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Friday, 03/07/08
Posted 03/09/08, 10:31
pm ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Friday, 03/07/08 |
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Dow Jones: |
11,893 |
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146 |
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NASDAQ: |
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2,212 |
-
8 |
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S&P 500: |
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1,293 |
- 10 |
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Opening Segment 1
Title: |
'Cramer's Game Plan
For Next Week'
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. . . .
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Featured Stock(s): |
Annaly Capital
Management (NLY*)
See NLY*'s official
website
here.
See the Yahoo!
Finance profile for
NLY*
here.
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: A bed of
nails... that's not
fun!... I'm trapped
in the stocks... no pun
intended... I'm
sitting on the old bed of
nails for the most brutal
torture session
imaginable... because, in
the case of
Annaly Mortgage (NLY*)
versus Jim Cramer, I'm
guilty of capital
destruction in the first
degree and, in Cramerica,
that makes me eligible for
some pretty darn cruel and
unusual punishment...
That's right! You
know what I did... I
got behind NLY* because I
thought it could withstand
the credit crisis.
Even though it relies
heavily on borrowing
money, because it only
invests in bonds that are
supposed to have the
implicit backing of the
federal government...
But NLY*, the stock, has
been taken apart... and
that's because even NLY*,
the company, is
vulnerable.
The stock is down a
catastrophic 27%, from
$20.44 to $14.99... It's
like a cents-off sale at
Walmart, that soup kitchen
of a store... since I
brought NLY*'s CEO, Mike
Farrell, on the show
on February 6th...
and I also put my money
where my mouth is...
my charitable trust bought a ton
of it...
There's a lesson to be
learned here... a
lesson to be learned about
where I went wrong with
NLY*... and it's a
lesson that should be part
of your Game Plan...
not just for next week,
but for as long as time
goes on... Because,
as long as our financial
system's in trouble, you
can't afford to make the
mistakes I did.
. . . .
.
So where did I go wrong
with NLY*? And
how can you avoid my
mistake in the future?...
For months, I have said
repeatedly that you cannot
own stocks that borrowed
large sums of money from
banks and brokers, in
order to make money...
There isn't enough
liquidity in the system...
not enough money!
Banks have become cautious
lenders... You know what
they are... because
they've got a lot less
money to lend...
But no, not me... Mr.
Smarty-pants... I
recommended NLY*, even
though that's exactly what
it does... it borrows from
banks and brokers at a low
rate. It was 4% the
last time the company
reported... and then takes
that money and buys bonds
issued by
Fannie Mae (FNM)
that pay about 5%...
It's called "spread"...
not much of a spread, a 1%
difference. But, if
you do it over and over
and over and over again...
which requires more and
more borrowing...
To make a sizeable profit,
NLY* doesn't just have to
borrow... it's got to
borrow at about nine times
the amount of money that
it actually has in the
bank... money it raises by
issuing stock... stock
that I told you to buy...
Okay, so nearly every day,
I'm telling you to stay
away from companies that
rely on massive borrowing
to make money, and then I
recommend NLY*?
How could I have possibly
justified that?...
I thought that NLY* was an
exception...
The company was and is led
by Mike Farrell - truly
the best in the business -
a guy who got sub-prime
totally right from the
beginning... and,
because NLY* was buying
the safest bonds out
there... just short of the
U.S. Treasuries... the
mortgaged-backed issued by
Fannie Mae that have what
is known as the "implicit
backing" of the
government, I figured... I
don't know... the company
would be immune... to all
that bad paper we hear
about all the time... all
those toxic mortgages...
because the stuff was
pretty much considered to
be as good as gold my
whole life...
I thought NLY* was an
exception, because it's so
conservative... so safe...
such a good record... and
it only buys the premium
stuff. What
company wouldn't want to
lend Mike Farrell, and
NLY*, money?...
Their mortgages were
supposed to be backed...
implicitly backed...
All it took was if Hank
Paulson, the Treasury
Secretary came on Meet The
Press, and said "we stand
by them"... That
would be the end, but
no... they say
nothing... they say
nothing...
