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Jim Cramer outlined a plan for President-elect Barack Obama to fix the struggling economy on his "Mad Money" TV show Wednesday.
Cramer said the first steps to turn the economy around are unfortunately beyond our control. The European and Asian central banks must cut interest rates, he said, ahead of what is sure to be a awful unemployment number on Friday. Without it, the markets will undoubtedly be in for another significant slide.
As for what Barrack Obama can control, Cramer said the first step is to fix the ailing auto industry. He said a major federal bailout, similar to that of
, will be needed.
The government should buy huge chunks of both common and preferred shares in
to stabilize their stock prices and secure the companies' corporate debt until structural changes can be made.
Second, Obama needs to solve the country's energy independence problem. Cramer recommended relying on the U.S.'s huge reserves of natural gas to bridge the gap to renewable energy.
Obama, he said, should mandate the U.S. automakers to make natural gas vehicles and encourage the oil industry to use tax credits to open natural gas fueling stations. Natural gas, he said, is not only a quick solution but one that could create thousands of jobs.
Finally, Cramer said the country must fix the housing crisis. Cramer says the remaining $400 billion in the TARP program should be used to buy 1.3 million homes in the hardest hit areas of the country.
Cramer: Obama's Win Gives Us Two Markets
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The government then can offer these homes to Americans for low down payments and fixed 5% mortgages. He said this strategy will stop home price depreciation cold.
With these steps, Cramer said any president could easily fix the country's problems in his first 100 days.
A Treacherous Market
Cramer talked with David Novak, president, chairman and CEO of
, to see if owners of KFC, Taco Bell and Pizza Hut have what it takes to weather the tough economic storm.
Yum! Brands last reported its earnings on Oct. 8, when it beat expectations by 4 cents a share with strong same-store sales growth. However, concerns over declining margins in China have sent the stock lower, where it now trades at just 14 times its earnings, despite its historical average of over 17 times earnings.
Novak said Yum! Brands has well established brands that are well positioned for this troubled economy. He said there are always challenges in the restaurant business, but his company is designed to weather the ups and downs.
Novak confirmed the declining margins in China amidst unprecedented food inflation, but emphasized the opportunities in China are still staggering. He said Yum! Brands will open 500 new stores in that country by year-end, taking it to a total of just 3,000 locations. This, he said, still equates to 2 stores per million people in China, compared to 60 stores per million here in the U.S.
When asked about political risks in countires like Russia, Novak said there are always risks when dealing overseas, but said Yum! continues to focus on its U.S., Chinese, and international divisions, with revenues from Russia adding to already strong sales.
When asked about opportunities domestically, Novak was also upbeat, noting several new products and initiatives for all of the company's chains.
Cramer said he's still a fan of Yum! Brands, but recommended waiting for the company's dividend yield to hit 3% before buying.
Future of Coal
Cramer also checked in with Jim Rogers, CEO of
, to discuss that company's recent disappointing quarter and the upcoming Obama administration.
Rogers said it's his mission to provide his customers with affordable, reliable and clean power 24x7. He said Duke is already the country's third largest generator of electricity using nuclear power, and the company is making sizable investments in both wind and solar energy.
Regarding the company's costs and profitability, Rogers reminded viewers that 70% of Duke's operations are regulated, meaning that increased costs are absorbed by its customers.
He said the recent earnings shortfall was mainly due to storm-related costs from Hurricane Ike and increased mark-to-market costs associated with the company's hedging and not from operations.
Rogers also spoke about Duke's "Save-a-Watt" proposal, which promotes energy efficiency. Under the plan, utilities would be reimbursed for working with consumers to help create a more energy efficient environment in a new low-carbon world.
Cramer called Duke a smart company and a good play in the energy patch.
Am I Diversified?
Cramer talked with callers to see if their portfolios have what it takes. The first caller's portfolio included
Bank of America
Cramer said "hallelujah" to this portfolio's plethora of diversified sectors.
The second caller's top holdings included
Cramer said Kraft and Unilever had too much overlap and one of the two must be sold.
The third caller had
as their top five stocks.
Cramer blessed this portfolio, calling it the ideal IRA portfolio.
Cramer was bullish on
Johnson & Johnson
Cramer was bearish on
Hartford Financial Services
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At the time of publication, Cramer was long Johnson & Johnson, Morgan Stanley, Celgene and Unilever.
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