Forex Investment

Take inventory of the last month’s stock correction and the numbers are staggering: From the market’s peak in mid-July through mid-August, «investing.businessweek.com» estimates that the total value, or market capitalization, of U.S. stocks fell by 10.5%. That’s $2.2 trillion vanishing from U.S. equity markets in four short weeks.

Nearly everyone agrees the pain started with risky mortgage debt, purchased in bulk over the last few years by financial institutions around the world. In July, debt markets stopped functioning properly, and investors started worrying about how much toxic debt was out there, hidden on balance sheets.

It was, in other words, a financial crisis, not necessarily a crisis for the broader world economy outside of the U.S. housing market. Financial Stocks Dodged Blow

So you would think financial stocks were hardest hit over the last month. Nope.

In the last month, about $961 billion in market cap disappeared from the Standard & Poor’s 500-stock index, an index of stocks designed to mirror the U.S. domestic economy. Though the financial sector makes up more than 20% of the S&P 500 (it’s the largest sector by far), only $149 billion of the market cap losses, or 15.5%, came from financial firms.

According to data from S&P, financial stocks fell 5.25% in the last month while the S&P dropped 6.8%. Far harder hit were stocks in the energy, materials, and consumer discretionary sectors, which toppled 10% or more. (S&P, like BusinessWeek, is a unit of the The McGraw-Hill Companies («www.businessweek.com»).)

Why? It’s hard, if not impossible, to explain what motivates the stock market. Prices are determined by millions of investors acting on millions of pieces of information every day. According to Morningstar («www.businessweek.com»), hospital stocks are off more than 23% in the last month. It’s hard to blame subprime for that.

There seem to be two main ways to explain what got slammed—and what got merely slapped—by Wall Street’s summer correction.

First, panic. Panic Selling

The level of fear got pretty high this summer. John Merrill, a 30-year market veteran who is chief investment officer of Tanglewood Capital Management in Houston, says the panic started when owners of mortgage-backed securities realized they couldn’t sell them or even determine their real value.

Because of that, many were forced to sell their “good assets” to raise money. Hedge funds and others “had to come up with money somewhere,” Merrill says. So, “basically everything that could be sold was sold.” That’s the only way to explain why supersafe investments like high-quality municipal bonds also fell in price, Merrill says.

Quantitative hedge funds wreaked havoc on some small-cap stocks, says Pat Dorsey, director of stock analysis at Morningstar. Amid the wild volatility, computer-run trading programs following similar models seemed to jump in and out of the same stocks at the same time, creating “a lot of very strange action.”

Individual investors also were scared. TrimTabs estimates $26.7 billion was pulled from U.S. equity mutual funds from July 20 to Aug. 15, about the same amount pulled in the fateful month of September, 2001. This selling was broad and deep, with all 10 sectors of the S&P 500 falling to some degree, from 2.6% for consumer staples to 12.76% for the relatively small materials sector. Credit Crunch

Despite the panic, there is another explanation for the selling: fundamentals. Not all the selling in the last month was indiscriminate. The seemingly irrational stock market was also harboring some quite rational worries about real effects from a credit crunch.

“Small companies need access to capital” far more than big, wealthy firms, says Michael Tarsala of Thomson («www.businessweek.com») Squawk Box. Thus, the Russell 2000, a small-cap index, fell faster than the S&P 500 and Dow Jones industrial average, and actually began its plunge a few days earlier, he notes.

Interest rates seem to be dominating forex newswires this week. Yesterday, it was reported that the ECB insinuated that it will hike rates at its meeting next month. meanwhile, America’s Federal Reserve Bank will probably cut rates at its meeting later this week. Fortunateky for Dollar bulls, the consensus is that the Fed will only be cutting rates by 25 basis points, instead of the 50 that was predicted last week, bringing the benchmark Federal Funds rate down to 4.25%, and narrowing the gap with EU rates to 50 basis points. However, if the rate cuts do what ther supposed to do, then the US economy should be eased out of the credit crunch and brought back to life, which would spell good news for the USD.

Read More: «uk.reuters.com»

A recent speech by Ben Bernanke, chairman of the US Federal Reserve Bank, sent the Dollar spiraling downward to fresh lows against all of the world’s major currencies. This is perhaps surprising, given that Bernanke used the speech to warn that higher-than-expected inflation may drive the Fed to hike rates, which is exactly what Dollar bulls wanted to hear. The downside of the speech, reflected in the markets’ reaction, was that the primary cause of the inflation is rising oil prices, would could plunge the US economy into stagflation: slow growth and high inflation, an unenviable position if there ever was one. Forbes reports:

Rhonda Staskow at Thomson’s IFR Markets said: ‘There is no Goldilocks scenario from Bernanke, who sees risks from inflation and an economic slowdown - the worst of both worlds.’

