Cramer's 'Mad Money' Recap: Misguided Market Notions (Final)

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NEW YORK ( TheStreet) -- "The sky better fall real soon," Jim Cramer told his his "Mad Money" TV show viewers on Wednesday, poking at the bears after stocks rose for a third straight session. He added that, at this pace, the market is "liable to break out to new highs."

Cramer proceeded to "call out concepts" that he believes have bedeviled stocks in the past two months, and get in the way of investors making solid stock picks. The first notion he questioned was the idea that Greece was ever going to be allowed to default, saying the European Union and International Monetary Fund had the situation in hand all along. He called the protests over the past few days "non-confrontational" and "anemic."

Cramer next said the idea that housing will never come back is being undercut by the most recent data, and poked holes in the media's reference of the risk trade, saying this isn't language that hedge fund managers actually use, adding he should know, "I'm from that world."

He called the idea of a so-called risk trade influencing the markets a "total canard" and said it's of no value at all. His take was that cyclicals are simply being traded out for staples.

Next he assailed the idea that only improved employment numbers can bring the consumer back, noting that gas prices are a factor and that most people still have jobs. He also said QE2 is not the main concern of a stock trader, and that stock traders should be more concerned with earnings. And finally, he took issue with the notion that stocks trade in lockstep with other markets.

He advised investors to look at what helps stocks, datapoints like machine orders and retail sales, and mentioned a number of companies, including Honeywell ( HON) and IBM which he said will execute.

Cramer advised investors to make sure they understand the difference between worries that affect stocks and those that impact countries.

A question from a viewer about Bank of America ( BAC) was next, and Cramer said the stock looks okay, not great, after reaching an $8.5 billion settlement on mortgage-backed securities that went bad earlier on Wednesday. He noted the stock is one he owns for his charitable trust, Action Alerts PLUS, and said he's "stuck in it" now, and that he likes the regional banks better.

Cramer was also asked by a viewer about the potential for a merger between CenturyLink ( CTL) and Sprint ( S) but he dismissed the idea, saying the companies are too different.

Natural Gas Engines

Cramer spoke to Westport Innovations ( WPRT) CEO David Demers, asking him about the company's deal this week to research natural gas engine technology with General Motors ( GM)

Demers said the news is important, not just because the company is working with a heavyweight like GM, but because it points to growing acceptance of the concept of the feasibility of a natural gas vehicle.

Cramer also asked about cost-effectiveness, and Demers said the argument that the engines will be too expensive is too simplistic. Demers noted that more mature markets like natural-gas powered buses already have pretty close pricing to gas-powered engines, and he sees a "promising payback" for business fleets.

Natural gas supplies were also a question, and Demers shrugged these concerns off as well, saying he's not sure what natural gas skeptics have up their sleeve and asking if they have a better idea.

Cramer then asked what real hope there is for a natural-gas powered car to get wide acceptance and asked about competition from electric cars. Demers described an uphill climb for wider acceptance of electric vehicles, saying "Our grid is not ready to power a nation of electric vehicles."

Noting the stock is up 30% so far this year, Cramer then acknowledged an investment in Westport does involve speculation but said he likes the technology, and that the shares are worth considering if an investors is as "enamored" of the technology as he is.

Coffee Trades

Coffee was the next topic of conversation, and Cramer was bullish and came out and endorsed Starbucks ( SBUX) as a great way to play international growth. He called Green Mountain Coffee Roasters ( GMCR), "a great way to play the turbo-charged single-serve home market," and said Caribou Coffee ( CBOU) was the pick for the speculative crowd.

A coffee stock that Cramer didn't like was Peet's Coffee & Tea ( PEET), which he said has backed itself into a corner and is too expensive.

Of Starbucks, he lauded the company's ability to create a welcome ambience, and noted the company's 23 million Facebook fans. His main bullish point though was the international growth, especially its push into Asia. He said he thinks the stock is a "great buy under $40" and was positive about the company's entry into the single-serve market.

Green Mountain got high marks because its Keurig business is growing steadily, and can no longer be dismissed as a flash in the pan. Cramer noted that he moved away from Green Mountain because of past accounting issues, but that he's now back on board, likening the company's ability to sell K-cups for the Keurig machines to a 'razor blades for razors' business model.

Cramer's affection for Green Mountain was the same reason he was skeptical about Peet's, which he also feels is too expensive.

Am I Diverfsified?

Cramer then covered diversification in the next segment, saying this is the best defense for stock pickers in this market. He proceeded to weigh in on whether the portfolios of callers were sufficiently diversified.

For the first caller, he said he would keep Consol Energy ( CNX) and Cliffs Natural Resources ( CLF) and throw everything else back, advising the investor to get a manufacturing company, a health care company and soda company, and then "we'll be in much better shape."

The next caller was told by Cramer that he was well diversified with his holdings that included IBM ( IBM) and DuPont ( DD), both of which are owned by his charitable trust.

Another caller's portfolio was deemed diversified with holdings that included McDonald's ( MCD) and Kraft Foods ( KFT).

A portfolio containing Citigroup ( C), Verizon ( VZ), Buffalo Wild Wings ( BWLD), ConocoPhilips ( COP), and Apple ( AAPL) was also declared diversified.

Lightning Round

Cramer was bullish on Transocean ( RIG), Ensco ( ESV), Natural Resource Partners ( NRP), Illumina ( ILMN), and Hershey ( HSY).

He was bearish on Hudson City Bancorp ( HCBK), Best Buy ( BBY), and Regions Financial ( RF).

Closing Comments

Cramer discussed the oil markets next, specifically the IEA's decision last week to release 60 million barrels from the strategic reserves.

The overvaluation of Brent crude was diagnosed as the biggest problem for the oil markets by Cramer, and he believes the government should start selling Brent futures against petroleum reserves, raise margin requirements to shake out non-consumer orders, and "lay down the law" for the pricing of refined product at the pump would get the crude markets under control.

"The only way to make the changes we need is through government intervention in the rules of the game, not just the supply side," Cramer said.

He added that he believes the U.S. needs a policy that transfers more natural gas into the heat and vehicular fuel markets.

Cramer's final bit of advice was to lighten up on the banks on Thursday after their rally this week because he still doesn't trust the group.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here.

For more of Cramer's insights during the Lightning Round, clickhere .

At the time of publication, Cramer was long Bank of America.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.

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