Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016

JIM CRAMER’S MARKET OUTLOOK

On a monthly basis, one of America’s most influential financial journalists – Jim Cramer – hosts an exclusive investor conference call for Action Alerts PLUS members.

During this hour-long discussion with Jack Mohr, his Director of Research, Jim shares his take on the market and addresses pressing member questions. Not only that, Jim and Jack name some of the stocks best positioned (or at most risk) in bull and bear markets.

Below is an excerpt from their most recent call. This behind-the-scenes look allows you to see the multitude of ways Jim is helping investors, like you, be more prepared and more astute as you navigate the market.

Keep reading to see Jim and Jack’s outlook for investors as we head into the end of the year and learn from their expertise so you can invest more wisely.

Jim Cramer: Good morning. I’m Jim Cramer. Welcome to our monthly Action Alerts PLUS club membership call which only club members are allowed to join. I’m here with Jack Mohr. We’re going to go over some things but first let me give you our analysis from the top down of where we are.

When you are in a club like this, like the Action Alerts PLUS club, I think you deserve a more personal touch about what we’re thinking not just the standard Wall Street fare. So let me start with an anecdote.

I was in midtown Manhattan yesterday--which is a total madhouse by the way given the central location of Trump Tower-- when I bumped into Bill Miller, the legendary stock picker who had just been a Squawk Box. He was the host the day before.

Every day at 8:47 am I do what is known as a cross talk with Squawk and my friend Joe Kernen and I do about a minute and a half riff with him. I chose limited time I chose to address Bill, because the last time I had seen him was in late summer, we both were enamored of the airline stocks. I congratulated him for sticking with his call and those stocks have had monster moves.

We both grinned and wanted to go on about what’s happening, what’s changing, what’s in the air, but the time clock just didn’t let us so I did it at the corner of 55th and 5th yesterday. I simply asked him “do you feel

1 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016 it?”

He said, “Yes I do.

Then I said “why don’t more people talk about it, is it ideology?”

And he said, “Absolutely, it’s left and right.”

Now you know what we were talking about: we were talking about the post- election optimism that so many business people and wall streeters have suddenly embraced including many who are most certainly not Republicans and some who didn’t vote for Donald Trump.

It’s as if some sort of magic wand was waved and the gloom was removed, regardless of what looks like one of the sloppiest transitions I can recall.

It’s the optimism that is being imbued here and that optimism is turning into higher stock prices without necessarily any facts behind it, other than kind of a “throw the bums out,” logic based on historical party change.

But here’s what’s hard to argue with. Many of the biggest moves I have seen in my career started without what looked like any basis in fact. Let me give you two of them the most prominent from my 36 years of investing.

When Ronald Reagan came in to the White House in 1980 you felt that optimism and that, plus the peaking of interest rates, translated into the beginning of a bull market that you could argue lasted until the Great Recession sliced the indices in half. Remember the great crash did not impact this. No one believed then that a former actor turned politician could really make a big difference at a time of national gloom and almost mourning for America. Of course Reagan turned “mourning” of the “M-O-U-R-N-I-N-G” kind into “Good Morning” and we ended up collectively embracing that as a country.

The analogy has some heft here even if Reagan had actually run the government of the largest state in the Union before he got in the job, while Trump ran a complicated real estate empire. The analogy is a subtle one. The country, in retrospect, needed Reagan because of a national esteem issues, self-esteem malaise I guess. I think many states went for Trump that had formerly voted Democrat because of a sense of national economic malaise even as employment rates are low and job creation strong. We have the best job loss claims in 40 years this morning. See, government’s been perceived as an anathema to business as it was back in 1980, the difference being,

2 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016 though, that this time more government economic might is needed to move things, fiscal stimulus so to speak, as well as less regulation, while Reagan really sought smaller government and less regulation.

The second time I saw it is a little more obscure but it was very important. It was in 1991 when the Fed Chief Alan Greenspan decided to raise short-term rates to stem a bank collapse that had wiped out many regional banks, forced larger banks to merge. The banking group, always the best and most broad of leaders as you can tell from today, just took off out of thin air until you realized that Greenspan had allowed the sector to rebuild capital with higher short rates and not with equity and that gave them a much better earnings track and dividend boost that well let’s say ended just until the Great Recession but had been quite a run.

These were specific instances where the federal government didn’t just stand there, it did something and that something was good for the stock market and that’s what I think is happening again.