Read More: «www.forbes.com»

for an archive of Cramer’s “Mad Money” recaps.

Recently, it seems as if everywhere Jim Cramer goes, people ask him the same question about the same stock: “What’s the deal with Google (GOOG) ?”

On Monday’s “Mad Money” TV show, Cramer tackled the question head-on.

“Lately the stock has stalled,” he said. It is time for market players to collectively acknowledge that while Google is “great,” its 90% growth is decelerating. Google still has $600 written on it, but it is going lower, Cramer predicted. When the stock falls through $450, he said it will be time to do some business with it again.

Right now at $465, however, is not the right time to buy it, Cramer said. “We have to wait until the momentum buyers are washed out and finished selling.”

Instead, he said, he has three Internet stocks with “better prospects” he would buy right here, right now to get through the “Google withdrawal.” He presented them in descending order. 3. Yahoo!

Cramer’s third favorite Internet pick is Yahoo! (YHOO) , which he owns for his Action Alerts PLUS charitable trust.

Although nobody can say this company is better than Google, the reason Cramer likes Yahoo!, the stock, has nothing to do with Yahoo!, the company. Right now the stock is being bought hand-over-fist, and if “you mimic where the big money goes, it’s often enough to score a big win,” he said.

There are two reasons why Cramer believes people should buy Yahoo!. First, Fidelity Investments, a giant mutual fund that has been cutting its “massive stake” in Yahoo!, is almost done selling, said Cramer. Second, Legg Mason is buying shares of Yahoo!. When Fidelity’s selling is done, the negative pressure on Yahoo! is likely to diminish, Cramer said. “This should take Yahoo!’s stock higher.”

In addition to these two reasons, Yahoo! also has positive fundamentals, he said. It has a new search engine, Panama, which looks like it’s “for real,” and it has low guidance, which means a lowered downside risk, Cramer said.

“Its estimates are too low and could be beat here,” he said.

2. IAC/Interactive Corp.

Cramer’s second favorite Web stock is IAC/Interactive Corp. (IACI) , CEO “Barry Diller’s latest project.”

Cramer said IAC is up nearly 60% from where he first recommended it on Aug. 8, back when “it was one of the most hated stocks.” And even though the stock is up 15 straight points, it has “the juice that Google sadly lacks at the moment.”

Plus, not only does it have “great brands,” IAC is “nibbling up the whole Internet one bite at a time,” Cramer said. In fact, it recently purchased CollegeHumor.com, a Web site he called a “quiet moneymaker.”

While people used to think of IAC as a bunch of screwed-up businesses that weren’t cohesive, the company’s businesses do have a common “legitimate” theme — “they are all things done better on the Web,” Cramer said.

Lastly, IAC has a “real buyback,” which shows just how much insiders believe in this company. 1. eBay

Cramer tagged eBay (EBAY) as his “primo, absolute favorite” Internet play.

He advised people to take some money off the table for Google and to put it into eBay, because he considers it the better stock right now.

Yahoo!, IAC and eBay are “pathetic parodies of companies when compared to Google,” Cramer said. “But right now Google is leashed in, at least until it gets to $450.”

Therefore, people can either stick with their guns and go down with Google or swap out of it and make some money with eBay, he said. There are seven reasons eBay is his favorite “while Google is out of commission.”

First, it has become part of the culture. Second, although its acquisition of Skype might have been the “single dumbest purchase of the decade,” Skype is at last getting “serious” after a period of underperforming. In addition, Cramer believes all the negative aspects of Skype have been priced into the stock.

The third reason he likes eBay is because it is starting to make “smart” purchases, such as its StubHub purchase, Cramer said. Fourth, it has an “improved search engine coming,” and fifth, eBay’s “international growth is en fuego.”

The sixth reason to own eBay is that it owns PayPal, “the Visa, MasterCard and American Express of the Internet.”

And finally, Cramer considers it the best Internet stock “because after all that’s happened, it’s pretty much a monopoly.”

The momentum players getting out of Google are going to go into eBay because of its accelerated growth, he said. It’s time for you to get in as well. GSI Commerce: No Amazon

Cramer welcomed GSI Commerce (GSIC) CEO Michael Rubin to the show and asked him why people should stick with the e-commerce stock.

