Go For The Gold - Cramer's Mad Money (9/22/08)
by SA Editor Joan Wickham
Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday, September 22.
Go For The Gold - Agnico-Eagle Mines (AEM), Barrick Gold (ABX)
In a market as uncertain as this, investors should consider gold, Cramer said during Monday’s show. "You can't afford to not own gold." Cramer advised viewers on Friday to sell 20% of their portfolios today. Cramer said it's time to put that money into gold stocks such as Agnico-Eagle Mines, Barrick Gold or an ETF that mimics the price of gold. Cramer told viewers that they simply "must own gold" in times of uncertainty. Gold is typically a great hedge against all this market madness. With the fate of Treasury Secretary Henry Paulson's financial bailout plan still uncertain in Congress, he said he cannot endorse a portfolio that does not include a gold stock. Cramer said owning gold makes sense whether the Paulson plan succeeds or fails. If it fails, he said, the financial system will completely freeze up, leaving gold as the only safe harbor. In a market where treasuries and cash pay almost nothing, gold will be the only trustworthy place to store value, he said. On the flip side, Cramer said if the Paulson plan does pass Congress, investors need to be concerned about inflation. With the government issuing so much new currency, inflation will be inevitable and gold will perform well. Either way, gold is where investors will want to be. Cramer said the fundamentals for gold are strong and worldwide demand for gold is still increasing around the globe. Cramer said even in the worst case scenario, gold stocks will still make investors money even if they underperform the market. "Gold makes sense when nothing makes sense," said Cramer.
Hesitation
Cramer welcomed Sen. Kit Bond (R., Missouri) to the show to find out details of the government's bailout plan for the U.S. financial system. Bond called the current financial system "filled with greed and regulatory loopholes" and said Congress needs to act quickly to protect the taxpayers from more fallout. Bond said Congress also needs to act responsibly. He said there needs to be accountability for those in charge, more transparency of the transactions and greater government oversight of the financial industry. On the accountability issue, Bond said the issue of executive compensation should be addressed at a later date. However, he said he's determined to see that no executive get a "golden parachute" and that an executive should be held accountable for his firm's actions. On the issue of whether a government seizure of home loans is good for taxpayers, Bond said that taxpayers shouldn't expect a profit, but with a fair value of around 60 cents on the dollar, taxpayers won't be taking on the full value of the loan, either. Cramer remained vigilant on the issue of rating home loans based on their vintage, the credit scores of the borrower and the location of the property. Bond agreed that greater transparency and classification of the loans needs to happen.
Dysfunctional Market
"When the market isn't acting like a market, it's not the time to buy stocks hand over fist," Cramer told viewers while opining on the market's uncertain outlook. Cramer said he's not sure what the Treasury Department's bailout plan will ultimately look like, but he views it as a capitalist move. He said any move that preserves free, unregulated capitalism is not communist or socialist, and he said he's a backer of any plan that wards off another Great Depression.
Undervalued – Goldman Sachs (GS), Wells Fargo (WFC) and US Bancorp (USB)
Cramer said he's not sure what to make of a market where firms like Goldman Sachs, which he also owns for his Action Alerts PLUS portfolio, and once the benchmark of solid financial firms, and one that did not make any mistakes or get involved in sub-prime mortgages, can teeter on brink of collapse. However with the likely passage of the bailout plan, Cramer said firms like Goldman have gone from risky stocks to cheap stocks. He recommended what he called solid banks like Wells Fargo and US Bancorp. Cramer also recommended consumer stocks as a defensive play in uncertain times. And he said that real estate, the asset that caused all of the problems, is starting to look better and better. Given how the market is acting however, Cramer advised waiting for the next big pullback before buying in.
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