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Go For The Gold - Cramer's Mad Money (9/22/08)

by: SA Editor Joan Wickham September 22, 2008 | about stocks: ABX / AEM / GS / USB / WFC    

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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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This article has 9 comments:

  •  
    Sep 22 10:33 PM
    Oh, so now gold is good enough, after a 20-30% run up. That idiot better not jinx me. GS is undervalued, now that it's regulated as a bank, with tighter cash ratios? I don't understand his logic on anything...damn this education of mine!!!!
    Reply
  •  
    Sep 23 01:04 AM
    Oh, paleeezzz....several months ago when commodities started to drop, Cramer was telling everyone to bail out of gold, and to sell Yamana, which he had been reccomending for some time. Now that the worm has turned, he does a flip flop that would make any Washington politician green with envy.
    Reply
  •  
    Sep 23 03:44 AM
    He was irresponsible not to tell people they should be in gold for the past 3 months(30- 50%) -and to sit out the storm - and he is still irresponsible by telling them to go into gold stocks -physical gold or silver should be the bulk of the portfolio with gold and silver stocks taking 2nd -agriculture and food stocks are also a safe bet (I personally choose not to invest directly in ag commodities right now for moral reasons ) if there is inflation or melt down this is the first choice consumers are going to make -
    Reply
  •  
    Sep 23 08:04 AM
    Mr. G, I'm not sure what gold index you're looking at that's risen 30-50% in the past 3 months. Every index and ETF that tracks gold or precious metals in general is sitting right where it was 3 months ago, within about 2%. So do your homework first.

    I won't say that his recommendation is about 5 business days too late in coming, but he's not recommending it for the quick buck. He's recommending it as a hedge against financial and inflationary uncertainty... so take advice for what's intended for, and as I always try to tell people... Take advice for what it is: Human.
    Reply
  •  
    Sep 23 08:29 AM
    oh no! is that the signal for a significant top in gold already? when cramer advises to buy, it is usually high time to get out.
    but foirtunately, i have the guy on 'ignore'. Don't let your investment decisions and your financial health be influenced by an entertainer-cum-hedgef...
    Reply
  •  
    Sep 23 09:19 AM
    Regardless of what Cramer says, it is always good to have some gold ( make sure you wait for a price dip first ).
    discountedstocks.blogs.../
    Reply
  •  
    Sep 23 02:03 PM
    If more inflation hits, what will happen to stock prices? GLD price will rise ofcourse, how about ETF VFINX or other big stable ETF's?
    Reply
  •  
    Sep 23 04:58 PM
    Prior to this (most recent) crisis gold was collapsing. Once this Perfect Storm (if you will) blows over, my gut feeling is that it continues its decline.
    Reply
  •  
    Sep 24 06:00 AM
    Buffett clearly agreed with Cramer on this occasion and bought into GS! I wonder if Buffett will not go one better than Cramer on gold and buy silver. He did it a decade and doubled his money. Warren likes that sort of investment. But I think the bombed out junior explorer stocks offer the chance to beat Buffett - these shares are too small and tightly held for him to bother but ideal for smaller punters to leverage the rising tide of gold and silver. LNXGF is my top pick from the NYSE - nice gold claims as assets, cash from a share placing and great at self publicity. Not quite GS but then we can not all be a WB!
    Reply
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