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NEW YORK (
) -- "The politicians are the tide our companies are surfing," Jim Cramer told his
TV show viewers Thursday, as leaders in both the U.S. and in Europe seem to be meddling in just about every aspect of capitalism.
Cramer explained that there are so many cross-currents in this market, it's hard to know why stocks seems to be ignoring just about every negative data point out there. Yet under the surface, he said, the moves in the markets make perfect sense. Cramer said we're in a political ocean, and not an economic one, and that's why negative economic data is taking a back seat to political rhetoric.
In retail, Cramer said its the hopes that Obama has the votes to extend unemployment benefits that's sending stocks like
higher. While in manufacturing, stocks like
, a stock which Cramer owns for his charitable trust,
Action Alerts PLUS, is rallying because the markets have priced in a full blown recession, and not a simple slowdown.
Meanwhile, the banking sector is preparing for a Lehman Brothers-style collapse in Europe, while Treasury Secretary Tim Geithner said Wednesday that option is off the table. Thus, stocks like
edged higher. And if Europe isn't going to collapse, we'll need more oil, said Cramer, so buying the oil drillers and oil service stocks makes sense as well.
In technology, investors have been betting on a weak Europe as well, yet the seasonally strong fall season will trump any weakness out of the Euro zone, said Cramer. Forget
Research in Motion
, said Cramer, "they're done, stick a fork in them." He instead advised buying more
, another Action Alerts PLUS holding.
Know Your IPO
In this IPO segment, Cramer highlighted
, a company which came public on July 21 at $17 a share, only to see its shares skyrocket 63%. Since then however, shares have slumped back to the $20 range.
Cramer said this specialty retailer of women's apparel and accessories is currently in no man's land, delivering only inline earnings during its first quarter as a publicly traded company. He said Francesca is unproven, and therefore cannot be bought, or sold, at current levels.
On the good side, Cramer noted that Francesca has growth, adding some 70 stores to its already growing portfolio of 279 locations. The company also has high margins and is growing revenues at a 40% clip.
However on the bad side, Cramer noted that Francesca's same-store sale have slowed to just 5%, down two-thirds from where it was a year ago. Cramer feared that this means the company is expanding too fast and is having trouble executing at its existing locations.
Cramer said Francesca's multiple of 28 times earnings will shrink fast if the company cannot deliver same store sales growth in at least the high single digits. Without solid execution at its existing locations, he said the company will see its shares shrink quickly.
More Buyers Key Turnaround
In the "Executive Decision" segment, Cramer spoke with Alex Smith, president and CEO of
Pier One Imports
, which is up 28% since Cramer first got behind it in April, 2010. Pier One recently delivered same-store sales growth of 10.8%, as the company continues its turnaround efforts.
Smith said that Pier One's turnaround started with their buyers, and an increase in staff from 10 to 24 people. Smith said the increased staff has allowed buyers to concentrate on their own departments and source better merchandise at better prices. He said that Pier One still has a small share of a very large market, so it's not impossible for the company to grow its share, especially with products that resonate so well with their customers.
Smith also addressed rising costs out of China, saying that his company has been able to cut costs in other areas to offset the margin pressures. He said Pier One is not passing on the full cost of these increases to their customers, although the company is not seeing any price resistance from its customers.
When asked about the company's stock buyback program, Smith said that the buyback does not curtail efforts to invest in its stores. He said the company has been able to take advantage of the dip in the share price and buy shares at great prices. Smith still sees a lot of upside still left in Pier One shares.
Cramer said he remains a fan of the Pier One story and continued to recommend the stock.
Cramer was bullish on
Cliffs Natural Resources
Chipotle Mexican Grill
Cramer was bearish on
P.F. Chang's China Bistro
American Capital Agency
In his "No Huddle Offense" segment, Cramer admitted he "got greedy" when continuing his recommendation of
. Wearing the "Post-it Note of Shame" on his forehead, Cramer said he didn't add up all of the negatives surrounding the stocks and failed to tell investors it was time to move on.
Cramer said the realization that customers were leaving Netflix in droves as a result of its new pricing structure was only the beginning. He said increased competition from all fronts, along with the fears that content costs from partners like Stars are also troublesome for a company that just lost nearly 800,000 subscribers in a single quarter.
Cramer said shares of Netflix will likely bounce off these lows, but he would be a seller of that bounce. "It's time to move on," he concluded.
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer was long Caterpillar, 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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