"What do you do when Congress raises our debt ceiling to $9 trillion?" Cramer asked on his "Mad Money" TV show Tuesday. "One of the best ways to play this profligate Congress and president is to buy Moody's ( MCO) because they're in the bond rating business." We're nuts about borrowing in the U.S., Cramer said, and Moody's is making a fortune off of it by rating the quality of the debt sold on the market. It's not just the government that's issuing bonds in order to get cash, he said, citing bond issuance by companies including AT&T ( T) and Verizon ( VZ) in the same boat. "They take a ton of debt down to make deals," he said. "And all the private equity and leveraged buyouts ... that adds tons of debt. "Our economy is just a big circle of people lending money to each other." And in order for this system to function, organizations like Moody's exist to determine the quality of all that debt, which directly affects the sale of the debt. Moreover, Warren Buffett must like the company because his Berkshire Hathaway ( BRK.A) owns a major stake in the company. The bond-rating business is a racket, Cramer said, noting that only five companies are considered nationally recognized ratings organizations and they have 99% of the ratings business. "So this is an oligopoly." This business is so good that the Senate is holding hearing to debate passing legislation to reign it in because companies like Moody's are making so much money, he added, saying that the fact that Moody's has little competition means money for shareholders. It's a noncompetitive business because the government won't recognize other credit-ratings companies, he reminded viewers. And one senator even called the ratings industry "self-regulated." That means unregulated, said Cramer, noting that Moody's makes its money when companies pay Moody's to rate them. The Securities and Exchange Commission has been working for a decade to change the business, but nothing has happened, and Cramer doesn't believe that there will be any big changes in the industry.
Analogic Makes SenseWatching NBC makes you money if you saw the "Nightly News" story on the need for better baggage screening at our nation's airports, Cramer said. According to the report, investigators were able to get the makings for a homemade bomb through security, which tells Cramer that we need a better detection system. That's why it's time to buy Analogic ( ALOG), he said, a company that makes a baggage-scanning system called Exact that works faster and better than the system most airports use now. The company is primarily a medical company, not a security company, since it makes machines for CT scans, ultrasounds and MRIs. Analogic's last quarter was a "total blowout," Cramer said. Its operating margins were unexpectedly high on medical equipment sales; and the company sold about 75% more Exact machines than analysts had expected. The company has a great balance sheet, and no debt, he added. However, the stock has gone higher since reporting such great earnings, so Cramer recommended building a position in the stock slowly by buying in increments.
Cramer, Greenberg ConfabCramer welcomed arch-stock-picking rival and Marketwatch commentator Herb Greenberg to the show to debate three stocks, the first of which was Aqua America ( WTR). Greenberg pointed out that this is a growth stock, and that when the company's acquisitions end the growth will, too. Cramer said he still gives the company one thumb up; and that he will use it to make some money for his
Secondary PlaysCramer told viewers how to find great deals on hot stocks by "doing a 'mon back* into contrived weakness created by investment bankers." That means buying the secondary offering of a stock, he said, referring to when a company issues blocks of shares from insiders or from the company itself. Stocks pull back after a secondary offering because the market is flooded with all these shares, he said, so you get the stock at a cheap price without commission. Then the stock usually takes off again, he said, saying that this is what happened with Rackable ( RACK) and Zumiez ( ZUMZ). Two stocks are issuing secondary offerings this week, he said. Those companies are China Medical Technologies ( CMED) and Central European Media Enterprises ( CETV). "We caught a double on
Lightning RoundCramer was bullish on Amgen ( AMGN), Nabors Industries ( NBR), Halliburton ( HAL), Schlumberger ( SLB), Dynegy ( DYN), Bristol-Myers Squibb ( BMY), Newpark Resources ( NR), Ormat Technologies ( ORA), Panera Bread ( PNRA), Starbucks ( SBUX), Alltel ( AT), Williams-Sonoma ( WSM) and Corning ( GLW). Cramer was bearish on Google ( GOOG), Martha Stewart ( MSO), Hercules Offshore ( HERO), Todco ( THE), Piedmont Natural Gas ( PNY) and Western Digital ( WDC). For more of Cramer's insights during the most recent Lightning Round,
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