People need reasons to buy stocks and this market just isn't giving it to them, Jim Cramer told his Mad Money viewers after a hideous selloff Monday.
If you want to be a buyer, you need a reason to buy, he said, and right now, the market isn't giving you any.
Buying the dips has been a strategy that's worked for the past 15 months, but it's not going to work any longer. That's why Cramer offered up his list of reasons not to buy stocks right now.
First is what he calls the Chinese conundrum of Evergrande, a huge land developer, with country-sized debt obligations. No one knows what the Chinese regime plans to do with Evergrande, leaving investors waiting to see what comes next.
Next is the looming debt ceiling debate in Congress. The only thing we know for sure is that the issue will eventually get resolved, but just don't know when.
As if those weren't enough, there's also the continuing COVID crisis. Has the Delta variant peaked? Then there's the calendar, where late-September has proven to be a bust for stocks every year for the past 20 years. Investors also continue to worry about the Federal Reserve and how they will handle inflation.
Finally, Cramer said the endless stream of new IPOs needs to stop, as it's putting undue pressure on existing stocks. And then there's the issue of all these new investors, many of which haven't seen a selloff and act like stocks can only go higher.
For all of these reasons, Cramer advised viewers not to get sucked into buying the dips. He said he can't be bullish until everyone else turns bearish, and we're still a long way away from that happening.
The Action Alerts PLUS team is looking at everything from earnings and politics to the Federal Reserve. Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts Plus.
Executive Decision: Airbnb
In his first "Executive Decision" segment, Cramer welcomed Brian Chesky, chairman and CEO of Airbnb (ABNB) - Get Airbnb Report, to the show to discuss the company's most recent results. Shares of Airbnb are up 138% since their IPO in December.
The company reported last month that its second-quarter loss narrowed sharply on rebounding revenue, but cautioned that the fast-spreading delta variant of the COVID-19 virus is beginning to affect its business.
Chesky said Airbnb just completed its one billionth guest arrival and its 500 millionth guest review this quarter, a fantastic feat for the 14-year-old company. Airbnb has over six million locations in their network and more than 55% of their hosts are women.
Chesky attributed Airbnb's success to their adaptable business model and the diversity of their listings, which includes properties in hundreds of thousands of locations and at every price point.
When asked about the market dynamics during COVID, Chesky noted that with people untethered from the office, they're trying new locations more often and staying for longer. People live in homes for a reason, he said, and that's why people prefer renting a home rather than just a hotel room.
The Evergrande Impact
How does a failing Chinese land developer send the entire market into a tailspin? Cramer explained that Evergrande has 1,300 projects in over 280 cities throughout China. The company is roughly the size of IBM (IBM) - Get International Business Machines (IBM) Report, but unlike IBM, has over $300 billion in liabilities it needs to pay. The company's bonds are everywhere in China, but are not a big threat to U.S. markets.
The standoff between Evergrande and the Chinese government began in August and September of last year, when the government instituted new rules for companies like Evergrande.
That was followed by stress tests in June of this year, which led to the company warning last month that it may default on its obligations. Earlier this month, the company suspended interest payments and began showing increasing signs that it was in financial trouble. With a Chinese bailout in question, only time will tell how this saga will play out.
But while Evergrande represents systemic and economic risks for China, Cramer did not see the contagion spreading to U.S. soil. He said if the huge default sends the Chinese economy into recession, then it will impact mining and minerals companies like FreeportMcMoRan (FCX) - Get Freeport-McMoRan, Inc. (FCX) Report, which fell 5.6% by the close, as well as companies with Chinese retail exposure, like Nike (NKE) - Get NIKE, Inc. (NKE) Report or Starbucks (SBUX) - Get Starbucks Corporation Report. But U.S. banks, he reiterated, are unlikely to notice.
Executive Decision: Beauty Health Co.
For his second "Executive Decision" segment, Cramer also spoke with Clint Carnell, CEO of Beauty Health Co. SKIN, one of the few winners to come from a SPAC merger.
TheStreet Recommends
Carnell explained that Beauty Health is creating a whole new category in skin care. At the low end, there are "lotions and potions," many of which provide little evidence that they actually work. Then at the high end, there are medically-oriented companies that offer results, but make the process unapproachable and expensive.
Beauty Health, he said, straddles the line between the two with the HydraFacial product.
Carnell added that because the company is defining its category, the company's biggest competition is awareness, which is why it has doubled spending to get the word out. Those who have tried HydraFacial, he said, continue treatments six to eight times a year.
Beauty Health has a great business model, Carnell continued, with 50% of revenues stemming from delivery systems and the other 50% from consumable products. The company is also diversified globally with many levers for growth at their disposal.
Cramer said there are many things that aren't working in the market right now. Beauty Health is one of the few things that is.
Evergrande or Cryptocurrencies?
In his No-Huddle Offense segment, Cramer said while most investors are worried about the collapse of Evergrande, he's more worried about something else, a collapse in cryptocurrencies.
Cramer reiterated that over the long term, he's a big believer in crypto. But in the short term, the price of Bitcoin is linked to the price of stable coins like Tether, and Tether is backed by Chinese commercial debt.
And while Tether announced that it holds no Evergrande debt directly, Cramer said it's a pretty good bet the debt it does hold has exposure to it. It doesn't take much to get the dominos falling, he said, and a huge default like Evergrande could certainly start the process.
If you're holding a lot of crypto, Cramer advised locking in some profits and lightening your position until we know for sure what the extent of the impending Evergrande collapse will mean.
Lightning Round
Here's what Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Monday evening:
MasterCraft Boats (MCFT) - Get Mastercraft Boat Holdings, Inc. Report: "This is homage to the belief that boats were only a COVID thing, but we know differently. I like Brunswick (BC) - Get Brunswick Corporation Report."
Nokia (NOK) - Get Nokia Oyj Sponsored ADR Report: "I'm warming up to Nokia. It's come down a lot and we're almost there."
SoFi Technologies (SOFI) - Get SOFI TECHNOLOGIES INC Report: "I think at $13 you want to pull the trigger."
AutoNation (AN) - Get AutoNation, Inc. Report: "Anything with used cars is a great business right now."
Raytheon Technologies (RTX) - Get Raytheon Technologies Corp Report: "But some on the way down. "
Spirit AeroSystems (SPR) - Get Spirit AeroSystems Holdings, Inc. Class A Report: "No, no, no. I'm cooling on the aerospace industry. I'd only go with Boeing (BA) - Get Boeing Company Report."
Workhorse Group (WKHS) - Get Workhorse Group Inc. Report: "No, no, no, we've got enough problems with Ford Motor (F) - Get Ford Motor Company Report and they're the king of pickups. We don't have time for Workhorse."
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.
At the time of publication, Action Alerts PLUS had no position in the stocks mentioned.
Cramer's Mad Money Recap: Evergrande, Debt, Delta - TheStreet
Read More
No comments:
Post a Comment