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"After weeks of the markets going higher, it's time to a reality check," Jim Cramer told the viewers of his "Mad Money" TV show Monday.
He said that it's important to pause and review your investment theses to see if they're still pointing higher, or signal a downturn.
According to Cramer, there are five threats to the bull market. Four of which he said are under control, but one still keeps him up at night. These threats include:
1. Unemployment Spike. Cramer said employment must continue to head in the right direction, with jobless claims headed downward. He said there needs to be progress every week.
2. Obama's market view. Cramer said Obama's been doing a great job as of late by taking on Wall Street without demonizing it. This needs to continue, he said. Obama has to realize that he has the power to take the markets lower and needs to continue to promote it, he said.
3. Signs of Inflation. Nothing can stop an economic rally cold like inflation, but fortunately we're not seeing any signs of it, said Cramer. Cheaper housing, slumping autos and the collapse in banking should keep this recovery killer at bay.
4. Dip in Bank Stocks. The rally in banking will only continue as long as the big money is buying in, he said. Fortunately all of the recent secondary offerings made by banks were priced right, and investors are continuing to make money, he added.
5. Higher Gas Prices. Cramer said this is the threat that worries him most. The rally in retail and restaurants, along with consumer confidence, is all predicated on lower gas prices, he said. If prices continue to climb, they will strangle any hopes of a recovery.
Cramer said none of these threats merit the selling your stocks, and he's still be a buyer on pullbacks like today. But he is keeping an eye on all five of these factors, with a special close eye on the price at the pump.
P/>How do big investment firms lure weary investors back into the market?
Cramer says its with underpriced IPO's. That's why he thinks investors need to call their brokers and get in on the IPO of
, which is set to trade under the ticker DGI later this week.
Cramer said Digital Globe is a satellite imaging company much like
( GEOY), with satellites designed to sell imagery to the military, big oil,
and GPS providers. The company's IPO is set to price between $16 to $18 a share and could come as early as Wednesday night.
Cramer said the deal's underwriter,
has the incentive to underprice the deal to boost investors' and companies' confidence in the IPO process.
Recent IPOs such as
Mead Johnson Nutritional
all followed a similar pattern. They were up an average of 20% the day after the IPO and are up 43% year to date.
But Cramer said there are other reasons to like Digital Globe as well. There are high barriers to entry in the imaging business and little competition, which is why GeoEye just off its 52 week high, he said.
Cramer said Digital Globe however, is a better company.
Cramer said even assuming a worst case scenario, including a delay in the launch of the company's new satellite, lower sales, higher expenses, increased depreciation and a 30% tax rate, he still sees the company trading at just 12 times 2010 earnings, or a 15% discount to GeoEye.
Cramer said he thinks Digital Globe could see $27 a share, and is willing to pay up to $20 to $22 a share for the IPO.
Cramer spoke with Richard Fain, chairman and CEO of
Royal Caribbean Cruises
, to find out how the company's self-proclaimed "miserable" quarter turned out to be good news for its stock.
Fain explained that while the company's sales were about half of that of last year, the stock was so oversold and investors expected things to be so bad, that the reality of a stabilizing market was welcome news. He said Royal Caribbean is now is a great position to do well as the global economy recovers.
When asked how the company is dealing with such obstacles as the swine flu and liquidity issues, Fain explained that overreaction to the swine flu was the right thing to do, and that those fears are now quickly calming. Regarding liquidity, Fain said his company took action two years ago to avoid the crises other companies are facing today.
Fain said Royal Caribbean is seeing good visibility and is in the fortunate position that its assets can move to where the consumer demand is located.
Cramer said he's be a buyer of Royal Caribbean under $12 a share.
Cramer told a viewer that
will not be going up anytime soon as it makes a bid for its bottlers, but he would not selling the stock at these levels.
Cramer told a second viewer that it's time to sell
if you have a profit. "It'd be a sin not to lock in that gain" he said.
Finally, Cramer told a viewer to absolutely, positively not to buy
, a stock he said should never be bought.
Cramer was bullish on
He was bearish on
Robert Half International
Basic Energy Services
Check out the latest edition of
"Cramer's Take onHeadline Stocks" on Stockpickr.
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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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