RealMoney Radio Recap: Just Right
"If you like playgrounds, today was a good day for being on the swing set," Jim Cramer told his
"RealMoney" radio show listeners on Friday.
That's because stocks were seesawing as investors hoped for an end to
Federal Reserve
rate hikes while also fearing a recession and geopolitical flare-ups.
"This is soft landing heaven," Cramer said, adding that he's not concerned at a time when it seems that things are just to Goldilocks' liking. The economy is not too soft and not too weak, he said. That's why he's not concerned and is even bullish on the stock market.
"I'm not going to run when I'm getting what I want, which is commodities weakness and earnings strength coupled with macro or big economic data -- that is not bad," he said.
Still Spending
What would make the average consumer stay away from the mall? Cramer asked.
You could point to debt, higher interest rates, soaring gasoline prices and a slowing housing market as typical consumer spending deterrents, but Cramer said that all of those real negatives are not keeping consumers out of stores.
All of those real negatives happened last month, he said, but people didn't scale back their spending. The proof is in the May retail numbers, which showed everyone but low-end retailers did "amazing business."
Walgreen
(WAG)
just reported a monster quarter and said that business was very strong, Cramer pointed out, adding that retail has been on fire.
This will show itself in some huge bumps in earnings of retailers like
Federated
,
Target
(TGT) - Get Report
and
Sears
(SHLD)
, he said. He owns Sears for his charitable trust
Action Alerts PLUS.
The retail results also show that the tax cuts have worked for the nation's rich, he said, and that the consumer isn't dead yet.
May auto sales also show that Asian cars are winning big in the U.S., due in large part to higher gas prices, Cramer said. These car makers are pumping out fuel-efficient vehicles, and Asian cars now account for 40% of the U.S. car market.
Pay the Man
Human nature is predictable, particularly because it often involves jealousy and short-term memory, he said.
Underscoring his point: executive pay.
Cramer said that he's a big fan of CEOs being on the same page as investors, which is why he constantly talks about Sears. He believes that the pay of the company's chief executive, Eddie Lampert, is "uniquely linked to the stock." If the stock goes down, he doesn't get paid, Cramer said.
So, what does he think about the fact that critics are dogpiling on
Home Depot
(HD) - Get Report
CEO Bob Nardelli, who got about $111 million in compensation even as the company's shares sink?
Cramer pointed out that before Nardelli, Home Depot had sloppy stores, grumpy employees and was losing out to
Lowe's
(LOW) - Get Report
in a big way.
He turned the company around, he said, adding that Home Depot was in dire straits.
Successful CEOs are rare, and if they deliver they should get paid, Cramer said. And in this case, he believes that Nardelli delivered.
He also asked listeners to consider
UnitedHealth
(UNH) - Get Report
, whose CEO William McGuire was pilloried for his compensation package.
He owns UnitedHealth for
Action Alerts PLUS.
The stock slumped on all the criticism, but the fundamental story was good and it has "snuck back," he said.
That's because people are finally looking at the most important issue, Cramer said, referring to the fact that for years the company has beaten the
S&P 500
and has made investors big bucks.
Don't ask for CEOs to be tossed for their pay because they make you money or even save businesses, he said.
Don't Fear the Fed
Even in this back-and-forth market, listeners called in to hear what Cramer had to say about stocks.
He told a caller that the Fed is targeting commodities prices, and using its rate hikes to try and quell speculation in the sector.
But, he said, the central bank can't really control ramping oil prices because it's not merely speculation that is pushing crude costs higher.
Cramer told the caller to find groups like oil that rise and fall regardless of Fed rate hikes, and suggested looking at
Schlumberger
(SLB) - Get Report
, which he called the finest oil driller.
The drillers have been fractured, Cramer warned, with some up and some in freefall. Since it's difficult to pick one, he said to go for a best-of-breed company like Schlumberger.
A caller said that he was pleased with the latest earnings report from
Ciena
(CIEN) - Get Report
, and Cramer agreed that he is interested in a company with strong growth potential.
The company's revenue is growing, Cramer said, and he believes that it is one of the single best plays on the battle between cable and phone companies.
When
Comcast
(CMCSA) - Get Report
showed that it was taking a share of the phone business,
Verizon
(VZ) - Get Report
and
AT&T
(T) - Get Report
were shaken, he said. He believes these big phone companies will spend heavily to roll out a new, more competitive fiber optic system, and that Ciena will be the beneficiary.
Even though he has been "loathe to recommend drug stocks," Cramer told a caller that he is interested in
GlaxoSmithKline
(GSK) - Get Report
, since it is buying
Pfizer's
(PFE) - Get Report
big consumer products division.
Glaxo will be able to do more with that division than Pfizer was able to because it's a better product marketer, he said. He also said that he has been recommending
Schering-Plough
(SGP)
, which he owns for his charitable trust
Action Alerts PLUS, saying that the company is in turnaround mode.
He told a caller that
Bank of New York
(BK) - Get Report
is too focused on payment services and securities servicing and not focused enough on banking.
While the stock's yield is good at more than 2%,
Citigroup
(C) - Get Report
and
Bank of America
(BAC) - Get Report
have 4% yields. Cramer said he would swap out of Bank of New York and into Citi or Bank of America.
He said that
Allegheny Technologies
(ATI) - Get Report
is played out. When it was trading at $30, he nominated it as his stock of the year because titanium is integral to the current aerospace cycle.
But the price has pretty much doubled, and he said that investors who buy at these levels are being hogs.
Cramer said that investors have been fleeing natural gas, but that they shouldn't. While he has been pushing
Chesapeake Energy
(CHK) - Get Report
, Cramer said the he also needed to give
Western Gas Resources
(WGR)
its due.
Finally, he told a caller that
Saks
(SKS)
is played out and that he would swap into
Nordstrom
(JWN) - Get Report
.
At the time of publication, Cramer was long Schering-Plough, Sears and UnitedHealth.
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
Action Alerts PLUS. Listen to Cramer's RealMoney Radio show on your computer; just click
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here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click
here to get his second book, "You Got Screwed!" and click
here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by
clicking here.
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