wearmanyhats

Jim Cramer, the wildly popular performer of “Lightening Round,” recently recommended Visa.  Will Visa continue to climb?  Probably.  But Cramer, a respected financial guru, seems to overlook the P/E ratio of Visa, which sits in the nose bleed area of 69.  While he is right that the credit card processing is completely entrenched in the monetary system, and it will always be lucrative.  He is also right that Visa doesn’t have the credit issues that affect credit card companies.

It’s that overly high P/E ratio that makes no sense, and begs a more dramatic question.  When is it ethical for a financial guru to back off on a recommendation?  Wouldn’t an overly high P/E ratio be one of the first yellow lights?

If Cramer can not look at simple fundamentals and make sound recommendations, what is his line in the sand?  When will it be “too expensive?”  Merely because Visa’s business is sound, will always grow, and is not in a sector that will get pounded from credit losses doesn’t change the fact that it is expensive.  If widely respected financial “rock stars” can not encourage responsible investing, what chance does the stock market have in maintaining any sensible stability?

Stock pickers of all kinds are often the first line of defense for the common investor.  People like Stephen Leeb, Larry Edelson, and Sean Broderick have the trust of the common investors. It is difficult to give advice to begin with, but its worse when the stock goes down.  If a stock already suffers from basic fundamental problems and the guru knows that, why on earth would they encourage people to put their hard earned money on the line for it? The majority of the above mentioned advisers only recommend those stocks as an agressive growth, the highest risk out there.

There are so many excellent stocks out there, but Cramer’s lack of caution makes no sense.  Performance has value, and his on “The Lightening Round” is entertaining.  But anyone following his advice needs to be put on notice. Be sure to understand the fundamentals before buying his recommendations.  That way you go into those stocks with your eyes wide open.

There is no doubt that the delisting of GM and the planned addition of Cisco in its place is a mile marker.  Goodbye King Auto, Hello King Computer.   Sputnik changed the views of the American culture from looking at the past and its fascination with the cowboy.  Now the nation’s complete dominance of the automobile has been changed to domination of the computer, ironically the very thing that helped make the Sputnik flight possible.

It’s not that America has lost its fascination with the car. It’s more that the marriage of the American consumer has mellowed with age.  We expect to hop in and go.  We expect to use it to get to work.  And now, after years of inexpensive fuel, the time has come to move to the next generation of cars, one that is fuel efficient.

GM’s demise was not that it had provided too much for the workers and retirees.  There was some of that as an issue, too, yes.  But it was because it lost its ability to look ahead, something Toyota did well.  When oil prices were climbing, it was putting out a vehicle that got 9 miles to the gallon and swooning the owners with lavish parties.  Their demise was not preparing for a different future.

One senior GM executive said that Tesla woke up GM to the fact that an engine could be fuel efficient.  Tesla showed that if their car could run 150 miles to the gallon, so could many others. And where is Tesla made?  On the west coast.

Europeans can, in no way, understand the American citizen’s need and desire about the automobile.  Yesterday an acquaintance mentioned that people in Norway bike everywhere. That’s great!  But here in the United States, we have so much space that in two of our states, you can’t even drive from one end to the other in 24 hours.  Our roads are not set up to accommodate bikers all that well; something that hopefully can be remedied. The U.S. is a car country, and changing that will not be easy.  Only in some cities is biking encouraged by the traffic patterns and laws.  And now since fuel became more expensive, mass transit is looking more inviting, too.

American needs a new car to fall in love with; one that doesn’t look like a jelly bean, is cool and economical, too.  We want the vroom of an engine, without using gas.  We want the cool look of the 50’s with a new look, something a new millennium can call its own.  We want the glamour of having a new car without looking like we spend ridiculous amounts of money at a time when people are struggling.  Basically, in order to fall in love with the car again, we want the same feeling we got in the 50’s when we bought one; it wouldn’t break our banks, it didn’t look like an old lady was going to drive it, but it wasn’t a car to pick up chicks, either.  The cars of the fifties were cool, even for  middle age folks, and affordable.  GM may have a lot of making up to do, but it better know what it is going to do before it just jumps into the same old cooking pot.

In the meantime, there is one more thing to consider.  Replacing GM with Cisco shows the movement of innovation and a new era to the west coast.  No longer are the repetitive manufacturing jobs the enviable ones.  The future is in secondary education; not in a manufacturing plant. And what an exciting future it will be.

Metals are once again on the move.  People who have owned gold and silver are enjoying the climbing price of metals in the past few months.  This blog encouraged all people to buy, buy, buy last February.  Now it’s time for those who listened to enjoy their investments.

Mining stocks have been bouncing back the same as most other stocks.  However, mining stocks may be next to  truly sparkle.  Here are two stocks to watch in the mining sector.

Cameco  (CCI)-  Ever since Cigar lake mine filled with water, Cameco has struggled with getting the mine up to speed. Water is still an issue there.  The result:  a stock price that is slightly overinflated, with a P/E ratio of 24.  Cameco is also the world’s largest uranium producer in the world. Uranium is lower in price right now than several years ago, and the charts indicate that the prices are on a downward trend.  This is surprising; China is putting over 120 nuclear plants into production in the next three years.  With the world’s most populated country using more uranium, it would be logical that the price would rise.

It’s not bad enough that Cameco is over the comfortable P/E level of 20.  Insiders are not buying either, and that’s never a good sign when considering jumping into a stock.  For now, it might be best to leave Cameco by the wayside.

Rio Tinto, (RTP) is blitzing upward at a frenetic pace.  It’s up to over $181 since it’s ridiculous drop to $59 earlier this year.  That deep discount was the perfect time to buy into Rio, but now is not a bad time, either.  The stock fell late last year from a high of $495, and with a current P/E at 15, there is obviously room for the stock to grow.  High metal prices will juice up the stock prices even further.

Rio seems to mine everything that can make money.  Diamonds, uranium, gold and silver are all part of its production.  In addition to that, Rio’s name is not often associated with some of the less ethical shenanigans that have sometimes dogged Freeport-McMoran.  Rio is huge and a “Steady Eddy.”

No insiders are buying Rio Tinto, so nothing in the way of mergers are on the horizon.   However, as gold continues to climb in price, so shall Rio enjoy the benefits of its luster.  When comparing Cameco over Rio, RTP is probably the better buy at this time.