Jim Cramer's 'Mad Money' Recap: Apple Fooled the Analysts

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NEW YORK ( TheStreet) -- The analysts think way too linear, which means that sometimes they get it wrong, Jim Cramer said on "Mad Money" Monday regarding Apple ( AAPL), a stock he owns for his charitable trust, Action Alerts PLUS.

Cramer explained that analysts tend to think in cold, hard, easy-to-understand numbers. They calculate what they feel a company can earn, divide that by the share count, then determine a multiple investors should be willing to pay for those earnings per share. But for many companies, using an analytical approach just doesn't work. According to the analysts, Apple simply had no innovation left, and couldn't possibly produce a product that would wow consumers as the first iPhone or iPad did.

That's why when Apple debuted its new iPhones earlier this month, the analysts were quick to not only pan the product, but also lower estimates and downgrade the stock every chance they got.

But then the iPhone launched to rave reviews, and Apple announced that it sold a record nine million units in just the first three days. The worries over the iPhones features, its pricing and its suitability for the global market, it seems, were just plain wrong.

So now the opposite is true: The estimates for Apple are too low and analysts will be forced to raise estimates. Those upgrades will only continue to propel shares higher, back to the levels they probably should've been all along, Cramer said.

Off the Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Mark Sebastian over the overall direction of the stock market in the face of another pending government shutdown. Fortunately, Cramer said, we've been here before, so we already have a playbook for what to do when the political rhetoric begins to heat up.

Sebastian noted that in the April 2011 government standoff, the CBOE Volatility Index, commonly known by its symbol, the VIX, was already elevated over fears about Greece. In the days leading up to the Washington showdown, the VIX sold off, as did the markets, which was unusual as the two usually trade against each other. The lesson, according to Sebastian, was to buy when the VIX was high because the market rebounded after a deal was reached.

In the 2012 fiscal cliff debacle, the VIX and S&P 500 followed a more normal pattern, with the VIX rising and the market selling off, going into the deadline. But here, too, the smart move was to buy in when the VIX was high to take advantage of the market surge upon resolution.

Sebastian said that only in the summer of 2011 did this pattern not hold up, but in that case the markets struggled with the U.S. debt downgrade that followed days after Washington came to an agreement. Over the long term, the smart move was still to buy ahead of the agreement, but the reward took longer to achieve.

Which brings us to today's market. Cramer said stocks had a terrific September and the VIX is still very low. However, over the next 10 days, the markets should sell off as the VIX begins to gain steam. Only when the VIX reaches its highs should investors begin to consider buying in, said Cramer. Until then, it continues to be a smart move to raise cash.

Executive Decision: Bob Iger

In the "Executive Decision" segment, Cramer sat down with Bob Iger, chairman and CEO of Walt Disney ( DIS), a stock that Cramer has been endorsing on "Mad Money" for almost nine years.

Iger said that while Disney will also rely on great creativity for much of its success, the company is also very well positioned for powerful, long-term growth for many years to come. He said that never has there been such a great opportunity to reach so many people around the world with Disney's stable of terrific brands.

Iger continued that there have never been so many new platforms and choices for consumers to enjoy content. He said Disney is approached almost daily by new platforms looking to add Disney, or ESPN, or ABC, or Marvel, Pixar or Lucasfilm content to their offerings. Disney, for its part, is also launching mobile apps to spread its content as broadly as it can, he said.

Turning to other areas, Iger said there were no ill feelings surrounding producer Jerry Bruckheimer for leaving. He said after 20 years of producing great movies, it was just time for both parties to move on. Iger was also upbeat on ESPN in the face of increased competition. He said the sports network is stepping up its game as a result of new entrants and has actually seen its ratings increase over the past few months.

Finally, when asked about the company's use of cash, Iger explained that Disney uses 60% of its capital on growth, 20% on acquisitions and the remaining 20% on dividends and stock buyback programs. There are no plans to hoard cash, he noted, saying that there aren't any acquisitions on the size of Marvel or Lucasfilm in the foreseeable future.

Cramer said that Disney remains, as always, a terrific investment.

Lightning Round

In the Lightning Round, Cramer was bullish on Nexstar Broadcasting Group ( NXST), Tesla Motors ( TSLA), Ford Motor ( F), Five Below ( FIVE) and Micron Technology ( MU).

Cramer was bearish on Yingli Green Energy ( YGE) and Transocean ( RIG).

Executive Decision: Martin Richenhagen

In his second "Executive Decision" segment, Cramer sat down with Martin Richenhagen, president and CEO of Agco ( AGCO), the agricultural equipment maker that's at a 52-week high despite overall weakness in the agriculture sector. Shares of Agco are up 11% since Cramer last spoke with Richenhagen in mid-July.

Richenhagen said Agco's success stems from the many investments it has made over the past 10 years. He said international markets continue to be one of the bright spots for the company, and quipped that his non-American status and German heritage does give him a slight advantage in Europe, which continues to recover.

But even outside of Europe, Richenhagen noted that sales are strong in South America, which is due, in part, to Agco building local factories in that region.

When asked about sales here in the U.S., Richenhagen said Agco is competing head-to-head with Deere & Company ( DE) by reducing the number of its dealers and sticking with a high-quality, exclusive approach toward its brand.

Cramer said that while he dislikes the entire agriculture sector at the moment, he's willing to make an exception for Agco, which has been rallying in the face of the decline.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said there was a lot on the line for stocks during last week's trading, and perhaps there still is.

Cramer said it's clear now that the Federal Reserve's decision was the right one, as a continued spike in interest rates would've crippled the home builders and made it extremely difficult for other dividend stocks like real estate investment trusts and master limited partnerships to avoid huge price declines. With Europe improving and U.S. debt still on shaky ground, it's easy to fore foreign money leaving our markets in the near future.

The Fed can't keep buying bonds forever, Cramer concluded, which is why the antics of Washington will continue to matter a great deal in the coming weeks.

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

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

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL and F.

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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