Jim Cramer’s Mad Money Recap 8/2 – Part I

We transcribed Jim Cramer’s Mad Money on August 2nd. Here is the first part:

Jim Cramer

Alright.  First, obvious question.  Can you imagine where the heck we would have gone if we hadn’t passed a compromise Bill to raise the debt ceiling?  Instead of just being down huge, with the DOW taking 266 points.  S&P nose-diving 2.56% and NASDAQ plummeting into a hellacious 2.75% as we were today.  We probably would’ve been down double.  Hey, listen.  Could it be triple? Nothing would shock me.

Which brings me to a trenching question I heard asked all day. Why didn’t we rally on this?

Debt ceiling deal? Especially after we had already been down seven straight days and now an eighth. Well, I’ve got the answer — Well, actually I’ve got the answers.  First — hey look, the market, it hated the deal. What are we going to do? It hated the deal. The market it has feelings and, its feelings were hurt by the deal. Now, it didn’t hate it as much as it would have hated no deal. Because, that would have been completely catastrophic. We’ve been saying that for months. But still, everybody was disappointed. Those who

Wanted big spending cuts to chisel at the gigantic budget deficit and those who wanted tax increases on the rich to help close the gap.  They were both bummed.

Sound Effect: Buzzer. Boo!

However, once again I was actually cheered that we didn’t get more spending cuts. As the stocks that rely on some Government spending were hurt bad and are now in bare market mode.  These could have been obliterated if the cuts were even deeper. Hey, cold turkey time. I think we could have used some tax increases to close the budget gap. But anything too extreme there would have thrown us back in a recession for sure. Because, then the consumer would be clobbered.

oh, and if we’d actually reached some deal that would have pleased the rating agencies for sure, the ones we’re so worried about, the ones we’re just quaking about.  Then I’m confident that the market would have reacted as if the whole economy had the rug pulled out from underneath it, and we would have surely collapsed anyway!

Alright.  So, here’s what I’m thinking. I’m calling this deal the lesser of all evils. Hated by all, but better than a default.  I mean, we’d still get downgraded anyway. Second, this economy came close to being killed — I mean, killed by this miserable budget battle — I mean, just crushed. And let me tell you something, when you have a near-death experience, you tend not to bounce back and be all cheery afterwards.  Especially when July was probably one of the worst months in this country’s economy in a long time.

Hey, let’s tick them off.  Bad for cars, bad for retail sales, bad for home sales, bad for exports, just about bad for everything.  And, why not?  Hey, I don’t know about you, was anyone really feeling pretty terrific?  I mean after the president told us that we were about to have an economic collapse?  I don’t know about you, I pulled in my horns. I just felt badly about spending. I’m not kidding.  Just seemed very 2008-like.  You don’t want to reach for stocks when you’re in the ICU.

Especially, when the government made you ill to begin with and, the government’s still out there lurking, hulking in the foreground, not the background. You just want to be able to stand without falling. You know what this market needs? It needs occupational and physical therapy. It needs OT and PT before it can get back on its feet.  It ain’t jumping anywhere for now and, we don’t even know if the government, who created this crisis, might just want to do it again. Who knows? You know what though?  At least if we get a recession, and it looks like we might, we know who to blame!

Third, our woes sure didn’t help the endlessly precarious state in Europe where hardly a day goes by without hearing about another default that’s about to occur.  . You know what it is over there?  It’s like a United Nations of default.  Plus as I pointed out the other day, carol king rules.  Lots of people think that the deal came too late, because the damage worldwide had already been done.

Fourth, the countries that had been bailing us out — taking all our stuff.  Those big multinational countries, like Brazil, Russia, India and china.  Hey, let’s thrown in Indonesia, they’ve been buying the heck out of you are stuff too.  They’re worried more about stopping inflation than promoting growth. That’s not what we need right now. Hey, so what should we do? I mean should we just jump off the Brooklyn Bridge? They’ve got some sort of scaffolding there; it’s going to be difficult right now.  No. We don’t want to get complacent; even as we have now pulled back some 6% from the high reached a couple of weeks ago.  But, we don’t panic either. Panic is not a strategy.  Now, I know home gamers must feel like; ‘okay. Stocks, you killed me in 2001. Stocks, you annihilated me in 2008/2009. I mean, just like, hurt me bad. I’m not letting you hurt me again. So I’m going all cash.’

Do you mind if I give you a better plan? Because, this is a manufactured by the government crisis. And, here’s one you probably never heard of all day. It can get better. Not yet. Over time. I say we dust off what saved our bacon last time. Remember the menu? Okay. First, we need some gold.  I know, I know, guilty! I’m a broken record on gold. But guess what? Gold keeps breaking records. It isn’t done. Gold represents only 1.5% of all portfolios in the world right now versus 5% historically. We’ve got a long road ahead of us.

Second, we want stocks with bountiful b-I-g, juicy dividends.  Let me ask you something. Maybe — just you and me anyway, right? why do you think I always have these execs on from like Con Ed, you know, Southern Companies, American Electric Power? The people no one else will put on, you know? Do you think I do it to bore you?  To put you to sleep?  Is that the game plan? Hey, listen.  Let me give you one of those seraquils.  Wow!  No! How about to save your Portfolio from this market.  This isn’t Ambien I’m dishing out here, it’s Con Ed (ED). as soporific as you think Con Ed might be, you are up 125% over the last decade if you bought Con Ed and reinvested the dividends.  You would have picked up 29% if you bought the S&P 500.  That’s why I do it. Not to bore you to tears. Not to say, that Cramer, he just has another money-maker on, forget him!

