Transcript
Jim Cramer (0:01)
My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a mo market somewhere and I promise to help you find it. Mad Money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. Other people make friends. I'm just trying to save you a little money. My job's not just entertain. Put days like this into context because they're hard to understand. So call me at 174.3CBC. Tweet me, Jim Cramer. Is the economy running too hot or too cold? I mean, that was the Fed's big dilemma today. And they resolved it by splitting the proverbial baby cutting rates by a quarter point, then indicating we're likely to get fewer rate cuts than expected next year. Nobody seemed to like that answer. With the dow ultimately tumbling 1123, SB plunging 2.95% and the NASDAQ company 3.56%. Sell, sell, sell. I guess you could say the baby got thrown out with the bathwater. It was truly hideous, a little unexpected and yes, wicked. And even though the market's badly oversold, we may not get that quick snapback that we normally expect in a deeply oversold market. Because after the bell we got disappointing guidance. Well, and also earnings from Lenore, that's that giant Florida based homebuilder. And then Micron, the semiconductor colossus, fell badly after giving what I thought was a disconcerting forecast about PCs and cell phone chips that was way out of whack with what people expected. Homes and semis, both bad, not good, not good at all. So why did the whole market fall apart in response to a rate cut? I mean, I've seen a lot of markets that have been clubbed by rate increases, but rate cuts? At first it does seem a little baffling, doesn't it? But after listening to Fed chief Jay Powell this afternoon, I think a lot of people got even more baffled because he seemed to get caught having to fulfill a prediction of the need for a rate cut. And that need was no longer self evident. The data didn't back it up. Look, this is a tricky situation. There are areas of real weakness in many businesses in this country, but there also is real inflation that hasn't come down enough to merit many more cuts soon. Now, we've been saying that on this show for every night and you always hope that everyone agrees with you and respects the prospects and is thought, yeah, that's right, I heard it on my money. But it's clear from how the market crater today that there are plenty of people still hoping for cuts, and those cuts may not come anytime soon. And those people, they were wrong. Why was this such a close call? As Fed chief Jay Powell told the reporters in that excruciating press conference, always feels like nails on the blackboard. How can you look for progress on reining in inflation while cutting rates is not a bit of an oxymoron? And that's why nobody seemed happy the Fed's actions, those who wanted inflation stamped out immediately were discouraged by a rate cut. Those who want lower rates were discouraged by the implication there'll be fewer cuts coming next year. Everyone simply confounded, which is why the market reversed so hard when the Fed released a statement. Then Powell followed up with what I thought were some pretty stern comments. Almost made it sound like he's rather raising rates than cutting them. Yeah, I mean, I think he kind of said, well, we had the raise, there's nothing we could do. But he didn't. Of course not. The problem is we have two economies, people. One that's on fire and the other one's a stalled out. They come together in a way that's very hard to fathom, which makes the Fed's job especially tricky. I always like to put it in the forms of companies because that way it becomes very clear to you. So I want you to consider the travails of a company you may not have heard of, but it's a very big company. And it's called J Bill. It's formerly J Bill Circuit. No way. It's a $27 billion revenue. This is what's known as a contract manufacturer, but that doesn't capture the incredible breadth of what it does. J Bill makes everything, electric, auto parts, data center components, medical devices, tech, hardware, robotics, you name it. Now, the stock shot up more than 7% today. Yes, on this egregious, horrible day, because the company reported such a spectacular quarter and also dramatically raised its full year forecast for 2025, largely in the strength of data center construction. J Bill is freight cooling technology, which these warehouses full of servers need in order avoid overheating. CEO Michael Dastor said he expected JBL to do 5 to 6 billion dollars in data center revenue. But now it's like 6.5 billion dollars. That's up so big. That's largely thanks to customers. People are saying maybe it's Amazon. 