Mad Mail: Could Stocks Drop Back To March Lows?
Jim: I was wondering what your thoughts on First Niagara Financial (FNFG). Since you suggested it on April 24th, it's been going down. I know there hasn't been any major news released on FNFG, but is it worth still owning? Should I hold this stock until the SEC completes the PNC acquisition? Thanks - Rob
Cramer: FNFG has raised a lot of capital, so it can buy a series of banks, not just one. I would buy every time this company raises capital, because First Niagara Financial is going to, I believe, double, triple - maybe even quadruple - in size by the time this year is over, because it’s a well-run bank with a good balance sheet.
Jim: In your book you recommended the highflying CGM Focus Fund (CGMFX). I have been a long time holder of CGMFX and an admirer of Ken Heebner. The question is, can Ken Heebner bring CGMFX back from the abyss? Hang'n in there - Joe
Cramer: I have always been a believer in Heebner, I am not his friend, I don’t know him, I’ve met him only on Erin [Burnett]’s show, I have followed him for many years, and you buy him when he’s down. You buy him when he’s down. He’s right now like a stock that’s having a bad streak that’s gonna come back.
Jim: Have the people talking about deflation been to a grocery store lately? I've watched a bag of chips go from 8oz. to 6oz. and the price go up…cat litterbag go from 10lbs to 6lbs…and the price go up…a can of tuna go from 8oz. to 5oz. and the price go up. I could go on and on. Is this not the definition of inflation if not hyperinflation? – Michael
Cramer: I have to admit that there have been many things that have gone up in price, but mostly because of the wrappings that they’re in, including cereal, because the actual cost inside of cereal has gone down. I have not seen prices come down as much as I would like and you haven’t, but it is occurring and I’m not giving up. I think there’s a big lag, all the companies said they’ll be a lag. Watch three months from now, prices will be lower.
Jim: With all the important human stem cell tests coming up, especially Geron Corp.'s (GERN) tests on humans to regrow spine tissue, when do you expect real volume and big positive movement in these stocks? – Michael
Cramer: Michael, these are all speculative stocks and I have been against these and want to sell them every time they go up because we like earnings and we believe healthcare is in a bear market, and in a bear market all these speculative stocks in healthcare are not going to do well.
Jim: I recently read that a few analysts believe we could drop below the March lows before coming back. Do you think it is likely that stock prices could fall all the way back to their March lows? What would drive the markets back to such a low level? – Larry
Cramer: I don’t think we’re going back to those levels. When it got to 6300-6500 if you remember I said that Doug Kass, who had the hot hand who works with me at thestreet.com and realmoney.com, said that we had bottomed, I said that the risk had gone out of the market, we decided to get in. If we go back to the mid-7000’s it would be a gift, but we’re not going to see those levels again because even when I did an absolute disaster analysis of the Dow Jones – with all the banks going to zero – I couldn’t get through 5300-5400. If we go back to that level again it’s a gift and I don’t think we will. It would take major banks to collapse and I don’t think that’s going to happen, I think the opposite is true.
Jim: A new ETF is coming public soon, MacroShares Major Metro Housing, to trade under the symbol UMM. It's designed to deliver 300% of the national home price index, and expire November 25, 2014. Do you regard the UMM as a good way to go long real estate? – Joe
Cramer: No I do not. The way you go long real estate is to buy property. I think that this is one more ETF that shouldn’t exist, that won’t be the way to do it, if you’re going to buy real estate, don’t buy it in a mimicking ETF with triple the leverage which is bad - go buy a house!
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