. . . .
.
But now I know there are
no exceptions to my rules.
All those reasons I had...
In the end, they meant
nothing... They were
just like lying on a bed
of nails...
Those bonds issued by
Fannie Mae... the ones
that should have been the
safest paper, short of
U.S. Treasuries?...
Well, the Treasury
Department is saying
nothing about that
guarantee. That's
got the Street totally
freaked out...
Suddenly, investors are
worried that agencies, as
they're called on the
Street, will default...
. . . .
.
With NLY* owning so much
of the stuff, and the Wall
Street market down nearly
everyday, this is
presumably really hurting
their ability to borrow...
even as the company
assures us not to worry...
If NLY* is right, and we
shouldn't worry, then
there's another problem...
Simply put, NLY* borrows
from brokers... and the
brokers, they're just out
of money... or they're
worried that they won't
get their money back from
NLY* and everybody else...
because the agencies it
owns will default...
That's right, they're
worried about Fannie
defaulting...
They've just decided that
they've lost so much
money... that there's just
such terrible
pin action...
that everybody's going to
lose money...
. . . .
.
Yesterday, everybody
figured out that NLY*'s
borrowing "problem", which
they may not even have,
means it can only raise
capital by issuing more
stock... and that can
dilute you if you own the
stock... which is why the
stock sold down so hard
again today...
Now that NLY* may not be
able to borrow at nine
times the amount of
collateral it won't be
able to, I believe, make
enough money to beat my
estimates... Maybe
it won't be enough to
raise the dividend, like I
was hoping...
If it turns out that NLY*
can only borrow at four
times its collateral, then
its earnings and bountiful
dividend may not hold
up...
That's why people are
selling... That's
why I'm in the stocks,
torturing myself...
If this is the fate of
NLY*, the best-run,
most-conservative player
in the mortgage game...
how can we even consider
buying another company
that relies on borrowing a
lot of money?
The truth is, if you need
to borrow, you're on life
support... I don't
think anything else about
your company matters -
good, bad... they're all
in trouble if you need to
borrow from a bank or a
broker...
. . . .
.
The Bottom Line!:
Annaly Capital
Management (NLY*)
proves it. I was
wrong. No
exceptions... The
company has to borrow a
lot of money. I
believe its stock has to
be sold, no matter how
much you like the business
or the CEO. That's
your Game Plan.
Unless you want to join me
on the stocks... unless
you want to sleep on a bed
of nails... it might
not make you money, but my
Game Plan can save you a
bundle.
[See Jim's 2nd Opening
Segment stock picks
below... ]
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See all of tonight's stocks'
latest quotes on
Yahoo! Finance |
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Most popular
investing books ordered:
(click any book to see at
Amazon.com) |
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■ |
Stock Snapshots - Includes
all stocks mentioned above |
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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) |
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NLY* |
15.00 |
15.41 |
Annaly Capital
Management (NLY*)
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Mutual-Fund-Holdings.com
NEW RESOURCE!
See Ken Heebner's CGM
Focus Fund
Top 25 holdings - The No.
3 Top-Performing Mutual
Fund in 2007
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Opening Segment 2
Title: |
'Tour De Force'
CEO Interview with
Marc Benioff, CEO |
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. . . .
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Featured Stock(s): |
Salesforce.com (CRM)
See CRM's official
website
here.
See the Yahoo!
Finance profile for
CRM
here.
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
Jim's Comments BEFORE
the interview:
You know me... when it
comes to stocks, I think
it's better to be safe
than right...
Back on January 9th,
we were presented with
what I regarded as a
classic investing
conundrum...
Salesforce.com (CRM)
was on the same day,
simultaneously upgraded by
UBS, and downgraded by
Goldman Sachs.
I sided with Goldman, and
said you had to sell.
Now, I had no doubt that
CRM is a great company...
let leader in a fabulous
business... software as a
service... with the best
CEO in technology... Marc
Benioff... He is,
he's the best. He
also is the
hardest-working...
