- Dow stocks to own,
- the coming rally, and
- insurers' big problem.
What to Buy in the Dow
Posted at 8:00 a.m. EDT, March 9, 2009 When I arrived at my worst-case view that the Dow could reach 5320, my first reaction wasn't, "Look out below." It was more like, "Wait a second, how much I would like to buy these stocks at those levels?" Then I started thinking, "What do I do if it gets there and I am not in? Will it stay down there? Is it right to avoid a market that's cut by almost two-thirds in such a short period of time when some companies with really good earnings power might be selling at prices that we might never see again?" But which ones? Certainly not the under-$5 crowd -- Alcoa ( AA), Bank of America ( BAC) and Citigroup ( C). Pass on ABC because you have to bet that Citigroup isn't AIG ( AIG), that Alcoa isn't the old Asarco and that Bank of America can't stanch the bleeding caused by Tim Geithner's indecision, which is allowing the ProShares UltraShort Financials ( SKF) to destroy the stock. No, I like eight of them, eight that I would be buying right here. If you buy in quarters -- 25 shares per 100 you want owned -- you'll need to start today. The first is interchangeable because of the price, AT&T ( T) at $20 or Verizon ( VZ) at $23. Why? Certainly not growth; there won't be all that much because of the recession. However, they have so much cash flow and they can slow deployment of expensive equipment -- yes, even with Verizon's FiOS -- to the point where a dividend boost will take them to about 8%, a level that Altria ( MO), the best-performing stock in the S&P 100, shows can withstand the onslaught. Verizon has a tad more growth because of FiOS, but it could cut both ways in a severe slowdown as the FiOS build-out will cost them. Caterpillar ( CAT) at $18 is just too juicy. I think that it will be like CAT in 1985 when it sold down low on a weakened balance sheet and a war with labor. The company has much more wherewithal now. This is still the single best machinery company in the world, and I think that if you abandon it at $18 you are simply betting that things will never come back. That's a difficult bet to make because, if it has to, CAT can move the whole shebang overseas to where the markets are heating up again or recovering.
Here Comes the Rally
Posted at 2:57 p.m. EDT, March 10, 2009 I'm going with Doug Kass. He says this rally is different. I say the facts are different. Over and over again I have said I will get more positive when something positive happens and when stocks are low enough that they factor in the worst case. Last Friday I did
Know what you own: Cramer mentions the banks. Companies in the financial industry include Wells Fargo (WFC), Bank of America (BAC), JPMorgan (JPM) and U.S. Bancorp (USB).
Insurers' Troubles See the Light of Day
Posted at 8:40 a.m. EDT, March 12, 2009 Finally it is hitting home. After months of toiling in the outskirts, the life insurance woes I have written about endlessly here and on MainStreet (where I tell you what to do if your insurer can't pay) are coming home, at least to The Wall Street Journal, which means it may be considered at Treasury, because when the clever Tim Geithner talks to his reporter friends to get today's agenda, they might bring it up. I was thinking about the Hartford ( HIG), Met ( MET), Pru ( PRU), Principal Financial ( PFG) and their ilk when the market almost took out 6000, because I know that each depth level down, the problems become more dire. These companies are like giant margined investors who come closer to breaking EVERY SINGLE TIME a new Dow or S&P level get taken out. It is so bad for these companies that when the market almost plunged into the 5000s, a bunch of my friends thought there would be an insurance plunge protection team out there saving the market. I am not kidding, that's how big an issue is. This issue is so dangerous to talk about because there are lots of elective annuities tied into the S&P that if the people who took them found out about and surrendered their policies, many of these companies simply couldn't make it. Now that the issue is being talked about, look for the shorts to press harder and cause this calamity to happen quickly rather than over time, when the authorities would have a chance to deal with it. At the time of publication, Cramer had no positions in the stocks mentioned.
Know what you own: Other companies in the life insurance industry include Lincoln National (LNC), Genworth (GNW) and Sun Life Financial (SLF).