Mad Mail: Will Ethanol Hurt Costco Earnings?

Jim: Big Cincinnati Bearcat-Booyah-Tooyah. I enjoyed the segment on the "Ax Effect". It gave me some good insight to the cause of the increase in Research in Motion on Monday. While I found that everything you said made sense, my question to you is where do you find who the ax analyst of a given company is? How can you tell whom the Street going to follow? --Dan

Cramer says: “Some things in life are literally experience. I never like to play this experience card on the show…[but] I’ll tell who these axes are because I have followed these industries for years…Each industry has an ax. I will try to reveal them as we go along.”

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Booyah Jim!: You've mentioned in previous shows that the current mortgage crisis is a greater concern over inflation. In my research, I discovered that residential mortgages only account for less than 5% of the GDP and consumer spending accounts for 70%. Therefore, isn't inflation the greater risk since 70% of the GDP is driven by consumer spending? --John

Cramer says: “I can show you extensive studies which show that the worth of your house in the single most psychological part of consumer spending. If the worth of your house is going down, you’re going to spend less…so I think you need to worry about that more than you worry about inflation.”
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Not only does Baldor Electric make a very efficient motor, but it is also the BEST electric motor out there. As a steel fabricator I have used BEZ's motors for years in all of my equipment and won't use anything else! They are very durable and last for years! --Bryan

Cramer says: “I’m glad that we brought to light many different things that no one knew about Baldor. I re-recommend Baldor right here.”
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Jim: You have recommended Permian Basin Royalty Trust and Linn Energy as good master limited partnerships. They pay a good dividend but have very little chance of growth because they are not totally committed to drilling new wells. I believe that Legacy Reserves is a much better choice for a high dividend MLP in the oil and gas sector. They are aggressively acquiring properties and committed to drilling and increasing production. They are currently yielding 8.29%. --Trey

Cramer says: “I think Trey may have a point, and I urge you to look at Legacy Reserves.”
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Jim: I'm not that keen on the idea of ethanol being even partially our savior for energy independence. I was disappointed to see a sticker on the gas pumps at Costco Wholesale indicating that their regular gasoline would now be 10% ethanol. Personally, I am seriously considering avoiding Costco, or any company adding ethanol, for gasoline. Do you think Costco's decision will have an impact on its earnings? --Jeff

Cramer says: “No, I absolutely do not.”

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