Cramer's 'Mad Money' Recap: Taking Stock of the Rally
NEW YORK (TheStreet) -- Is today's historic market close the real deal or just a flash in the pan?
That was what Jim Cramer was trying to figure out on his "Mad Money" TV show Tuesday. Cramer told viewers there are a few key metrics that investors can use to see why today's highs are vastly different than those of October 2007.
The first metric is valuations, Cramer told viewers. Take a stock like Google (GOOG) , which received another upgrade with a $1,000 price target today. Is Google expensive? No, not really. Google trades at just 15 times earnings, Cramer noted, and that's less than most companies that make things like cereal and soap, companies that certainly don't have Google's growth.
Investors can also look at market breadth, said Cramer. In 2007, the markets were only being led by commodity stocks and anything levered to China. Today, the markets are seeing strength in just about everything, including housing, autos, retail, rails, aerospace, the banks and a whole lot more. Cramer reminded viewers that the transports usually act as a confirmation of a rally. They weren't rallying in 2007, but they were today.
So with valuations not stretched and good leadership and a wide breadth of stocks, the markets certainly look a lot better today than in 2007, Cramer concluded. Add to that the many things that are now behind us, including the financial crisis, the worst of Europe, U.S. debt downgrades and the presidential election, and it's easy to see why investors may be adding to their positions instead of running for the hills.
Off the Charts
In the "Off The Charts" segment, Cramer went head to head with colleagues Scott Redler and Carolyn Boroden over the chart of Facebook (FB) , a stock Cramer owns for his charitable trust, Action Alerts PLUS. Should investors give Facebook a second chance after its miserable IPO last year? According to the chartists, yes.
Looking at a weekly chart of another social network, LinkedIn (LNKD) , Redler noted that once the stock got above its ceiling of resistance at $110, it shot directly to $176, proving that once a social network proves itself, investors are more than willing to pile in.