I even said their next
quarter... the one they
just reported last week,
on February 27th... was
going to be stupendous...
and, hallelujah, it was...
But, while I had no doubts
about CRM, the company, I
said to you, that CRM, the
stock, was too risky...
I had been worred that it
was priced to
perfection... If Benioff
didn't deliver a blowout
of blowouts, it would
crater... as momentum
investors, and weak hands,
desperately sold the stock
down...
At the time, CRM was
trading at $54.33...
and I thought it was a
situation where you could
potentially lose $30, if
things went wrong... or
make $10, if everything
went right...
I used my judgment as a
stockpicker, not as a
businessperson. $10
up, $30 down... I figured
a terrible
risk/reward... so I
said stay away...
Now, after sinking to
$47.06, down 13.4%, when I
said to sell it
on January 9th,
Benioff and CRM just
delivered the most perfect
quarter I have seen this
year... in terms of
revenue growth...
Yeah, his stock was
priced to perfection...
and perfection is what he
gave us...
So, was I wrong?...
Well, the stock is only
trading at $56.66 now...
It's up $2.30 above where
I said it was too risky...
but, the market has just
been killed since then...
So, you missed the 4.3%
gain, if you listened to
me... but, then again,
this was just an
unbelievable stock in a
market that's horrible...
I don't think the gain was
worth the risk, but you
may disagree with me...
I think I made the right
decision as investor,
because the risk was too
great... even as I
obviously got the company
and the stock wrong,
because I didn't give
enough credit to the man
and his team... and
I still feel that way...
But, you know what?...
It's good to have
something work.
The question is now, what
to do with CRM, after its
blowout quarter.
Benioff gave us 6 cents of
earnings per share, when
the Street was only
looking for 4 (cents)...
He grew sales at an
incredible 50.4% clip,
year-over-year... that's
unbelievable. And he
delivered the greatest
single upside surprise
that I have seen since
January began...
The best of 2008...
But the stock's
valuation... I don't know.
It trades at 170x
earnings, even though it
should grow at 39.1%...
A long-term growth rate of
47%!... It is
hard to say that this
stock is anything but
expensive!...
But the amazing thing to
me is how CRM has held up,
as the vast majority of
momentum stocks have
fallen by the wayside...
I think I'm going to call
Salesforce.com (CRM)
the last momentum stock
standing...
Maybe that's because Marc
Benioff has proven that he
can deliver perfection,
when perfection is what's
needed...
I
want to know how he did
it... I want to know what
he's going to do next...
And I wanted to introduce
him to you, because he's
an amazing man who has
written great books...
Compassionate Capitalism...
The Business of Changing The World...
These are great books.
I read one of these in
preparation for a speech
that I gave recently at
Bucknell... because
I thought it was just so
smart, how corporations
can do well. He's an
heir apparent, I think, to
the great Drucker... Peter
Drucker, if you ever read
it... Enough me.
Let's go to the man...
. . . .
.
Jim's Comments AFTER
the interview:
Guys, look... You
want to own a stock that
held up... that tested
time? But you
don't mind to pay up?...
you don't mind
expensive?... This
man... that company... is
the last momentum play
standing! I
bless it... not for me,
but for those of you who
want momentum... who want
growth... and who want
quality! Benioff,
Salesforce.com (CRM)...
They've got it!
. . . .
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■ |
Stock Snapshots - Includes
all stocks mentioned above |
■ |
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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) |
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CRM |
56.66 |
57.16 |
Salesforce.com (CRM)
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Go to the LIGHTNING ROUND from
tonight's show
here >>
See current quotes on Yahoo!
Finance from
tonight's show stocks
here >> |
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Symbol keys: |
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A Charitable Trust stock.
- An asterisk next to a
stock symbol indicates that
Jim mentioned it is a stock
that he manages within
his
charitable trust portfolio.
You can see the complete
portfolio
of stocks
here >> |
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Thumbs up - indicates
he would buy the stock or,
at the very least, not sell
the stock. We do our
best to interpret Jim's
opinion on stocks, as we
think it is indicated by his
comments during the show.
