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Jim Cramer (1:04)
My mission is simple. To make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad money starts now. Hey, I'm Kramer. Welcome, everybody. Welcome to Cramerica. I hope you make friends. Hey, look, I'm just trying to make a little money. My job is not just entertain, but to educate, teach. Call me at 1-800-743-CBC. Tweet me, Jim Cramer. One of the most stunning things that's happened in my lifetime was when Nixon went to China, totally out of nowhere. 1972, we thought we'd done something unthinkable. We'd embrace Mao Zedong. We decided our mortal enemy was no more. We were going to be acquaintances. 1979, we normalized relations between the two countries. We did a billion bucks in business in the next year. In 1985, we imported nearly 4. $4 billion in the People's Republic of China. 2001, China got into the World Trade Organization. We bought over $100 billion in goods from the PRC. 23 years later, the number is roughly 439 billion. An insane amount, especially given how little they buy from us. But those days are over now. Excluding the first three and a half months of the year, it will be almost nothing. Unless the President can cut a deal. Something he doesn't seem that eager to do. I don't know about how you think it is. Hey, by the way, the Chinese aren't too either. Eager either. Now I think that what's dawned on people today, and it was not a pretty sight, is that maybe there is no deal for some time. That's why Dow's tumbling 1015 points S&P plunging 3.46%. Nasdaq plummeting 4.1%. Okay, it came on top of some amazing results yesterday. But the sell off decimated some areas and left us think that this China issue could be with us for for a while. We now have 145% tariff on Chinese goods. A number that high frankly isn't really a tariff. It's more of an embargo. Almost nobody's going to pay that much of a markup. It's a recipe for losing money. I think Trump knows that and he seems more angry at the previous presidents who gave away the store than he is at President Xi whom he always says he respects a great deal. As much as I sympathize with what President Trump is trying to do here, and I do, we simply aren't ready yet for this as a nation. Shamefully, we've gotten addicted to cheap Chinese imports. Last year we imported $127 million in electrical equipment alone. Think smartphones, computers, lithium ion batteries, video games. We brought in 85 billion in Chinese machinery like computer hardware, industrial equipment, toys, games, sports equipment. 32 billion plastics 21 billion, 20 billion in furniture. And you can expect as you figure, it's Wal Mart, it's Amazon, Target, Home Depot, Dollar Tree, they were the big. Now I want you to imagine what happens when these imports dry up. It is not good. We do not have enough sourcing capability around the globe to make up for this lost merchandise. Now layer on our companies that have high revenue exposure to China. Las Vegas Sands with 63% Qualcomm 62 wind resource, we just saw them 47. Corning at 33. Intel 27 according to Goldman Sachs. And I could tell you they're all hum. And then figure out which companies are China using China as a major base of manufacturing. Apple 70% Hewitt Packard 40% Dell 40% HP 30% that is harrowing. These numbers from bank of America Research. Much longer set of numbers available in cnscnbc.com if you're intrigued by this. Long story short, hate it or like it and I hate it. Our economies are deeply intertwined. I don't want it, but I don't know about this way of doing it. Our people are definitely going to take a real hit from this. We'll survive, but it's incredibly disruptive. Very inflationary. I fear that the Chinese will have more stamina than we do. Their people might have a higher pain threshold. Told them we have. They live in an authoritarian dictatorship. They're on a warrior footing. We are now it's possible that we can find alternative sources for some of these things, but you can imagine empty shelves in almost all the stores for Christmas. A dick's the best buyer at Target. And maybe not Wal Mart, maybe Macy's. We know there are other countries that are clamoring to make the things that China makes, but it's not realistic to believe they can pull it off in such a short period of time. The companies that are dependent on China, companies like Apple, are going to have a very hard time moving their manufacturing. They'll have to take a monumental hit. I have said own Apple, don't trade it for years. But boy oh boy, will Apple suffer if the White House doesn't cut a deal or at least give Apple a needed exemption as it should have given because it's pledged to do so much here. Is the market reflecting any of this? No, but something else is happening too. People are investing in companies just started yesterday that don't have all that much exposure to China or none. You can see it in health care, excluding