Today was a big profit for the stock market and investors would be happy, Jim Cramer told his Mad Money…
Today was a big profit for the stock market and investors would be happy, Jim Cramer told his Mad Money viewer Wednesday. After months of economies of economics, Federal Reserve Chairman Jay Powell made a sudden face, thinking about the rate of interest rate hikes.
Cramer has said for weeks that Fed saw the economy wrong, not taking into account the slowdown in housing, cars, oil and retail. But today’s action by Powell complies with Cramer’s one-and-wait strategy on interest rates, which means a more interest rate hike, then a break to assess economic data – news that led to a fantastic rally.
Shares were able to jump from bearish to bullish, said Cramer, with Salesforce.com (CRM) leading the fee, increased by 1
0.2% and took the rest of the FANG shares. Amazon (AMZN) closed 6% and Apple (AAPL) ended the day by 3.8%. Other economically sensitive stocks, such as transport and industry, also gathered, which is exactly what should happen in a bull market.
Investors are not out of the woods yet, Cramer warned because customs and trade will still dominate the headlines and it is likely that President Trump will increase Chinese tariffs from 10% to 25% if an agreement can not be reached.
As of today, however, no longer invests Fed. Powell has proved to be a flexible leader, Cramer finished, and we should all celebrate the win.
Cramer says that Fed should crack on lending by banks. Get more of his insights with a free subscription subscription to Real Money.
Can tech shares hold a sustainable rally? Cramer said it depends on the store. In the case of DXC Technology (DXC), the answer is probably “No”.
DXC was formed almost two years ago after the old Hewlett-Packard had spun its IT consulting business and merged it with Computer Sciences Corp. DXC shares rose 59% in the first 18 months, but in the last two months have fallen from $ 96 to just $ 62 per share.
Initially, DXC made its number through cost reductions. The company later tried to ignite growth by spinning off its slower public sector such as Perspecta (PRSP). As revenue continued to decline, investors began to worry about cost savings damaging DXC’s ability to win new business.
Yesterday, DXC took an analyst upgrade and quoted the company’s cheap valuation. But Cramer reminded viewers that stocks are not cheap when revenues fall. He felt that the stock could see a short bounce because the overall market recovers, but in the long run, the technical investors want growth that DXC simply does not have.
For its Executive Decision Segment, Cramer spoke with Steve Mollenkopf, CEO of Qualcomm (QCOM), a stock that is outside 25% from September highs. Shares today yield 4.4%.
Mollenkopf explained that the upcoming 5G revolution will be launched next year and wireless operators will be able to offer 10 times the 4G service rate for just 1/30 of the price. This means that any company that has devices connected to the Internet will benefit.
The expansion of 5G will begin in the US and South Korea in the spring, Mollenkopf said, with Europe beginning in the middle of the year and China followed in the second half of the year. There is a lot of activity happening globally to prepare this rollout.
Mollenkopf added that the US is in a strong position to be a leader in 5G, but governments around the world are taking an interest because of the great opportunities it presents.
When asked about an update of Qualcomm’s ongoing legal battle with Apple, Mollenkopf said both companies were continuing to work towards a resolution.
Cramer and the AAP team trim some of their weaker names in this market power. Find out what they tell their investment club members and enter the conversation with a free subscription to Action Alerts PLUS.
Investors seeking winners in an uncertain environment need all the help they can get. Fortunately, our government is happy to force by letting more companies merge with their competition.
Nothing is better for a company than being part of a perfect legal oligopoly, Cramer told the viewers. Therefore he is a fan of industrial gas supplier Linde (LIN), who has just received approval to acquire Praxair (PX). The merger gives Linde 32% market share, as the US now has only three major players in the space.
We have seen this pattern in the airline earlier. Over the years, air traffic was very competitive and the airlines would go out of business like clockwork. However, the government approved a number of airline mergers, which resulted in 70% of all domestic flights being controlled by only four remaining air carriers. In fact, many flights now have no competition at all.
The same applies to bottles and jars, where Ball Corp (BLL) was allowed to put up its competitors and led to a duopol. Shares of Ball are up 31% for the year.
In the case of Linde, Cramer said that the company deserves the highest multiple of 20 times profit and believes that stocks only go higher.
Now that the Federal Reserve has fallen in line with interest rates, Cramer said it’s wise to look at what might otherwise be wrong to track stocks. One thing that Powell is worried about is the bank’s lender, and Cramer said he is worried.
Non-bank lenders now control almost half of the mortgage market, but they play a different set of rules than traditional banks. The last time the lending was out of control, Fed chose to cancel its supervisory authority, a move that proved to be a big mistake.
Fed has the power to turn off risky lenders, says Cramer, with home sales falling, inventory borrowing and interest rates that force sellers to lower their prices, they could be in trouble with floating interest rates, which could in turn spell trouble for this flowing non-banking industry.
Before we move towards a mini-financial crisis again, the Federal Reserve must engage, “concluded Cramer.
Lightning Round was Cramer bullish at Berkshire Hathaway (BRK.A) (BRK.B) Axon Enterprise (AAXN), Oneok (OKE), JPMorgan Chase (JPM), Delta Air Lines DAL American Airlines (AAL) and Acadia Pharmaceuticals (ACAD).
Cramer was in charge of FNB Corp (FNB) and Copa Holdings (CPA).
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