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Investors should look to take a hard look at their portfolios and make some sales tomorrow after today's huge rally, Jim Cramer told viewers of his "Mad Money" TV show Thursday.
Cramer advised selling into any future rallies to free up cash for the declines that are most certainly ahead. "Get into position for the next big sale," he told viewers.
He said today's 410-point rally in the Dow was entirely due to rumors that the federal government is considering a resolution mortgage trust to begin buying up bad home loans in an effort to rescue the U.S. banking system.
Cramer said he first floated this very idea on NBC's "Today Show" back on July 16, but said it's only one part of "the Cramer plan" for saving the markets. He said a resolution trust will not only put a floor in the housing market but is far more effective and inexpensive than the current plan of nationalizing entire companies.
He said the
needs to cut interest rates to 1% to spur growth and add liquidity into the markets. He again urged the re-instatement of the uptick rule, which is designed to prevent relentless short-selling of companies. And finally, Cramer said regulation is needed to stop the credit default swap activity that companies have been engaging in.
All of these things, said Cramer, are what the markets need to finally put the housing and financial crisis behind us.
Cramer: No Recovery Without Confidence
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A Turn in Housing
Cramer talked with Richard Dugas, president and CEO of
, about the state of the housing market.
Dugas said he still feels there's a ways to go before the housing market hits bottom. He said that while the situation is improving, there is still a lot of excess home inventory that needs to be worked off. On the upside, Dugas confirmed that deposit cancellation rates, which peaked in 2007, have moderated so far in 2008.
For would-be homeowners, Dugas said now is a great time to buy a home, citing low mortgage rates and depressed home values that make owning a home more attractive than renting.
When questioned about Pulte's financials, Dugas said his company currently has one of the best balance sheets in the industry, with over $1 billion in cash.
With the housing market still underselling the growth rate and pent-up demand for homes building, Cramer and Dugas agreed that now may be a great time to buy a home and shares of Pulte Homes.
The New Banks
"The market is speaking and I hear it," said Cramer in his "Sell Block" segment.
He said that the markets are clearing saying that investment banks, like
, a stock which he owns for his charitable trust
Action Alerts PLUS, just cannot be owned, while other companies, like
, another Action Alerts name, and
are the place to be.
According to Cramer, the time has come to put the investment banks, like Goldman, on the back burner, and instead focus on the deposit banks, such as
Bank of America
, which he also owns for his
Action Alerts PLUS portfolio.
Ever since the takeover of
, the confidence in the financials has been shattered, with the markets now clearly favoring the more stable food names and deposit banks, said Cramer.
Cramer said even names like
, which is now on the SEC's watch list of heavily shorted names, will likely see a pop as the shorts vacate in droves.
In this segment, Cramer told a viewer that he expects
to rise now that it's on the SEC's list of heavily shorted names.
He said he still likes
more, but thinks that any profitable company on the SEC's list should do better going forward.
He told another viewer that he's still a believer in
as a speculative stock.
Cramer was bullish on
Nordic American Tanker
Southern Peru Copper
He was bearish on
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At the time of publication, Cramer was long Goldman Sachs, General Mills and JP Morgan Chase.
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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