The reality is, Rubin responded, that the company is less than eight years old and its services are just “kicking in.” The key factor that distinguishes a company such as GSI from and gives it the comparative advantage over a company such as Amazon (AMZN) is that “everything we do is about supporting our partners,” the CEO went on to say. “We don’t compete with them in any shape, way or form.”

Cramer said that the company has “fabulous growth” and that he likes what he heard. He advised sticking with it.

To view Cramer’s interview with Michael Rubin, please click here.

During the show’s “Sudden Death” round, Cramer was bullish on China Mobile (CHL) and Time Warner (TWX) .

He was bearish on Qiao Xing Universal Telephone (XING) , Coca-Cola (KO) and Terra Industries (TRA) . Lightning Round

Cramer was bullish on GlobalSantaFe (GSF) , Transocean (RIG) , McDonald’s (MCD) , EMC (EMC) , Moody’s (MCO) , McGraw Hill (MHP) and Greif (GEF) .

Cramer was bearish on Alvarion (ALVR) , Boston Scientific (BSX) , Noble Energy (NBL) and NetScout Systems (NTCT) .

For more of Cramer’s insights during the Lightning Round, click here.

Want more Cramer? Check out Jim’s rules and commandments for investing from his popular book by http://www.thestreet.com/tsc/cramerbook.

PUB food. So often it’s exactly what you want - not a restaurant, not a takeaway.

Going to the pub for a quick meal, especially a lunch, sits comfortably between food on the hoof and the out-on-the-town-to-eat experience where you might have to book, pay 25 a head and generally make a meal of it.

So you would think that pub food - the informality, the opportunity to be either a grazer or glutton - would be an experience that pubs would engage in enthusiastically and strive to build a reputation.

Unfortunately, a plethora of good pub food choice is not what we’ve had, at least until recently. There is a perception that pub food is “grub” - it should be cheap. But it isn’t.

Hostelries in Scotland where the food is notable and the pub becomes a destination have been few and far between.

This is not to say that there aren’t a lot of pubs which offer steak pie and chips and lasagna and chocolate mousse cake out of a box. Perhaps for most people, it’s enough.

But about five years ago, a new approach to pub grub arose and quickly became a phenomena.

The term “gastropub” was created by pubs in London which started doing “real food”, well-presented dishes served through lunchtime and the evening.

With linen table clothes, proper service and a menu not dissimilar to posher restaurants, but still in informal surrounding, gastopubs quickly become the new foodie destinations.

Although in Scotland there weren’t many who adopted the nomenclature and joined the gastropub gravy train, there were pubs like the Canny Mans in Edinburgh and the Shore Bar, which had been serving superior grub for a long time.

Gastropubs were easy to identify in Edinburgh, like those above and the Sheep’s Heid in Duddingston, but were mainly found in less-likely places all over Scotland, such as the Lairhillock near Stonehaven.

Curiously, there were none in Glasgow. The city always had pubs like the Horseshoe and the Griffin, where you got a pie, chips and beans and a pint for 3. Then Bar Gandofi came along, upstairs from the famous coffee shop and Stravaigin in the West End extended its eclectic restaurant menu upstairs and into the evening.

They didn’t call themselves gastropubs either, but they were. Perhaps this is where the value-for-money argument stems - these pubs are more expensive than usual but the food is cheap compared with dishes on their equivalent restaurant menus. It’s the widespread mediocre mid-range food that’s a rip-off.

‘STILL THE BEST VALUE FOR THE QUALITY YOU CAN GET’

THE price of pub grub in Scotland is rocketing, according to a new guide which warns that customers may be put off by bills of about 20.

The Good Pub Guide 2008 claims: “Pubs can’t hope to attract a great many new diners - or even keep all their old faithfuls - unless they rein in their rising food prices.”

Co-editor, Alisdair Aird, said Scotland represented “a microcosm of what’s happening in the rest of the UK”. He added: “The price of a decent pub meal is now very high. It’s going to be a lot more than people would think makes sense for pubs typically to charge.”

Mr Aird said factors behind the rise could include pubs outside city centres finding it difficult to make money on drinks and “squeezing their customers a bit too hard” on food. Also, large chains who dictate the market might be pushing up their prices to offset the rising cost of debt.

Trade bodies denied the increase in prices. Paul Waterson, of the Scottish Licensing Trade Association, said: “If anything, it’s still the best value meal for the quality you can get.”

Patrick Browne, of the Scottish Beer and Pubs Association, said he would be “surprised” to find such prices.

A survey of 1,069 pub menus showed a starter and main course cost on average 16.76, with a glass of wine pushing the bill to 20.

A pint of beer now averages 2.41 in England, compared to 2.49 in Scotland.