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Jim Cramer fills his blog on
every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- foolish buybacks,
- the rate cut, and
- the game plan for this market.
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Buybacks Tie the Hands of the Flush Companies
Originally published on Tuesday, Oct. 7, at 12:50 p.m. EDT
Wait a second,
has bought back $218 billion in stock, more than the market cap of
I know that money's not totally wasted. The stock has almost tripled in the last ten years. That's much better than the
, which has done little or nothing. But oil's gone up huge, more than the stock!
Now, I wonder how it would have done if it has just paid a better dividend? Because that's just way too many shares bought vs. plowing it back into the business. Exxon could have bought pretty much every single independent oil and gas company in the business and increased reserves huge, and it would have provided tremendous growth, something the company sorely lacked.
We are in a moment where we really have to question the buybacks, because they are not creating any real value, and most are much more reckless than Exxon's. Many of these buybacks are arguably destroying value. We know that there is tremendous amount of money made from dividends, perhaps about half of the gains of owning stocks. But these buybacks are nothing but prop-ups, or attempts to juice short-term earnings.
Right now we are in a revaluation of everything has been done with the cash of the corporation. If the S&P 500 has done nothing in 10 years and all of this stock has been bought back, shouldn't we start thinking that acquisitions and diversifications and dividends might have been better?
Anything but just plowing the money mindlessly back into the stock.
I remember when the big buybacks began. They started after the crash in 1987 when CFOs recognized that the pull of the S&P 500 futures could send all stocks down, even the ones that were doing well. Even before that, though, we had Exxon buying back stock.
Now we have worldwide recession. There are bargains galore for any company that is not levered and that has cash. But those that are levered that have been buying back stock by the boatload? To me it looks they never thought a rainy day would come. Sure enough, we have a monsoon. And very few look ready for it -- particularly, oddly, the oil and oil service companies, which should be
the most flush
and instead are the most naked.
Seems very wrong to me. When is a buyback justified? When a company is trading through its cash and receivables. When there is a distressed seller taking the stock down to a level that seems ludicrous. When cash is so brimming and a stock is so low relative to its fundamentals, on a P/E basis, where management has a pretty good idea how the company is doing that it makes sense, particularly if it reduces the amount of dividends paid so the cash is better spent than sitting in the bank. That rarely happens. Which means, alas, that buybacks should be rare!
: Don't forget to check out some of these new great writers. Stay close to
, and await
from Helene Meisler, which might happen on a retest.
At the time of publication, Cramer was long GE.
The Rate Cut Matters -- for 2009
Originally published on Wednesday, Oct. 8, at 8:58 a.m. EDT
We have to distinguish what rate cuts do. They help the prime come down. They also slope the yield curve, which lets the banks make more money. These are good things that will have an impact next year. They do not help near-term earnings.
I have heard endlessly that the rate cuts don't matter at all to anyone anywhere. That's just stupid. They can set a path for no depression.
As I said earlier today, they are too late to make a lot of money in the stock market. They are
too late to help Main Street. They are too late to help earnings. They are
too late to make people feel that they might want to get off the fence and do some buying of homes. That's Main Street again.
All of this matters for 2009. That's the issue. They are too late to help 2008. If you think of these cuts like that, you can actually see a path to a bottom next year.
I cannot say enough that the issue here is taking the Great Depression off the table. If we take that off, we can begin to think about actually making money.
Until then, it is all about preservation of capital, raising some cash into strength and trying to be as whole as possible for when the economy does come back, if they cut rates big.
As usual, I picked at the market slowly into the horrid weakness for
. I tried to buy some truly depressed, panicked merchandise. I am hoping for some lift today off the cuts to reliquefy. Let's wait and see.
Here's a Game Plan for the Decimated Market
Originally published on Friday, Oct. 10, at 12:27 p.m. EDT
Understand that if you are buying, you are looking at a host of companies that are trading around cash. That takes homework, but they are available.
You have to expect that interest rates are going through the floor, so if you can find a
company, one that is a
that yields an attractive 4% -- here I am talking about
-- you could take in a 25% position right here, as the risk/reward has changed.
stands out here, and
is almost there.
You can make a case to begin to buy some cyclical with 4%-5%,
, but there you can only by a beginning position, as they are
self-financing, because in a prolonged recession they are going to have to reach down deep for that dividend.
qualifies at 4.57%, and
is just too juicy to
start buying, even if Russia is confiscated.
Then you can buy the companies that are going to take over the world at this pace, and I am thinking of
The question is, what financials can you buy?
has the best balance sheet of the majors and yields 6%. Intriguing.
I don't have many others.
You can only buy a quarter of any financial, because the
deal hangs in the balance.
Finally, good yielders that are safe:
Kinder Morgan Energy Partners
There's a decent buy list.
says bankruptcy is not on the table. Someone better tell them it isn't for them to decide.
At the time of publication, Cramer was long Chevron, Freeport-McMoRan, Kraft, Unilever and Altria.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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