Cramer's 'Mad Money' Recap: Toxic Bond Auctions (Final)

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NEW YORK ( TheStreet) -- "Today was a sobering reminder that we're playing with European fire," Jim Cramer admitted to his "Mad Money" TV show viewers Thursday.

He told investors they need to keep their cash ready and ask themselves which stocks will rebound first when the drag from Europe finally ends.

Cramer said he never expected to open his show talking about Spanish bond auctions, but that's exactly what drove our markets lower today. He said that nothing else seemed to matter today, which makes many investors wonder if it's stupid to own anything at all in such a topsy-turvy market.

But Cramer said that since today's Spanish bond action was one of many that the European countries will have to have in the coming months, investors need to be prepared for others to go as badly. He said that no one wants to own these bonds, not even the special funds that were created for that express purpose.

Here at home, Cramer said there was a lot of good news, including healthy retail sales and lower jobless numbers. He said there was a strong secondary offering from Linkedin ( LNKD) and the IPO of Angie's List ( ANGI) also went well. But none of those positives, he said, could hold a candle to Spain. Making matters worse, the congressional supercommittee is hopelessly deadlocked and protests continue on Wall Street and throughout the country.

Cramer told investors to stay out of the line of fire, which means owning no bank stocks. He told them they can raise cash by buying on any dips. "In the short term, everything is going lower," Cramer told viewers, "the question is which ones don't deserve to go lower and which ones will bounce back first."

Revenues Are Key

In the "Executive Decision" segment, Cramer spoke with Marc Benioff, chairman and CEO of ( CRM), a high-flying stock that delivered a three- cent-a-share earnings beat on a 36% rise in revenues. Shares of Salesforce were sharply lower in after-hours trading, as some of Salesforce's metrics didn't meet expectations.

Benioff touted the quarter as "fantastic," saying that Salesforce just issued 2013 guidance that will put the company at $3 billion in revenues. He said that Salesforce remains the heart and soul of many companies information management systems and there's been tremendous uptake in their latest mobile and social initiatives.

Benioff also explained that Salesforce is still in a growth mode and is focused on revenues and market share, not necessarily earnings. He said that the company's revenue guidance, such as $3 billion by 2013, is the best way to measure the company's success. Benioff clarified that there is no bookings shortfall, something that troubled analysts on the company's conference call.

Cramer said that Salesforce is a fabulous growth company, but noted that investor need to balance the growth vs. earnings equation themselves.

Overseas Edge

Continuing with his "Stock Supermarket" series comparing the valuations of similar companies, Cramer looked into Starbucks ( SBUX) vs. Dunkin Brands ( DNKN) to see which coffee purveyor should be filling up investors' portfolios.

On the surface, it would appear that Starbucks is the more expensive stock, trading at 24 times earnings vs. 22 times earnings for Dunkin. However, using the PEG Ratio, a company's multiple divided by its growth rate, investors see a different story.

Starbucks is growing at 18%, which gives it a PEG Ratio of 1.3, while Dunkin is growing at 15%, giving it a PEG Ratio of 1.4. Given that the companies are almost even, Cramer said that makes Starbucks the cheaper play, as you're getting a better company for roughly the same price.

Dunkin grew same-store sales by only 5.6% in its most recent quarter, but Starbucks was able to deliver 9% growth during the same period. Cramer said that Starbucks real strength is in its international growth, where the company has 6,000 locations, 500 of which are in China. The Chinese store count is expected to grow to 1,500 locations, giving Starbucks the clear edge over Dunkin, which is mainly focus on U.S. growth.

Cramer said he predicted that Dunkin shares would languish after its IPO, and they have. He cited insider selling as another reason why investors should drop Dunkin and pick up some Starbucks instead.

Promising Drug

For his second "Executive Decision" segment, Cramer spoke with Don Bailey, president and CEO of Questcor Pharmaceuticals ( QCOR), a small biotech company whose primary drug, Acthar, has a lot of promise. Shares of Questcor trade at 23 times earnings and the company has a 42% growth rate.

Bailey explained that Acthar is used to treat autoimmune diseases such as muscular sclerosis. He said the drug costs $24,000 a vile and is only prescribed a few thousand times a year so far. Bailey said that his company has a safety net in place to see that all eligible patients can receive the treatment and in some cases the government pays for it, while in others insurance will.

Bailey also noted that Acthar has a complicated extraction and manufacturing process, so it's unlikely that the drug will ever face generic competition. He was also upbeat on finding new indications for the drug and said it's already being used for spasms in children and also for some kidney ailments.

Cramer said that Questcor remains a promising company and its drugs could be used by hundreds of thousands of patients.

Lightning Round

Cramer was bullish on Colfax ( CFX), Verizon ( VZ) and AT&T ( T).

Cramer was bearish on NII Holdings ( NIHD), Frontier Communications ( FTR), Akamai Technologies ( AKAM) and VirnetX ( VHC).

Trading Natural Gas

In his "No Huddle Offense" segment, Cramer opined on the difficulty in picking stocks that fit a "green" thesis. He said that everyone loves wind and solar plays, but those need subsidies to survive. THe same applies to ethanol stocks. Cramer said that recycling is interesting, but that tends to be too volatile. He likes energy conservation plays, but those are also economically sensitive.

That's why Cramer has been focused on natural gas this week, as it's a cleaner, if not a totally clean, fuel. But even there Cramer said there are problems. He said if President Obama is re-elected, it's unlikely that natural gas will be adopted for surface vehicles, but if Republicans win, it likely will. So what's an investor to do?

Cramer said they should split the difference and buy Chart Industries ( GTLS), which makes equipment to liquify natural gas. He explained that if we use natural gas for vehicles, we'll need to liquify it, and if we export it, we'll still need liquifying equipment. Chart Industries, he said, wins both ways.

--Written by Scott Rutt in Washington, D.C.

To contact the writer of this article, click here: Scott Rutt.

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At the time of publication, Cramer was not long any stock mentioned.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for, Inc., and CNBC, and a director and co-founder of All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of 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, 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 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 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, 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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