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Oct.27
9:10 PM ET
Monday, 27 Oct 2008
Mad Mail: What's Wrong With Covance?

Dear Cramer: I recently graduated from Virginia Tech this past May and returned home to New York with an engineering job. I finally have a steady income and will be able to pay off my student loan without a problem. I have put some extra money aside and was wondering if this is the time to jump into the market? From watching your show the past couple of weeks, I'm aware I would need to stay diversified and choose quality stocks that will rebound down the road. I'm sure there are many other college students and graduates out there who are looking for suggestions on how to start investing early. --Frank

Cramer says: “Anybody who needs the money in the next five years, this market is not for you. But Frank doesn’t. So Frank can go pick and choose among the Disneys [DIS  Loading...      ()   ] and McDonald’s [MCD  Loading...      ()   ] and look absolutely fabulous.”

          ___


Hi Jim: You recommended Covance [CVD  Loading...      ()   ] back in September as a great recession stock. I listened to your interview with the CEO, liked their business model and went ahead and bought some shares. After they matched the street's earnings estimates last week, why are they now plunging so precipitously? What did I miss? Is it already time to get out of this stock? Thanks for your consistent efforts to educate all of us retail investors out here! --Elizabeth

Cramer says: “…What happened is, is that once the market got bad every stock where someone could sell it to raise money, even the recession-resistant ones, have been sold. That’s why the only ones that are really holding up right now are the dividend stocks and the companies that are trading through cash. I think the recession-resistant stocks, because the recession’s going to be a long one, can be bought on weakness, and you should be buying not selling.”

          ___

Booyah Jim: I am confused here. Oil has dropped below $70 and retail gasoline is dropping accordingly to now being under $2.90 a gallon. That is good for the U.S. economy, right? The dollar is strengthening, that is good for the U.S. economy, right? This housing debacle will hit a bottom according to you next June, that is good for the U.S. economy, right? The Fed is injecting $700b with the TARP, that's good for the US economy, right? The credit market is apparently easing according to news reports. That's good for the U.S. economy, right? So what's the problem? Why is the market continuing its instability? Why are we still talking recession? --Steve

Cramer says: “…Every one of those things is true, and that’s what’s going to keep us from having the Great Depression II. It is not going to create earnings. It is not going to make companies do better than expected. But it will keep us from bread lines, 25% unemployment, and a two-thirds decline in the gross domestic product, which is what happened between 1929 and 1932 in this great country.”

          ___

Jim: I know you have answers for all Wall Street questions. One thing I cannot figure out is Goodyear Tire [GT  Loading...      ()   ]. GT went from $37 to $10 with no significant news other than $300M being stuck in the Reserve fund (which I think they will get it back) and them taping into their credit line for $600M loan. How can stock go down this much? Fundamentals seems to be safe, earning forecast in 2009 may be bit light, but how can stock suffer this much? Thanks for answering on the show. --Nalin

Cramer says: “Goodyear in the end is a cyclical stock that is related to autos. The automobile build has been reduced from 16 to 15 to 14 to 13 to 12 to 11 million cars. Far fewer tires will be used. Doesn’t matter if the raw cost has come down. Nobody’s spending. And Goodyear, while a good company, is still dependent upon autos. It’s never going to change because they are tires. In other words, stay away.”







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