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"Interest rate cuts do matter," Jim Cramer told the viewers of his "Mad Money" TV show.
He said that no matter what the nay-sayers may say, rates cuts are exactly what the markets need.
Cramer said there are only two types of people who feel interest rate cuts are insignificant: the academics, who are grossly behind the curve, and those who short the market and profit handsomely from a panicky market.
These people, he said, have no sense of history and don't remember 2003, when extremely low interest rates supercharged the U.S. economy out of a recession and crisis.
is on board at last, said Cramer, although it came "a year too late."
He said the Fed's statement that it's no longer worried about inflation should give the Chinese and European central banks the fuel they need to follow suit and further juice up the U.S. economy.
Cramer said the rally in stocks will be sustainable if the rest of the world cuts rates. If they don't, all bets are off.
Cramer noted today's rate cut means individuals and businesses will find it cheaper to borrow money because the federal funds rate is tied to the banks' prime rate.
The lower rates also allow the banks to make more money on what they lend. And with savings and money markets earning less, more money will eventually flow back into stocks.
Cramer said it would also be huge news for the housing market and the economy if the federal government were to buy 3 million residential mortgages.
The move, part of his plan for fixing the economy, would finally allow the housing market to stabilize and stop the relentless home price depreciation spiral, he said.
Cramer: Retailers That Worry Me
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Cramer's made it no secret that he's a fan of high-yielding dividend stocks with his recent recommendations of
But he warned that all dividends are not created equal.
Cramer said there are several things investors must consider when evaluating the health of a company's dividend: the company's earnings, its cash flow and its balance sheet, and the consistency in which it pays its dividends over time.`
Cramer used this criteria to analyze the recent dividend boosts by Verizon and building products maker
Verizon's 46-cent-a share dividend is higher than its earnings. Cramer generally looks for earnings to exceed twice that of its dividend. In this case, Verizon's earnings doesn't meet that standard but he says the company gets a reprieve because its cash flow is 60% higher than its earnings. The company's balance sheet is also quite healthy, with much of its debt rated "A" or better.
Masco is a different story. While the company does have a 50-year history of paying its dividend, its recent boost of 23.5 cents a share does not even reach the company's projected quarterly earnings.
Cramer also said the company's free cash flow also does not seem sustainable, and while it has $1 billion of cash, its $4 billion worth of debt also makes it suspect.
Banking on Wind Power
Cramer welcomed Timothy Wallace, chairman, president and CEO of
, to the show to see if this railcar and wind tower maker is still on track for a great year.
Wallace said that business at Trinity is still going strong, despite the company's recent decision to suspend its earnings guidance. He said the decision to suspend guidance was made because the company could not reliably forecast its long-term earnings and not because of any immediate earnings shortfall.
Wallace said the demand for Trinity's railcar and construction products are seeing some gaps, but the company's barge and wind tower businesses are solid.
When pressed about wind power, Wallace said the company has not seen order cancellations, but has seen some delays in orders due to credit and financing concerns.
Cramer reserved judgement on Trinity, as he expressed concerns that the company may suffer from both financing issues and lower oil prices. However, he said that he doesn't expect big losses ahead for the company.
Am I Diversified?
Cramer played "Am I Diversified" with callers to see if their portfolios have what it takes. The first caller's portfolio included:
Cramer called this non-traditional portfolio diversified, but advised selling Harley, Dish and BCE.
The second caller's top holdings included
Johnson & Johnson
Cramer said this portfolio was a "well played game" and was the greatest portfolio he's seen in a long time.
The third caller had
Bank of America
Kinder Morgan Partners
as their top five stocks.
Cramer said this portfolio had too many energy stocks with Kinder Morgan and Duke, and advised selling one in favor of transport stock.
Cramer was bullish on
He was bearish on
The Bank of Ireland
MDU Resources Group
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At the time of publication, Cramer was long Johnson & Johnson and Unilever.
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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