Cramer's 'Mad Money' Recap: Do Your Homework
NEW YORK ( TheStreet) -- Ignore the calendar and do the homework. That was Jim Cramer's advice to his "Mad Money" viewers Tuesday as he explained that trading based solely on what month it is is a total waste of time.
Cramer said that these seasonal and monthly patterns grab people's attention and seem to be perfectly logical, but in reality, they're totally bogus and only work until they don't.
The old adage that October is the most dangerous month for stocks no longer applies, said Cramer, and he outlined five reasons why.
First, back when these patterns first emerged, the U.S. was in charge of its own destiny. But that's no longer the case, as the U.S. economy is forever linked to the well-being of China and Europe. Do the same patterns still hold true in the middle of a European financial crisis? Probably not.
Second, these patterns never met a Federal Reserve willing to keep interest rates low by any means necessary. That changes the dynamic for all stocks, said Cramer.
Next, there's Apple (AAPL) , a stock which he owns for his charitable trust, Action Alerts PLUS. Cramer said the markets have never seen a company with a $650 billion market cap or one with so many other companies' well beings tied to it.
Fourth, there are the banks and the tech stocks. The banks used to be a great place to invest, said Cramer, but not in an environment where they now trade on the latest news from Congress. Likewise with technology. Tech stocks used to trade based on the strength of the PC, but now that past history is worthless.
Finally, Cramer noted that hedge funds and high-frequency trading has also changed the game for the individual investor. Thus the notion of "sell in May and go away" and other such patterns only offer a false sense of security.
In the "Executive Decision" segment, Cramer spoke with Jim Prokopanko, president and CEO of fertilizer giant Mosaic (MOS) , a company which delivered a 15-cent-a-share earnings miss on an 18% drop in revenue amidst problems delivering its products to customers. Shares of Mosaic responded by falling 3.7% on the news.
Prokopanko said that every year the world needs to feed 74 million more people, and the fastest way to accomplish that is by increasing the yield on every acre of farmland, which is done through fertilizer. He said the difference between today's rise in crop prices and that of 2008 boils down to risk tolerance.
Back in 2008, dealers stocked up big on fertilizer as soon as crop prices rose, but today they're waiting to the last minute, which has kept demand tepid so far. "Farmers will be planting for maximum yield next year," Prokopanko said.