Friday, 01/18/08
Posted 01/18/08,  8:16 am

(Scroll down to see Jim's comments below)

 
 
Today's date:  Friday, 01/18/08

  Dow Jones: 12,099    - 59
  NASDAQ:   2,340     - 6
  S&P 500:   1,325     - 8
 
 
 
 
 
First Segment
 
 
 
Opening Segment 1 Title: 'Cramer's Game Plan
  For Next Week'

.  .  .  .  .

Featured Stock(s): In this Game Plan, Jim lays out an interesting alternative to save this market, and pleads to the Federal Government to consider it as an alternative to their currently-proposed stimulus package.

No specific stock picks.



See Opening Segment 2, below...

        
JJC:   In tonight's Game Plan, I'm dispensing with the usual list of stocks to buy... Because, look, stocks may not amount to a hill of beans soon, if we don't put my Game Plan through...

This is the Game Plan for the President... for the Treasury Department...  for the Federal Reserve... and whoever else might be listening...

Here it is...

Why can't we get to a bottom?...

Why do stocks go down every day?...

Why are people losing so much money?...

It's because there's a pervasive fear of failure out there - a particular kind of failure... a failure involving insurance companies...

They're called mono lines... But that's Wall Street jibberish...

We're talking about MBIA (MBI) and Ambac (ABK) for the big mortgage bonds, and PMI (PMI) and MGIC (MTG) for personal mortgage insurance that backs up these bonds.

Now, these insurers have about $500 billion in what they call exposure...  The problem is that they don't have the money to pay it off, and they need to...

If these insurers go belly up, and the smart money is saying they will... the system will be paralyzed... the financial system...

I would not be surprised if the Dow Jones Average (i.e., the Dow) lost a couple of thousand points when it's announced that these companies cannot pay... a couple of thousand points.

That would be a lot of capital wiped out.

At that point, many of the banks could then run out of money.  You see, it's a domino effect.  First, the mortgage insurers go down, then the banks, then everybody who needs to borrow... you.

There won't be any homes sold.  We'll have 100% inventory... See, that's the problem we need to solve... and it's very unsophisticated, frankly, for the government... kind of analysis that they're using... putting a check in every pocket... a chicken in every pot...  it doesn't work...  

.  .  .  .  .


So what should we do?...

We need the federal government to buy these companies - the ones I just mentioned - and close them...

The mortgage insurance - all the stuff... the toxic stuff - will be picked up by the government, and then guaranteed.  The government can say, look, we're not going to pay out 100%.  We're going to pay out 50% on the dollar for any defaulted mortgage junk you have that's insured...

If billions don't turn out to be worthless, that's terrific for the taxpayer... but every financial accident will get paid off at 50 cents on the dollar, instead of zero on the dollar, which is what it would be without government intervention... and something that would destroy our banking system overnight, and send us back into the 1800s...

If the government pays 50 cents on the dollar, then the whole bill comes to $250 billion.  It's still cheaper than the stimulus plan that everyone's proposing...

For that $250 billion, you get exactly what this market and this economy needs...certainty.

The banks will be able to tally and access their losses, build reserves and start lending money... When you couple my plan with the 100 basis points (i.e., full 1% cut) worth of cuts in the Fed funds rate that we need right now...  these banks will be able to make enough money to save themselves from bankruptcy with my 50% backstop...

For $250 billion, max... we can put this whole crisis past us, and start over...

It will probably only cost $125 billion, but I'm using the big bear case...

That's about the same price as everything that even the democrats are talking about... but it would directly address the real problems and jumpstart the economy.

.  .  .  .  .

If the Fed takes my game plan, not only would the banks be able to lend again, and know their exposure...  Here's my prediction...

A 2000-point rally in the following two weeks...

2000 points down... if we let this trainwreck happen, which is about to occur...

2000 points up... if my plan is accepted by the government...

And I know that there are people - not within the federal government, but within the state governments - who think that this plan is right.

.  .  .  .  .

The Bottom Line!:     You want to save the economy?  You want to save the stock market?... Put down $250 billion.  Shut down these insurers... Take their book of business over... Give the munis to Buffett, or the highest bidder, and you prevent the end of the world or, at least, another 2000-point decline in the market which, in my view, is about the same thing.