Third, we need to be in something else other than this country. We need something foreign to avoid the vicissitudes of this country’s craziness. I praise the higher yielding Canadian Bank Stocks endlessly.  Strong dividends, good balance sheet.  I’ve done it on Twitter man, I was doing it like a gazillion times.  Back in Nova Scotia.  Or, another, Vodafone (VOD). European Phone Company that yields over 7%.  That’s a winner.

Fourth, I plead guilty.  I like a solid industrial stock.  One that pays a good dividend and is rapidly approaching a great, accidentally high dividend as the stock goes down. Consider this, Eaton.  Okay?  They reported — not like the E of Emerson where the guy was like really complaining.  I’m talking about Eaton.  No complaining there. They reported a magnificent quarter, it has it has plummeted endlessly since then. How about PPG?  Another excellent Industrial reported terrific quarter.  Both yield about three. Buy them on the way down as their yields grow larger.

If you stick around, we’ll get a current reading from PPG, from chuck bunch, this company’s fantastic CEO later in the show. Most people won’t care.  You know why? Because, their doing well, it doesn’t fit the thesis.  It’s a fact that gets in the way of the negative story. Finally, you can own a high-growth speculative company. My list?  Hey, come’ on.  You can probably repeat them after me.  Fadscan, F5 (FFIV), Amazon (AMZN), Deckers (DECK), Salesforce.com (CRM), Chipotle (CMG), Apple (AAPL), or Netflix (NFLX). These were all pummeled today. Of course, they always get hit hardest on down days. But they have a tendency to bounce back furiously.

I know you want to slit your wrists if you own these stocks in ugly days. However, consider how you would have done in these seven stocks.  Including F5, which has been a stinker, truly disappointing.  From when I isolated these turbo charge growth stocks in November of 2010 until now.  You’d be up 33%. That’s only six times what you would have made in the S&P 500. Six times. No wonder I always suggest buying one of these into this kind of blood bathe. The numbers don’t lie. It works. I would use deep in the money calls and buy any one of those stocks other than F5 and I would do it tomorrow. You’re supposed to have a quarter position on today, that’s what it said in that Squawk on the Street.  Quarter position on today, buy them tomorrow if they drop another 2%.

Look, that doesn’t mean you aren’t going to lose big money on days like today. You sure did today on all but your gold. Some days are just horrible. Nothing you can do about it. But what I’m offering is a portfolio that historically over the life of this show has gone down less on terrible days and gone up more on good days. That’s pretty much all you can ask for. Why not go into cash if things are so bad?  Alright, let me finish with this point.

If I thought we were going to be crushed well below these levels, well beyond. Not 2, 3, 5%, well beyond, I would think nothing of telling you to take it all off the table. I did it three years ago; I got you to dodge more than a 30% bone crusher.  Look I can’t — I don’t see it that way.   I don’t like this market, I don’t like what’s happening, I don’t have blinders on.  I mean, July was hideous. But, we aren’t in a Lehman brothers situation. We’re in a sell-off.  It’s a nasty one, but not one that’s worth dumping all of your stocks and heading for the hills. Dump the wrong ones still, dump the tech, dump the banks, dump the companies that need the help of the government.  That’s Defense, that’s Healthcare, they’re not ready yet — they’re not going to work. And then circle the wagons around my four favorite stock groups and gold. Okay?

You can buy —  remember those long-term bull markets that I like, that fits into that industrial sector that I talked about. The bullion, the gold, not the stock ifs you’re going to do gold. Here’s the bottom line. Yes, you’ll still get hurt with this portfolio, hey, yeah! But when the smoke clears, and it always does, by the way, even in 2008, 2009, you’ll be in positions to make the most after hopefully losing the least.

Let’s go to Sal in New Jersey, please. Sal?

Sal:                 Boo-yah Jimmy!  How are you?

Jim:                 Boo-yah!  Boo-yah Home stater! What’s up?

Sal:                 Good!  Did Crocs of American Stocks [inaudible09:44] economy?

Jim:                 You know Crocs (CROX) is a truly amazing story. I just finished that conference call over the weekend because; I lead a really interesting insinuating life.  And, that was a largely internationally driven quarter. It was not a domestic driven quarter and they are on fire. I actually talked with my staff, Nicole Erikin and Ted Graham who brought it to my attention — that as these stocks go down — here I’m thinking about Deckers and Crocs.  They are where to be — you know Deckers was up most of today?  Deckers and Crocs are good and it’s because they’re international.  International.  And, they don’t stop wearing shoes because the market’s bad.

Tyler in Ohio Please.  Tyler?

Tyler:              Jim!  Big Boo-yah to you from the buckeye state.

Jim:                 Man I’m loving the Buckeye state provided the best calls that we have.  How can I help?

Tyler:              With the debt deal looming over the nation and everything, I was wondering, how is it going to affect the healthcare sector and more importantly McKesson Corporation (MCK)?

Jim:                  Well, McKesson actually saves the Government money, but that doesn’t matter.  It’s health care right now and, health care — well lets just say, this is a bear and this is what it’s doing to the bulls and anything in health care. So I say, healthcare, not now.  Maybe lower, unless they’re saving the government money. That’s a different story. It could have been worse, right?  I mean, we could have gotten no debt deal.  Fadscans. Golds. Dividends. Foreign.  Please, don’t panic.  I’m not panicking.

Mad Money will be right back.