies universally trumped the estimates, including
Johnson & Johnson
Technology, led by
, a stock which Cramer owns for his charitable trust,
Action Alerts PLUS and
, along with scores of others, surged past the estimates. Oil stocks benefitted from oil about $80 a barrel.
Even the banks, which were also forecast to disappoint, raised guidance, as evidence by
Bank of America
, another Action Alerts PLUS name, and
fell short of expectations.
And the list goes on, said Cramer, from restaurants and retail, to the transports, telco, chemicals, aerospace and industrials. Even the airline stocks were able to squeak past the forecasts, he noted. "We're forging a new consensus for 2011," said Cramer, and that will affect the entire market.
Firing on All Cylinders
In an exclusive "Executive Decision" segment, Cramer spoke with John Killian, retiring CFO of
, which Cramer has championed on "Mad Money," and one that's up 27.5%, including dividends, since Cramer's last recommendation on Oct. 29, 2008.
Killian said Verizon is firing on all cylinders, making it a tough time to leave the company. He said the company is in a great position with the assets it has, and Verizon will be focusing more and more on wireless and data, with an emphasis on network quality.
When asked for more details on Verizon's wireless business, Killian said only 23% of subscribers currently use a smartphone, making a huge opportunity for increased wireless data usage. While some have forecast a peak in mobile messaging, Killian said Verizon does not expect that to happen any time soon.
Other bright spots for the company included Verizon's FiOS Internet and cable TV service, along with
iPad, which Killian said is a great fit with the company's current lineup of products.
Finally, when asked about Verizon's dividend, Killian said the company calculates its dividend based on its cash flow from operations, and he's very comfortable with the level given free cash was up 25% year over year. That's why Verizon just raised its dividend 2.6%.
Netflix's for Real
What makes a stock rally 75% in just three months? Cramer said "growth," along with a tectonic shift in how Americans watch TV. He said that's why
, a stock he recommended on July 26, was able to power 62% higher, and why that's only the beginning.
Cramer made it clear that the short sellers, along with just about every Wall Street analyst who covers the company, just doesn't "get it." He said that Netflix is now the king of streaming video, and while Wall Street might not understand what that means, the younger generation does.
Cramer said Netflix is now available on over 100 different devices, including the new Apple TV. The company has even officially changed its mission in a recent press release to define itself as a streaming video company that also offers DVDs by mail.
With subscriber growth up an astonishing 52% year over year, and 13% from just last quarter, Cramer said the potential for Netflix is huge. Couple that with the fact that subscriber acquisition costs were lower, and Cramer said it's clear Netflix is benefiting from more than just the demise of brick-and-mortar video chains.
Netflix trades at 44 times earnings, but has a 30% growth rate, said Cramer. And while some are worried about competition and a decline in DVD rentals, Cramer said streaming is where it's at, and the estimates for Netflix are still way too low.
Black Box Needed
Cramer once again welcomed the outgoing Senator Ted Kaufman (D, Del.) to to discuss the state of financial reforms in this country.
Kaufman said the biggest obstacle to reforms is time. He said the Securities and Exchange Commission took three months just to gather the data from the so-called "flash crash" and even still we don't really know what happened. Kaufman said the markets need a black box, like aircrafts use, so that data can be monitored continuously and not just after something bad happens.
Kaufman said the flash crash was a result of a perfect storm of events, where a lot of money met a lot of change in a place with neither transparency nor regulation. He said with 70% of all market trading now done by computers, it's harder and harder to know what's going on.
Kaufman said that democracy and capital markets are what makes America great, and he wishes that everyone on Wall street would pitch in to help with reforms before America's markets become second rate behind Hong Kong, Singapore, Frankfort and London, all of which don't seem to have the high-frequency trading issues that American markets do.
Cramer was bullish on
He was bearish on
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer was long Apple.
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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