drugs, which are still facing the possibility of their own set of powers. UnitedHealth Group in your man are good examples. They were up once again. I mean it's really incredible. Former up nearly 3%, the latter up 2%. Sinkhaun McCassin. You know those middlemen, they always work. Kroger rallies 3%. Why not? American grocery store chain Con Edge doing well. Utility, Verizon. Perfect. Coca Cola. Waste Management. Yeah, these are timeless. The best. You know what's the best? Tjx. A ton of retailers will have to order a lot of inventory to be able to get through the holidays. Too much inventory and they'll then have to offload their unsold merchandise to tjx. There is a reason the stock keeps finding itself on the new all time high list of the fact that I'm next door to 1. I go there all the time. Finally, and most obviously, there are three retailers with the balance sheets to win and to own. It's Amazon, Walmart and Costco. Take a look around at all the other retailers. They could be in their death throes. Death by withdrawal. With the exception of the two big box hardware stores. I don't know how they can make it if they're up against those big three. On the other hand, there are a Lot of hidden problems. Companies that are relying on some key elements from China. I was looking at a deck on Stanley, Black and Decker stock that we fortunately sold at a good price for the Chapel Trust. $1 billion in their cost of goods sold came from China. They said that a 10% China tariff is equal to 90 to $100 million for them. And we're doing 145% Best Buy. Oh, another test. Tough situation. Oh man, they got a source from China. No, thank you. Of all the companies that we that will never know that need parts made in China, parts you never heard of. Well, that's going to come too. What about these companies, the auto companies, the trucks, the machinery, all the automotive after parts. All this stuff that we thought we were making, they've been making sure we can do without their sandals and their pens. We don't need their gift wrap and their printed bags. We can get Samsung stuff from Korea to substitute for Apple even though we certainly don't want it. They're the winner. Yeah, Korea. And the best company in America is the loser because it bet too big on China. Remember this all happened because our previous leaders decided that we might as well outsource our manufacturing to other companies because they could do it cheaper than we could. I like to mention my dad's business because it's so pertinent. My dad represented the best gift wrap companies in the world. In Philadelphia he sold the very finest, Champion St. Regis. I still have some of the roles from 50, 60 years ago. They are gorgeous. But China came with this real cheap, nasty gift wrap. And America likes cheap. One by one the mills that my dad worked for went under. It was a terrible business. Then one day he switched sides. Worked for the Chinese because they made themselves the only game in town. All the American guys were out of business. They all got wiped out. He sold their plastic bags and hey, they treated him fabulously. He developed a terrific business starting at 72. Was still bubbling at 92 when he d. He did great last month. I know I had to pay the taxes, but how about the people who are in the mills? Pop repped, who knows? And from the heads of both parties, who cares? Sacrificial lamb shanks. I think what we saw today was the beginning of a sorting period between those that have no China exposure and those that do. Unfortunately, those that do employ a lot of people and are excellent companies. But they may not be excellent enough to make it through this new environment. And that is a real shame. Oh, I'm sure we can live without China. Really? But America will be a far more expensive place with lots of unemployment and reliance on other countries outside of China. Yes, I think we have to take them on now or never. But there'll be lots of pain ahead, more than we might be willing to take. And we got to do some changing, some portfolios. So the bottom line, is it worth it? Depends. I think it's worth some temporary pain to drive a hard bargain, though, and get a more favorable trade deal out of the Chinese government. But it's not worth it to go back to $439 billion in imports to zero, unfortunately. I'm actually thinking that might be where we're headed. Hey, how about Tanya in South Carolina? Tanya. Hey, how are you, Tanya? I'm dynamite. How about you? I'm wonderful. I'm excited to talk to you. But I have a question. This is my first time investing in stocks, so what do you think about Coca Cola? I love that. I think it's true. James Quincy is terrific. It's got a good dividend, it's really well run, it's got an international presence, but at the same time, it's not got. Not as a China problem. And it's doing well in this environment. You have a winner. Hey, why don't we go to Josh in New York? Josh.