Wednesday, 01/30/08
Posted 01/31/08,  1:17 am ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Wednesday, 01/30/08

  Dow Jones: 12,442     - 37
  NASDAQ:   2,349      - 9
  S&P 500:   1,355      - 6
 
 
 
 
 
First Segment
 
 
 
Opening Segment 1 Title: 'Fed On Target'

.  .  .  .  .

Featured Stock(s): MBIA (MBI)
Ambac (ABK)
Radian (RDN)
PMI (PMI)
MGIC (MTG)
Altria (MO*)
AT&T (T)
Verizon (VZ)
Costco (COST)
Urban Outfitters (URBN)
Sears (SHLD*)
Bear Stearns (BSC)
Goldman Sachs (GS*)
Wachovia (WB)
Washington Mutual (WM)
Countrywide (CFC)
Citigroup (C*)
Ford (F)
General Motors (GM)


See Opening Segment 2, below...

        
We got a gift today...  The market anticipated a big cut, so we got it, and then it sold off...

As someone who's traded for almost 30 years, I can tell you that's just very typical of the short-term thinking that colors the market these days...  Don't fall prey to it...

Thanks to these cuts, the future is looking much brighter than the past...

I am being so un-cynical here, because there's no reason to be cynical.  So don't think that a decline in the averages, after the cut, means you have to be bearish...

Right now, I believe it is incredibly imperative for you to be more bullish!...  Post-rate-cut... because this is where and when you make the money... 

.  .  .  .  .

I am so confident that, right now, I feel like purchasing perhaps the most loathed and toxic investment around... I feel like purchasing an asset, now synonymous with the destruction of value...

With this rate cut, I think I'm going to go buy house... You heard me...  A house!  One of those poisonous financial instruments with living rooms and bedrooms and bathrooms... kitchens!...

10 days ago, before the cuts, the very idea of buying a house... buying domestic real estate was simply unthinkable!...

This was the malignant growth at the heart of our financial system...  the heart of darkness that was going to bring everything down...  and now, I think, you could probably find some darn good buys among houses...  I mean it.  I'm not lying...

Why?...

Because, beginning next week, Dr. Bernanke (Fed Chairman) has become Dr. Guioutine!... The guioutine of interest rates... and, with this additional 50-point basis cut, I think he has made a turnaround in housing inevitable!...  Buy, buy, buy!...
 

.  .  .  .  .

Today, I believe the Fed averted national systemic bank failure...  This cut takes a situation where major banks were going to go under...  And maybe still, some mortgage insurers do... I believe that...

But this was a situation that would have been truly catastrophic and, you know what?...  We're taking the catastrophe right off the table...

Now, banks can make enough money lending, because the Fed has lowered the rate at which banks have to pay out interest to their depositors, which increases their profits... 

.  .  .  .  .

These companies that insure the derivatives... Again, MBIA (MBI), Ambac (ABK), Radian (RDN)...  I fret about the personal mortgage insurers, PMI (PMI) and MGIC (MTG)...

Now... There will be a step back if they fail, but you must be ready to buy, not run, from that retreat, because they are all that stands in the way of a full-blown housing recovery that no one in this country is expecting or predicting...  perhaps, with the exception of Chad Dreier, the unbelievable CEO from Ryland (RYL), who got it right the whole way...

This is part of the Fed's mandate to avert financial Armageddon...

They did their jobs, even though there are a lot of people out there, still urging them to go in the other direction, and fight inflation by destroying the economy...

.  .  .  .  .

It's not the Fed's job to choose stocks, but make no mistake here... I believe this cut has given you an opportunity to make a great deal of money...

Let me tell you how...

First, stocks with high dividends... Even better today than yesterday...

Think Altria (MO*), which just announced a major split, and a major dividend boost today... 63% payout goes to 70% payout on average...

How about AT&T (T) and
Verizon (VZ)?...  Much heaped upon...  Frankly, I think their yields are so attractive... you've got to swap out of cash and into that...  The rate Bernanke cut... the cash rate... it's just not compelling enough...  Those stocks should go higher...

.  .  .  .  .

Second, you know the rate cuts mean the retailers go higher... I've been saying that for a long time... Costco (COST), Urban Outfitters (URBN)...  You know something?... I don't even care... Just get one.  I mean, even my friend, Eddie Lampert's stock at Sears (SHLD*) has been going up... of course, only because they don't have Eddie Lampert to kick around anymore...

.  .  .  .  .

You know the bankers and the brokers from Bear Stearns (BSC) and Goldman Sachs (GS*)... They should all go higher...

A few weeks ago, I would have said that the strength we had today, before we sold off, and the coming rally I'm predicting, would be a chance to sell the banks... especially the ones truly hobbled by sub-prime...  And there you've got to think Washington Mutual (WM), Countrywide (CFC), Citigroup (C*), Wachovia (WB), Downey Financial (DSL), BankUnited (BKUNA), FirstFed (FED)...

Now, you can buy Wachovia (WB) on weakness...  That, by the way, is the best of the troubled lot...  and I'm thinking that Washington Mutual (WM) can hang on, until it gets a bid... And Bank of America (BAC), with that big preferred issuance, can now handle the Countrywide (CFC) acquisition...   And Citigroup (C*)?...  Well, hey, listen...  It muddles around...

.  .  .  .  .

Third, you can buy industrials... You can buy - get this, first time ever - automakers... I've been recommending General Motors 7.5 Preferred (GMS)...   I now think you can buy Ford (F) and General Motors (GM) common stock...  Go ahead.  They work now, because financial catastrophe has been taken off the table...

New recommendations, and we know the economy should be better in 10-12 months than it is right now...

Anything that used to be in a bear market is now in a full bull-market mode...

Housing, banks, brokers, retail, the industrials... automakers.  Buy them on weakness... 

.  .  .  .  .

In 1990, when we got here, the bears doubled down on their shorts... kind of like the market tanked today, after the quick Fed-induced rally...  They talked about shooting fish in a barrel... the banks...   Well, they were the ones that got shot.  You never heard from them again...

A lot of them were tepid bulls... panicked today, and sold what they had.  But a few of us said, down 50% - two weeks ago - that the worst was over for the financials...  and the Fed would now see the error of their ways, because that's what history dictated...

They followed history.  They did it.  Be glad the market came down...   It's an opportunity.

It was simply reacting to day after day of anticipation of the cuts... 

Don't run away from stocks, now that we have to run to them...

.  .  .  .  .

Business is real good away from housing and retail and auto...

You'll hear a lot of people talking and say, why did they have to cut?  Business is real good away from housing and retail and auto...   Because housing was so bad, they had to cut!

.  .  .  .  .

The Bottom Line!:     I believe the Fed has given you a once-in-a-decade opportunity to make big money right now... frankly, in stocks... and, in six months, in homes.  Do not be scared away...


[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

 

 

 

Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)


MBI

13.96

12.09

MBIA (MBI)

ABK

10.85

9.86

Ambac (ABK)


RDN

8.42

8.28

Radian (RDN)

PMI

9.11

8.41

PMI (PMI)


MTG

17.15

16.47

MGIC (MTG)
 

MO*

76.50

76.08

Altria (MO*)


T

37.35

36.81

AT&T (T)

VZ

38.24

37.75

Verizon (VZ)


COST

66.23

65.63

Costco (COST)

URBN

28.24

27.64

Urban Outfitters (URBN)


SHLD*

105.07

103.78

Sears (SHLD*)