Jim Cramer told "Mad Money" viewers on Thursday that he was going to commit stock market heresy -- and recommend buying bank stocks at this part of the business cycle. The business cycle dictates which stocks will work. Where you are in that cycle should determine what sectors you buy into, Cramer said, adding that when people go against the cycle, they lose big. At this point in the cycle, after 17 straight rate hikes, banks should be train wrecks and ugly untouchable businesses, he said. However, this is not the case. In fact, Cramer believes banks are going to go up, therefore, he broke the rules and told viewers they should want to buy a bank. "But what if banks are on the verge of blowing up, and Cramer's being premature?" he said. That's how you should be thinking when someone challenges an orthodox rule. After all, it's orthodox because it works, he said. However, he really believes bank are on their way up. "Why are banks in a good place, when history and discipline says that they should be in a bad place right now?" he asked. "What makes me so confident?" Reason No. 1 is that banks have stopped issuing stock and are beginning to buy back stock. Secondly, whereas banks used to have pretty bad credit card losses when people declared bankruptcy, now with the new bankruptcy law, it is tough to declare it, Cramer said. In addition, you are still liable for your debt, even if you do declare bankruptcy. The third reason he gave was that banks are cheap. Cramer's final reason was that after 17 rate increases, when banks should be experiencing loan losses and mortgage problems, they actually have the fewest loan losses and mortgage problems they've had in years. Banks have created a slew of businesses that are fee-based by relying less on interest rates and more on fee-based business, he said.
Want a Tip? Do Your HomeworkIf you're trying to make money, you have to follow the rules, Cramer told his viewers. Don't buy on tips, buy after doing your homework. Making money can be easy, but not losing money can be difficult, he said. Using an example of a tip he received, Cramer tried to teach his viewers how not to lose money. Recently he received a tip via email from a frequent viewer and mailer who is a doctor with diabetes. The doctor, who has been following Amylin's ( AMLN) diabetes drug Byetta, said that people who were on Byetta were losing weight without even trying to. He said this was a secret that only the medical community knows about. This information would make many people want to buy Amylin, especially coming from a doctor that is diabetic, Cramer said. But while the natural instinct is to like these types of stock tips, since they are attractive, our instincts are usually wrong, and we need to fight them if we're going to make money, he said.
VF Shoots Down DowngradeLast Tuesday morning, Todd Slater, a research analyst at Lazard Capital, came out with a four-bullet-point note on VF ( VFC) and downgraded it from a buy to a hold citing softening consumer trends, Cramer said. Slater said it wasn't a negative call, even though it was a downgrade. The report came out right before VF reported earnings. When an analyst comes out and downgrades a company a day before the company is to report earnings, people assume he must know something they don't, and he's not including it in the report, Cramer said. Because no reasonable person makes a call like that unless he knows it's right, otherwise it's too embarrassing, right? Cramer asked. In addition, Slater gave macro information and talked about 'general' consumer habits when making his call on VF. "If you read this research report, you might have assumed that he had some insider info and this macro issue was just an excuse to downgrade," Cramer said. VF was up 22% when Slater's report came out, and the next day it beat estimates and traded higher all day. Slater got it wrong big time, he said.
Straight From the TopWelcoming Eric Wiseman COO and President of VF onto the show, Cramer asked him how, if the low-end consumer is allegedly slowing, the company was able to blow out the numbers. "We have a great story," Wiseman responded. "We're getting growth because we have great brands, and we know how they connect with consumers." Further, he said the company is able to execute their business very well and that results in consistent growth. "One of our greatest strengths is that we have number of brands," Wiseman said, adding that 25% of their business is done outside of the U.S. "We have a broad footprint which allows us to manage some risk." Wiseman added that the company is very aggressively going after acquisitions, but they are being patient and are confident they are going to find acquisitions that are right for their portfolio and their shareholders. Cramer advised viewers to stay bullish on VF and called it one well-run business. To view Jim Cramer's interview with Eric Wiseman,