Search Jim Cramer's Mad Money trading recommendations using ourexclusive Mad Money Stock Screener and watch Jim Cramer's Mad Money Post Game videoexclusively on TheStreet.com.
NEW YORK (
) -- "Headlines can cost you a fortune," Jim Cramer cautioned the viewers of his "Mad Money" TV show Tuesday.
He said any investor trading just off the headlines of the day missed out on an incredible rally.
Cramer warned yesterday that today's housing headlines would likely tank the markets, but instead it was the earnings headlines that did most of the damage. He said that while the media touted
, a stock which Cramer owns for his charitable trust,
Action Alerts PLUS, as a huge earnings miss, Goldman actually earned $2.75 a share, a full 76 cents more than estimates, when government fines and penalties are factored in.
Cramer said the same point could be made with the earnings of
Johnson & Johnson
He said all three these great companies saw negative headlines on their better- than-expected earnings. Cramer said savvy investors could have caught a seven- point swing in Goldman had they bought at the lows, and caught similar moves in the others.
The headlines even affected tech bellwether
, another Action Alerts Plus name. Cramer said the market open saw Apple down five points, but investors could have caught a 20-point surge, as Apple traded up 11 points when it reported after the bell.
Cramer said the real story today was China, where the Chinese-mandated economic slowdown appears to be working, and the country is once again buying commodities like copper, oil, gold and steel.
He said China is far bigger than any domestic headline, and is great news for stocks like
"Sometimes companies can set the bar way too high," Cramer told viewers, as he examined the earnings of
, a company that appeared to beat the estimates, only to see its shares get clobbered.
Cramer said on the surface, all seemed well on IBM's conference call. The company beat by three cents a share, on 2% revenue growth. On the call, IBM management said they met all of the goals they set on their April call, and gave a bullish outlook for the future.
So what went wrong? Cramer said it wasn't the company's April conference call but its May analysts day, where IBM laid out its roadmap through 2015. Cramer said at that meeting, IBM promised double-digit growth over the coming years, and portrayed unfettered optimism. As a result, analysts provided IBM estimates that were impossible to meet.
Cramer said in this case, it wasn't the analysts fault that the estimates were raised so high. He said IBM's call for double-digit growth was unnecessary, and analysts naturally assumed with such a bullish outlook that their short term estimates were too conservative.
Cramer said it was bravado that killed IBM shares today, and even with today's plunge he's still not a fan of the company. He instead recommended
, an Action Alerts Plus stock that posted better-than-expected bookings and growth, and a company that knows how to under promise and over deliver.
Stocks or ETFs?
Is it better to own individual stocks, or an ETF that spans a sector? That's the question Cramer answered as he went head to head with colleague Tim Collins in the "Off The Charts" segment.
Cramer compared the charts of individual bank stocks versus the
Financial Select Sector SPDR
, which that covers the banking group.
According to Collins, thanks to ETFs like the Financial Select SPDR, banks stocks have become commodities, trading in lock step with each other. Collins noted that there is now a 91% correlation between
and the ETF, and an 85% correlation between
Bank of America
and the ETF.
He said with the bank stocks having more volatility that the ETF, he'd be a buyer of that over individual stocks.
Cramer said he agreed Collins' points about the ETFs. However he defended owning individual stocks, as Cramer owns both JPMorgan and Bank of America for Action Alerts Plus.
Cramer noted that JPMorgan has outperformed Bank of America over time, and with homework, individual investors can still pick out the winners. "The ETFs appear to be winner," admitted Cramer, "just at a time when it should be the other way around, and individual performance should matter more."
Cramer spoke with Senator Ted Kaufman (D., Del.) for an update on financial reforms and the state of financial affairs in Washington.
Kaufman said the outcome in the case against Goldman Sachs is clear: Goldman lost and the Securities and Exchange Commission won. He said Goldman may spin the verdict as a win for them, but the fact is that the $550 million fine that was imposed was the largest in history.
Kaufman also said it's important to modify the behavior on Wall Street. "People can't believe that they will get away with this," he said. There is an arrogance on Wall Street, which is why we need to get the regulators back on the beat to keep the market credible, Kaufman said.
When asked about the complexity of the new financial regulations, Kaufman said that no senator ever gets the exact bill they want, but this bill was better than nothing at all.
He said that it was important to lay down the rules, then let the regulators decide how to handle the new rules, but Kaufman admitted that regulators already have their hands full, and this bill doesn't help that matter.
Overall, Kaufman endorsed bringing both sanity and ethics back to Wall Street, and Cramer agreed wholeheartedly.
Cramer was bullish on
City Telecom HK
Deere & Co
He was bearish on
Cramer reiterated his $300 price target on
, a stock which he owns for his charitable trust,
Action Alerts PLUS, on the heels of the company's earnings report. "The Internet tsunami is alive and well."
Don't Miss Any Market Catalyst Visit the Earnings/Economic Calendar
-- Written by Scott Rutt in Washington D.C.
To watch replays of Cramer's video segments, visit the Mad Moneypage on CNBC
Want more Cramer? Check out Jim's rules and commandments forinvesting from his latest book by
For more of Cramer's insights during the Lightning Round, clickhere
At the time of publication, Cramer was long Goldman Sachs, Apple, Accenture, Bank of America, JPMorgan.
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."
None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.