30% growth last year. 30%. Anything related to data centers, red hot. And this extends all the way to the electric utilities, because we simply need more energy than we have, which Requires a gigantic build out because our current grid won't cut it and that is actually moving the gdp. At the same time, JBL is another business. Regulated industries accounting for just over 40% of its sales. Microcosm again, that's focused on things like renewable energy, electric vehicles. That's down 7%. Ice cold. I suspect these businesses, including solar, will continue to be weak. But then again, within the same segment, JBL has a pharma business which is currently doing great because they're helping to build out its clients. GLP1 franchise. Talk about smoking hot again. All right, this is a worldwide company, gigantic global footprint. I mentioned 27 billion revenues, its largest manufacturing in Mexico. Under President elect Trump, that could be a major problem. Tariffs will absolutely slow the growth of American companies. But JBL says not to work. In the past these tariffs have been largely pass through costs. So you get this all within one company. Me and Jabil's the indeed microcosm of our economy. Although the stocks ultimately soared because there's more exposure to the hottest industries out there. How about the ones that don't though? Jabil represents the part of the stock market that is smoking hot. But it seemed like it just hit it. Many, many other companies hit an air pocket today after the Fed spoke and they could be very vulnerable to even lower prices. Despite the fact that the dowels had many down days, it's now back to where it's the longest streak of down since 1974. Okay, then there's another side to the story and that's the industrial economy. Residential, commercial construction. Away from the data center, the power grid. We have a surfeit of commercial properties, especially office buildings. We have way too much capacity. This part of the economy, it needs rate cuts. Then there's autos. Gigantic part of the economy. It's directly or indirectly responsible for 4.1 million jobs. Orders are in a real slowdown. Inventories rising. When inventories get too high, you get weaker sales, ultimate layoffs. That doesn't want that. Again, rate cuts needed. How about housing? We saw Lenore tonight. We've got two problems with housing. First, we aren't building enough homes to meet the demand. But homebuilders are reluctant to build more or less. They can be caught with excess inventory in an environment where long term interest rates have been stubbornly high. When we consider the Fed statements, their worries seem justified. So we won't get the new supply we want. Worse, we have the least turnover in housing in 30 years. Like the autos, housing needs lower rates to get things moving. The Fed's comments coupled with Lenore's earnings, well, let's say it's going to put a real hex on housing. It will be ugly tomorrow needs rate cuts. When housing and autos and commercial construction are weak, you get softer numbers from the materials companies, the service companies involved in the buy and selling of homes as well as the home improvement retailers. These groups all need help from the Fed and it doesn't look like they're going to get it. But against that we have persistent inflation in food, insurance, health care and rent. Gets even more complicated when you consider what the Fed isn't supposed to be worried about yet. Immigration. The immigrants who come here from all over the world are integral to the economy because our country doesn't produce enough workers on its own and we don't have enough robots yet to do anything. At the same time, immigration puts upward pressure on housing because everybody needs somewhere to live. Less immigration means wage inflation, but housing deflation? Talk about tricky for the Fed. Tricky for you, Tricky for for me. Now let's throw in a couple of issues that the Fed might not be worried about, but it should. Rampant speculation right now in the financial markets right here, endless run ups in nuclear power, commercial space and amorphous groups like quantum computing. The speed of the rally in Bitcoin can worry you. Those club members who read my Sunday Think piece know that I think this kind of speculation is my principal concern about the market and it is coming home to roost. So you see the pattern. Some could look at the economy and say the Fed simply fanning the flames of inflation with this rate cut. Others will say that without fanning the embers, the fire is about to go out. Or to put it another way we could understand the price of eggs and coffee keep going up, but what is the Fed going to do about it? Plant coffee beans and grow chickens? It can raise rates so high that we won't have enough money to afford a cup of Joe at Dunkin Donuts. Starbucks Eggs yolks bear free anyway. Sure, we can ask why doesn't a new insurer come in, take advantage of these high rates, offer something affordable. Why can't we cut out the middlemen and farmers we see? It saves money as so many legislators tell us. We might be able to estimate the more planes from Boeing will bring the price of travel down, when in the end, I really wish the Fed hadn't been so definitive about the need to cut rates going forward, albeit more slowly. We would have been much better off if they'd explicitly taken a Wait and see approach before this meeting. This time they telegraphed the wrong thing, hence today's meltdown. But if the part of the economy is not so hot, gets worse or inflation comes down, the Fed does have more room to cut. Here's the bottom line. A previously data dependent Fed chose not to be data dependent today with its pronouncements. And that's what drove the market down in spite of that quarter point rate cut. Something that's supposed to be good news for stocks, but it turned out to be the very opposite.