Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click here for details.Jim Cramer fills his blog on RealMoney 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.
Buybacks Tie the Hands of the Flush Companies Originally published on Tuesday, Oct. 7, at 12:50 p.m. EDT Wait a second, Exxon ( XOM) has bought back $218 billion in stock, more than the market cap of GE ( GE)? I know that money's not totally wasted. The stock has almost tripled in the last ten years. That's much better than the S&P, 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?
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.
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 self-financing company, one that is a food bank that yields an attractive 4% -- here I am talking about Altria ( MO), Kraft ( KFT), H.J. Heinz ( HNZ) -- you could take in a 25% position right here, as the risk/reward has changed. Unilever ( UN) stands out here, and Coke ( KO) is almost there. You can make a case to begin to buy some cyclical with 4%-5%, Nucor ( NUE) and Freeport-McMoRan ( FCX), but there you can only by a beginning position, as they are not self-financing, because in a prolonged recession they are going to have to reach down deep for that dividend. Chevron ( CVX) qualifies at 4.57%, and BP ( BP) is just too juicy to not 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 Wal-Mart ( WMT). The question is, what financials can you buy? U.S. Bancorp ( USB) 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 Morgan Stanley ( MS) deal hangs in the balance. Finally, good yielders that are safe: Kinder Morgan Energy Partners ( KMP), Duke Energy ( DUK), Con Ed ( ED). There's a decent buy list. Random musings: General Motors ( GM) 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.