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Opening Segment 1
Title: |
'Cramer's Game Plan
For Next Week'
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Featured Stock(s): |
No specific stock picks.
See full comments below...
See Opening Segment 2,
below...
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JJC: The Game Plan
for not just next week
but, perhaps, the next
month... and maybe even
the full year... is all
about one word, and three
letters...
The word is "recovery"
and, for most of the
big-money managers out
there, recoveries come in
only three shapes...
An "L"... A
"U"... and a "V"...
This is a three-letter
game, and you need to
understand what the
proponents of each letter
think, in order to have a
clue about what's going on
in this market...
. . . .
.
If you think the economy
is going to come right
back, because of all these
Fed cuts and, perhaps, the
cuts to come... then,
what's you're betting on
is a "V"... That's
right, a "V" recovery,
meaning we're going to
snap right back to where
we were, before the chaos
began, one year ago...
Now, don't laugh please...
Lots of people actually
believe in this kind of
recovery...
We've had some of these
before.
Who believes? Well,
how about the people who
are buying the
homebuilders right now?
This is what they
believe... a "V"
recovery...
When you look at the
charts of
Toll Brothers (TOL)
and
Ryland (RYL),
and
Pulte (PHM)
and
DR Horton (DHI)...
the buyers here wouldn't
be taking these stocks up
so much, if they didn't
believe in a "V"
recovery...
These are people who,
despite the horrible
trading in this down-5%
week... the horrible
trading of
Bank of America (BAC)
and
Wachovia Corp. (WB)...
they're betting that BAC
is recovering now, and WB
is going to keep its
dividend safe...
because things are about
to get better fast, and
happy days are almost here
again...
They want to buy some
financial insurers...
They're actually debating
purchasing some MBIA Inc. (MBI)
or Ambac
(ABK)...
the most toxic of the
group... because
they're not in danger...
those companies are not in
danger, if a "V" recovery
is upon us...
I think these guys have
rose-colored glasses, like
you wouldn't believe...
I think they're being too
aggressive... too
assumptive...
They genuinely can make
the case that the Fed is
on the case. They
clearly don't believe
this... "They know
nothing!" (soundbite)...
and that the recession is
already coming to an
end... already!...
When the "V" enthusiasts
take over, we go higher.
These guys are huge bulls,
and I say, do them a favor
and sell stock to them.
They were absolutely
slaughtered today, along
with their optimism...
. . . .
.
On the opposite end of the
spectrum, you've got
people who believe this
recovery will be an "L",
or just a so-so bottom
that doesn't take a turn
up...
They really don't see a
recovery, as much as
stabilization, without
anything getting any
better... but the
stabilization is happening
at a lower level than
where this market is right
now...
These people are buyers on
dips only...
On the things that have
some, but not much,
cyclicality...
because they're worried...
You can imagine... if we
don't snap back, we're
going to be here for a
while...
So, what do they like?...
They like
McDonald's
(MCD*)...
They like
Verizon
(VZ)...
They're more buyers of
United Technologies
(UTX)
and
Honeywell
(HON)...
those companies did very
well this previous
quarter... and
they're saying to
themselves that, with
this, they won't get much
worse...
They like a
Pepsi (PEP),
if they can find it before
a rally...
When we're down big, the
"L" crowd has taken
control... and that's
almost always a good time
to buy...
These people are unexcited
about most stocks, and
only buy when they think
that the market reflects
still one more breakdown
from this level...
. . . .
.
Finally, there are those,
like me... who
believe that we are in for
a "U" recovery...
This could be months right
here. Maybe even
seven months, 10 months...
We think that the recovery
will be a slow and
grinding but, ultimately,
a successful exercise.
A "U" recovery means you
shouldn't be in any hurry
to buy...
So, wait for pullbacks,
like we got mid-day
today... and don't
get too excited about
anything, other than the
companies that will
ultimately come back six
to nine months from now...
no hurry...
It make take a year before
we get back to here
(pointing to the top of
the "U", on the flip
side).
People who are betting on
a "U" (recovery) believe
that this time next year,
things will be better...
So they're socking in some
retailers... Maybe
Kohl's (KSS)...
How about some J. C. Penney (JCP)?...
They like Jones Apparel (JNY),
which pays a good
dividend... They
like
Loews Corp. (LTR)...
Some would even step up to
Home Depot (HD)...
These people aren't afraid
of missing anything,
because they think the
market will come to
them... we're making
some time here...
They like the banks, but
they aren't chasing
them... because they see
this as a slow recovery...
and they know the Fed may
not cut much more...
They're worried about
dividend cutting, not Fed
cutting...
They make actually believe
in the silly Wall Street
Journal today that the Fed
is more worried about
inflation than
recession...
But that's not my kind of
"U" recovery...
Trust me, the Fed is
worried more about a bank
failure, and that's what
is motivating things.
. . . .
.
Nobody thinks things are
going to get worse,
because we eventually get
at least a leveling off...
right? None of
these three camps that
I've just described...
Not one of these camps
believes that we are about
to have another
breakdown...
That's because they all
believe, when the Fed
cuts, things get better...
. . . .
.
So it's just the three
letters of big money...
There are short sellers
who disagree, but the
mutual fund managers are
conditioned to "L", "U",
and "V"...
To believe we've got a "V"
recovery... Uh... too hard
for me...
To believe it will only be
this (holding up an "L"
recovery sign)... No.
Not bullish enough...
And to believe... citing
the Wall Street Journal
headline... that Mounting
Inflation Concerns Weigh
on the Fed's Next Move...
well, that too, is
wrong...
. . . .
.
Since I'm part of the "U"
school, I want
my charitable trust... to buy when
the market is swinging in
the "L" direction...
and to sell, when the
market thinks that the "V"
is about to take over...
This is too happy a
scenario, even for me...
. . . .
.
The Bottom Line!:
This
recovery is as easy to
understand as "LUV"... if
not A-B-C, or 1-2-3... to
give the Jackson Five
their long-awaited due...
Recovery comes in three
shapes, "L", "U", and
"V"... I believe in
"U"...
[See Jim's 2nd Opening
Segment stock picks
below... ]
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