[See Jim's 2nd Opening Segment stock picks below... ]

 

 

 



See all of tonight's stocks' latest quotes on Yahoo! Finance


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Stock Snapshots - Includes all stocks mentioned above

 

 

 

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Second Segment
 
 
Final Segment 1 Title: 'Technical Knockout'

'Windows of Opportunity'

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Featured Stock(s): Microsoft (MSFT)

See MSFT's website here.

Yahoo! Finance profile for MSFT here.


2nd segment picks below...



All week, in a miserable, down 5% S&P week, I'm looking for opportunity... like a moron... no... like somebody that's done this all his life... looking for undervalued and overlooked tech stocks with strong fundamentals, as one of the few ways to try to make money in this relentless bear market...

And, may I also just give you a little caveat?... I don't ever want to see you buying into an up opening...  When the market opens, it's just been a sucker's play every single time... every single time!  Don't you dare buy when the market's up.  There'll be ample opportunity to buy when it's down...

Today, it's time to talk about the most overlooked tech stock of all...  the one that no one's talking about... the one that no one cares about...  the one I don't know a soul who owns... the one that everybody just thinks is wallpaper...

And I am talking about the invisible elephant in the room... a stock that's down and out but, above all, safe right here...

I am talking about Mister Softy... Microsoft (MSFT)!

.  .  .  .  .

The stock is four points off its high... It is perfect for the bear, and nobody's paying much serious attention to it, because tech is hated, hated, hated, and then hated again...

And MSFT?  Well, it is tech...  But it has all the characteristics as the kind of tech stock that will work, even in this unfriendly environment.

.  .  .  .  .

The Fed-mandated attack on our economy shouldn't touch Mister Softy...  This stock is the second-largest global brand, after Coke (KO), which by the way, at $60, is a real buy...

It's really liquid, meaning the average daily volume of shares traded over the last three months, is 78 million...  Why does this matter?... It means it's very hard to knock it down, and knock it down quickly, like so many other stocks...

Above all, MSFT is a battle-hardened company... and this one can hunker down, and make it through a slowdown.  In fact, MSFT may actually benefit from the current environment, as smaller tech companies get washed out, and MSFT is still standing, ready and eager to take their business...

Plus, MSFT has a pristine, beautiful balance sheet... house of pleasure... and a cash hoard of $21.57 billion!  A lot of credibility there... think of all that cash... 

.  .  .  .  .

Now, not only is MSFT not suffering in this downturn, it's actually thriving...  And my theory is that any tech company that can deliver, or blow away the numbers, in this environment... can do a heck of a lot better when things get better, when the Fed finally wakes up...

MSFT's last quarter was spectacular!... and surprised everybody, and it was real.

All of their business units beat and beat big... They beat the consensus earnings estimate of 39 cents a share by 6 cents.  It's hard to do when you're a company as big, and as highly examined by analysts, as this one is...

They beat the consensus sales estimate by over a billion dollars...  You think IBM (IBM) went up a lot on their good news?...

This is the one... this is the one...

They've got sales growth higher than at any time, since 1999, and they gave upside guidance.  Just a perfect quarter right there...

The weak dollar's a huge boon for MSFT... They estimate upside of 339 basis points... jibberish for 3.39% percentage points, thanks to that strong foreign currency... 

Goldman's already joined the party...  They added MSFT to their conviction buy list on Wednesday...

The estimates are rising... 

.  .  .  .  .

They've got some catalysts coming too...

The launch of Windows Server 2008... the release of Service Pack 1 for Vista... which might make Vista worth buying...  and unlock a lot of pent-up demand... and increase buybacks from their strong balance sheet...

Product cycles are on their side, and so is this environment.   Microsoft (MSFT) reports next Thursday.  I would be in this stock, even if we get the bank insurance collapse that I'm talking about... I would be in ahead of this report Thursday.  It could be the moment when this invisible elephant - this $33 elephant that was down today - starts getting some serious love. 

.  .  .  .  .

The Bottom Line!:     Microsoft (MSFT) is the best tech stock for this bear market, and don't you ever forget it...



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