Cramer Makes Sense

Cites Takeover Wave as A Catalyst to Speculation

Last night’s Mad Money show was a keeper. Especially for traders and investors who are currently long.

Cramer opened the show with a theory about how the recent takeovers bids like BHP Billiton (NYSE:BHP) for Potash (NYSE:POT) show that some people still feel this market is too cheap. Cramer mentioned that mergers are up this year in relation to 2008 and 2009.

He also spoke of the “old days”. Which happened to be right after the Crash of 1987. Back then, stocks were so cheap, that many of them were acquired by other companies. I took his remarks in a pretty simple fashion. If the big boys are willing to buy entire companies. Maybe it is time to step in.

Cramer also mentioned that despite some of the positive earnings, many investors failed to be enticed. Now here is the good part, Cramer mentioned that investors may be lured back to the market due to this increases M&A activity.

My sense is that if Cramer is correct, we could see major activity with penny stocks this fall. From my experience, I have noticed that retail investors who speculate, do not have much of a problem buying a stock like Mosiac (NYSE:MOS) and then turning around the next day and allocating five or ten thousand dollars into something they perceive to be a hot penny stock.

Although M&A activity on the OTCBB is usually sparse at best, some microcaps on the AMEX could eventually be in play in the rumor mill. Keep in mind that a rising tide lifts all boats and the return of speculative buyers to the market could make things interesting soon. Hopefully we have not missed it and Cramer is early with his theory. I would venture to guess that he is, and that many large cap and penny stock newsletters will try to jump on this trend. So read up !