Jim Cramer's 'Mad Money' Recap: A Total Calamity in Washington

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NEW YORK ( TheStreet) -- It's going to get ugly before it gets pretty, Jim Cramer warned his "Mad Money" viewers Thursday after the markets received their first sizable haircut of the week.

Cramer said the government has finally created enough concern that people are starting to notice, and the earnings estimates will have to come down as a result.

That will be the case with United Technologies ( UTX) -- the company announced it will be cutting 5,000 jobs as the government shutdown enters its third day. Cramer said that investors can expect estimates to Lockheed Martin ( LMT), General Dynamics ( GD) and Northrop Grumman ( NOC) to follow suit.

Why should investors expect these estimate cuts? Because no one will increase spending ahead of what is becoming a total calamity in Washington. Congress needs to create far more pain and suffering in order to make its point, he continued, which is why the analysts will start getting ahead of the situation shortly.

Then there's the "Mickey Mouse" factor, Cramer explained, where the longer the shutdown goes on the more international investors will view U.S. bonds and investments as a joke and move on to more stable and predictable investments. The Mickey Mouse factor used to refer to the rest of the world in decades past, said Cramer, but now we're the ones being laughed at by the rest of the world.

Cramer said it will likely take another week before the investing public and the analysts begin to realize just how bad things could become, which is why he expects a lot more pain ahead before the time to get back in will be upon us.

A More Attractive F5 Networks

When stock prices go down, they only get cheaper, Cramer told viewers as he circled back to a networking equipment maker that he hasn't liked in years, F5 Networks ( FFIV).

Cramer admitted that F5 has been a dog of a stock for many years, failing to outperform Cisco ( CSCO), which itself has been having a roughy couple of years. But with Internet traffic continuing to rise and a new product cycle ahead, Cramer said that F5 could be poised for a sizable turnaround.

F5 already enjoys huge gross margins nearing 83%, thanks to its growing software segment, Cramer explained. Now that the stock has gotten cheap and is likely to get even cheaper, that makes the stock attractive for the first time in a long while.

Networking equipment makers trade on their product cycles, which is why F5's revenue were down 10% last quarter -- the company is gearing up for its biggest refresh in over three years. Add this to easy comparisons and it's easy to see how F5 can beat the estimates and surprise Wall Street.

F5 is also a story about timing because the company reports right at the debt ceiling debate in Washington hits later this month, he pointed out. That will likely cause the stock to go unnoticed, at least until its analyst day on Nov. 14 when, hopefully, Washington is off the front page. Given the huge amount of cash on its books, Cramer said F5 will be one stock to watch going into the end of the year.

Focus on Franks International

Investors need stocks that can transcend Washington, and that's why Cramer turned his sights on an oil service initial public offering, Franks International ( FI), which came public two months ago but was founded in 1938.

Cramer explained that Franks manufactures the pipes and casings the oil drillers and offshore drillers need for their wells. The company competes with Weatherford ( WFT), but unlike Weatherford, which only has 6% of its revenue coming from pipes and casings, Franks is almost a pure play.

What makes Franks so attractive? Cramer said the company has the opportunity to take share from Weatherford as that company struggles with accounting issues. Franks also focuses on offshore drilling, which is the fastest-growing segment of the industry at the moment. Unlike other oil services, once rigs begin using a certain type of casing, they're unlikely to switch. This gives Franks a "stickiness" not seen in the rest of the industry.

Cramer said Franks is also a technology company and holds many patents that make its services unique. The company has a solid balance sheet with almost no debt and only came public to use its shares as a currency for upcoming acquisitions. With 43% gross margins and solid growth prospects ahead, Cramer said Franks is shaping up to be a real winner in the industry, especially with shares trading at only 19 times earnings.

Lightning Round

In the Lightning Round, Cramer was bullish on Himax Technologies ( HIMX), Iron Mountain ( IRM) and Heico ( HEI).

Cramer was bearish on Annaly Capital ( NLY), International Business Machines ( IBM) and Valmont Industries ( VMI).

Executive Decision: Tom Farrell

In the "Executive Decision" segment, Cramer checked in with Tom Farrell, chairman, president and CEO of Dominion Resources ( D), the electric utility with a 4.6% yield that's just off its 52-week high. Dominion also has a natural gas storage and transmission business with its own export terminal on the way.

Farrell said it's too early to tell whether the government shutdown will have any effect on Dominion. He said electric usage was up in the second quarter but the company is seeing some impact on government and commercial usage.

But beyond Dominion's electric business, everyone is excited about the company's natural gas export project in Maryland. Farrell said Dominion already has 20-year contacts in place with India and Japan to virtually take all of the capacity of the new terminal, which recently received its export permit.

Farrell said the site already has a direct pipeline to the Marcellus shale region, along with 14,5 billion cubic feet of natural gas storage and a terminal fit for supertankers. All that's needed is the equipment to liquify the gas.

When asked about the government's involvement thus far, Farrell described the process as "balanced," with the Department of Energy weighing both domestic and international needs. Farrell noted that exports will not drive up the price of gas because once the price reaches a certain level, producers will make more money using the fuel domestically.

Cramer reiterated that Dominion remains his favorite utility.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said when it comes to the Oct. 17 debt ceiling deadline, we simply don't know what will happen. Some posit that it will be business as usual come Oct. 18, while others predict financial catastrophe. But if the latter were true, wouldn't bonds be getting crushed ahead of the debacle?

Cramer said only time will tell if the President will invoke the 14th amendment and force the U.S. Supreme Court to decide whether the U.S. must pay its bills. President Obama has said in the past that he didn't find that option viable, but it could send the debate into a whole new arena and, perhaps, force the hands of those needing to be forced.

In the end, Cramer said, panic is not an option. But for the time being, clarity on the matter remains illusive.

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 CSCO.

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