I reach back to those two incidents because they led to growth spurts that brought people back in to the stock market in droves. They changed the perception of the actual asset class from a negative to a positive. That’s right the entire asset class of equities, and that’s what I also I think that could be happening right now. Stocks had become a disgraced, dwindling place to put your money in both those instances. I sense that could be reversing now, which, of course, as someone who lives and breathes stocks, is like fresh oxygen pumped into the room.

It’s that sea change--whether you believe in Trump or not-- that is fueling this rally and making it so, as I said last night on Mad Money, there are constant bids lurking underneath as there were today with the bank stocks which opened down..

Let’s face it club members. Until this election the stock market had become a bit of a moribund atavistic entity. We had a few stocks that were loved and you know them, I named them FANG and it stuck, Facebook, Amazon Netflix and Google now Alphabet. Two of these we own for the trust and we have huge gains in them I know lots of people think that FANG has had it and, as you know we did take some Facebook off the table just to preserve the gain. I am cognizant of it and Jack Mohr and I debate it every day. How good is tech in this new world, especially high growth tech?

Well, there is reason for concern. A week ago we got the standard rotation out of the fast growers into the cyclicals and even the deep cyclicals as Trump assumed the role of not just Commander in Chief but I call him Builder in Chief. That’s just the animal spirits of a do-nothing Washington being trampled on by a possible do something gang now that the White House and Congress are in synch.

3 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016

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But the more we looked at what Trump stood for economically--not any other prism, not social prisms, just economically--the more we realize that he’s a rare combination of what’s good for stocks from both parties short-term, yes emphasis on short term--he wants lower taxes and more money spent with the idea that he can grow us out of the multi-year morass we have been in.

Now I like being skeptical and I hate being cynical. The cynic says it is all one big phony. That he’s a phony. That the plan’s a phony. That there is not plan. Or maybe that you are seeing that play out in the bizarre attempts to build a cabinet that make you worry that there is a government.

But the skeptic says you know what? Something feels different, like I said to Bill Miller. Something feels more optimistic and I agreed on that street corner in the capital of Trump land yesterday afternoon to emphasize that optimism in today’s call for members...

So what comes of it? What can we do? All right. Let’s be candid. We had a big cash position betting that there would be uncertainty going into the election and then be able to put a lot of that money to work into some chaotic moments.

Unfortunately, the chaotic moments only lasted until the wee hours of the morning. A sense of relief that there would not be a disputed outcome, a sense of graciousness coming from both the defeated candidate and probably more important, the one who did the vanquishing and it all happened before the market even opened on Wednesday after the election.

It would have been terrific to throw all of our money at the market that very morning. I get that. We choose to prudently apply capital in an atmosphere where prudence was the enemy.

That discord had only happened a couple of times in my life and it was, indeed, unexpected. Fortunately we had some big financials which helped us and some good industrials but not enough of them, though. Unfortunately we didn’t have many classic Trump stocks that took off like a rocket, the big machinery stocks, the Caterpillars, and those that are related to building roads and highways. They, along with the banks, would have been an anathema to performance had the favorite won the day.

4 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016

But that phase is now over. The question is where do we go from here?

Let me give you five bullets about how we’re thinking.

First, the move in the banks stocks is here to stay. If you are going to spend but not tax that is inflationary and I am now expecting multiple rate hikes from the Fed in 2017. We own [Redacted] it should be fabulously in this environment. We caught a rare lucky break with [Redacted] which had hurt us so bad because of the scandal. Saw some numbers today. They were terrible but the stock’s up. Higher fed fund rates, which we have learned, cures all when it comes to the banks as I mentioned in the 91 scenario. I am spending overtime working on the banks right now, ones that have come down, ones that people are taking profits everything from [Redacted] to [Redacted]. Everything’s on the table.

This group after a 14% sector move is now being taken down on profit-taking that lasted about, I don’t know what. Say 20 minutes this morning? Expect us to add a financial as the pullback which started unfolding yesterday could come back again remain troubled by [Redacted] because of the previous transgressions, but again we acknowledge how well the stock is doing today.

Second, industrials will be given a pass even if their earnings are a little soft right now. That’s why we hold on to our [Redacted] even after its anemic order growth, and we keep building our position in [Redacted], which I think is worth dramatically more than it is selling for. I stress dramatic, club members, because of the oddities of the spin and the difficulty people have grasping with what they own with [Redacted]. We’re quite familiar with the company and you know from our bulletins, including yesterday’s, we like what we see. We search for more industrials including those we might have sold at higher prices in the fund to get more exposure. You know we like circling back to the winners that ran so much and have been pulled down by profit taking.