Please read his comments to
decide for yourself. |
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Thumbs down -
indicates he has said not to
buy or to sell the stock,
based on his comments
We do our best to interpret
Jim's opinion on stocks, as
we think it is indicated by
his comments during the
show. Please read his
comments to decide for
yourself. |
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Back up the truck -
indicated by Jim, when he
says the stock is so good,
that he would do a
'mon-back' on the stock...
In other words, this is the
sound someone would say to a
truck driver, "Come on
back... " as he is "backing
up the truck" to load up on
his cargo. Translation
for buying stocks:
This recommendation by Jim
indicates that, after you do
your own
homework on the stock,
you should feel comfortable
loading up on it, as it is
in a good position to be
bought at this point. |
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Stumped. - Of the
2,000+ stocks that Jim
Cramer has in his head, for
which he has an informed
opinion, he sometimes comes
across a caller with a stock
he does not know well enough
to opine on... He then
indicates he is stumped and
will have to come back to
it, after he does some
homework of his own on
the stock. This
usually occurs during the
Lightning Round, when Jim
does not know in advance who
is calling, or what their
stock question is about. |
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Definitions of key phrases
used by Jim, known as
"Cramerisms": |
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Definition: 'Pull the
trigger' is Jim's phrase for making
the decision at that point to trade -
either to 'buy' or
to 'sell' (although he
usually uses the phrase for
buying), as if to say you
should feel comfortable
enough to make the final
decision without looking
back... |
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Definition: 'Ring
the Register' is Jim's phrase for
selling a stock, and making
it a final sale, that you
should not look back on.
Put it behind you. |
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Definition: 'Let It Come In' indicates how you
may wait for it to pull back, or have the
stock price come down briefly, as your
chance (after letting it come in) to buy
the rest of your position (i.e., total
number of shares you own in that stock). |
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Definition: 'backing it up'
or 'doing a 'mon-back' is Jim's
phrase for the metaphor of backing up a
truck to load up on a stock by buying
it. 'Mon-back is short for the
imaginary worker saying, 'Come on
back...' as the truck is backing up to
receive its load... Notice that we use
the little truck icon to indicate where
Jim has mentioned this.
Translation for buying
stocks: This
recommendation by Jim
indicates that, after you do
your own
homework on the stock,
you should feel comfortable
loading up on it, as it is
in a good position to be
bought at this point. |
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See more
"Cramerisms" & other
financial phrases
here >> |
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Helpful Websites: |
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See the stocks currently
known to be in Jim Cramer's
Charitable Trust at:
jim-cramer-charitable-trust-stocks.com |
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See the stocks currently
known to be in Warren
Buffett's portfolio
of
stocks at:
warren-buffett-portfolio.com |
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Stock Homework 101:
This is an excellent
upcoming site that provides
resources and links to help
you do that homework that
Jim Cramer recommends after
hearing his suggestions...
StockHomework101.com
This site is coming soon.
Thank you. |
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FastMoneyRecap:
This site will be a quick
summary of recommendations
made by the great Fast Money
TV show crew, that will
offer you a unique service,
to compare their picks to
Jim Cramer's past comments
about those stocks.
Fast Money Recap - Trades
for next day...
Compare these picks to Jim's
comments for the same
stocks. |
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© 2005-2007 MadMoneyRecap.com ■
Important disclaimer: This site is
not affiliated with Mr. James
Cramer, and is not associated with
any television networks or
broadcasts. Please note that all
thumbs up or thumbs down
indicators are not always clearly
indicated on the show and are
interpreted by us as accurately as
possible. Some comments have been
edited for brevity and clarity,
and extraneous material omitted. Please rely on watching
the show yourself, doing
your own homework,
and reading the text of the
comments to draw your own
conclusions. Also, data presented
on this site should not be used to
make investment decisions and
accuracy, although attempted,
cannot be guaranteed. Please
consult with your own financial
advisor for professional advice. |
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