Third, the consumer will have more cash in her pocket because of the coming tax cuts while the companies will have more cash courtesy the coming repatriation of capital.

That means we have to stay longsome retail and some of the internationals that you would have otherwise sold given the strength in the dollar.

You saw us build up [Redacted] before that terrific quarter. And we keep on some [Redacted] even though we had to take some off after that dramatic run that we hope you participated in given our endless table pounding at the 190 level. Remember, the keys to the club: the bulletins and the round-ups as we are so often frozen and the separation between what we can do with the trust itself and what you can do with our bulletins seems to grow as time goes on. Walgreen’s, another frozen name, looms large, as does Costco down two bucks, questionable, no real reason.

5 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016

The internationals like [Redacted] and [Redacted] make too much sense to leave them now. We added to [Redacted] in the turn against the consumer packaged goods because we believe people will circle back to that company, too if more money comes in and the equity class is not disgraced any longer.

Fourth, while rates have gone higher and they will continue to do so, higher yielding companies with a game plan that can profit off turmoil and disruption, that have seen their stocks slaughtered here, namely stocks like [Redacted], which we sold much, much higher, have to be bought opportunistically as we did today. The new position beckons. We want to buy more if it goes down.

Finally, fifth, you can’t give up on tech even as you saw our enthusiasm wane for [Redacted] in this morning’s downgrade bulletin. You have to buy higher growth stock tech when it comes down because when this euphoria wears off, it always does, even as new, higher levels stay in place, there will still be a rotation into tech names that have come down from their highs with good stories. I would normally be reluctant to stay in the [Redacted] and the [Redacted] and the new name you will hear today, but given the fact that I continue to expect new money coming in because of the change in the spirit that I have described, remember whether you like him or hate him the spirit has changed for the better, you can stick with some high growth names knowing that they will bounce back when managers worry if this big growth in the economy can be sustained. Remember I think that it can be. Four, I think possible four percent growth next year.

Given what we are hearing from Washington, make no mistake, I think it will the growth is here, but these stocks never ultimately lose their appeal. Now given how robust the companies underneath, the highest growing tech companies will be able to beat their earnings estimates perhaps handily if the economy expands and there’s more advertising dollars and search dollars to spend.

What else will characterize our near to intermediate term worldview?

I continue to think that there will be plenty of deals, like the deal we now expect to close where Walgreen’s buys [Redacted], although I am actually somewhat rooting for [Redacted] and [Redacted] to not pull of their deal together. I think [Redacted] would be trading much higher. It’s actually being kept back by the deal and has underperformed the group. We had a western refinery deal today where both stocks are up. That’s what’s going to keep happening, I think.

I continue to think that defense spending will lead and if you ask me what I am most disconcerted about since I talked to you last in terms of stock selection, it was our inability to react quickly enough and get back into [Redacted] after its dramatic decline soon after we sold it for a huge win.

I believe travel and leisure will improve given this new spirit and we want to add [Redacted] to our bullpen. The airlines, alas, took off too quickly. If [Redacted] pulls back it might be worth a second look and we didn’t get to pull the trigger in [Redacted] which is, again hindsight and that’s 20 20.

6 Excerpt of Action Alerts PLUS Members-Only Conference Call Originally Presented on November 17, 2016

And, as I mentioned, we are going to introduce a new name today, one that Jack and I like that has come down to levels where we like it simply because it’s part of the throw-tech-away trade that I think can’t last given the opportunity.

Finally, let me just say that while we have been critical of ourselves for not putting more cash to work before the election, believing that there could be an uncertain outcome, I like how the portfolio is acting under the Trump rally and just wish we had more money behind the positions. Our discipline trumped our conviction as it’s always supposed to but in this one instance like when Reagan was elected in 1980, you had about a 48- hour period where you had to go from having a big cash position to having a non-existent one and we were not able to do that.

Fortunately, though, we were able to do some buying of some great stocks and are still doing so as we wait methodically for our prices knowing that there are always some mispricings like [Redacted] and [Redacted] now or [Redacted] the day before when we pounded the table.

(End of Excerpt)

A Message from Jim Cramer:

Once again, Jack Mohr, my Director of Research, and I held our Action Alerts PLUS members-only conference call.

This exclusive monthly call answers members’ most pressing questions and concerns as we constantly strive to improve, enhance and deliver a better overall experience.

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