Mad Money with Jim Cramer – Episode Summary (January 6, 2025)

Host: Jim Cramer
Producer: CNBC
Release Date: January 7, 2025

Market Overview: The Great Selective Bear Market

Jim Cramer opens the episode by dissecting the current market dynamics, coining the term “great selective bear market of 24/25.” He highlights a divergent performance across sectors, with technology leading the charge while traditional sectors like consumer staples, energy, healthcare, and materials face significant downturns.

• Tech Resilience: Despite a prolonged bear sentiment, technology stocks, particularly semiconductors and software firms leveraging artificial intelligence and accelerated computing, continue to buoy market averages. “These tech plays are so strong that they end up buoying the averages,” Cramer notes (04:25).

• Sector Weakness: In stark contrast, sectors such as consumer staples and healthcare are underperforming. Cramer attributes this to rising long-term interest rates and a stronger dollar, which particularly hurt dividend-paying stocks. “Why isn't stock of Procter Gamble down another 2.7% today? That's a great company,” he questions (06:15).

Key Factors Driving Market Movements

1. Interest Rates and Dividend Stocks: Cramer explains that rising long-term interest rates have a detrimental effect on dividend-paying stocks. As bond yields increase, these stocks become less attractive, especially when bond prices fall due to new Treasury auctions. “As these bonds go down in price and up in yield, things get worse for the dividend stocks,” he states (07:30).

2. Strengthening Dollar Impact: A robust dollar negatively impacts consumer staples companies with significant overseas operations. Even domestically focused companies like Clorox aren't immune due to sector-wide pressure. “Sector ETFs are like gravity. They pull all their subjects down,” Cramer asserts (08:00).

3. Pricing Pressures from Retailers: Cramer discusses how major retailers like Amazon, Costco, and Walmart are forcing consumer goods companies to slash prices, squeezing profit margins. “Maybe the consumers had it will no longer tolerate Covid era high prices,” he speculates (08:45).

Deep Dive: The Defense Sector under Scrutiny

The defense sector is experiencing a significant downturn, with companies like Lockheed Martin and Northrop Grumman experiencing stock declines of up to 25%. Cramer connects this trend to potential political shifts with the incoming Trump administration and increased criticism from influential figures like Elon Musk.

• Impact of Political Changes: Cramer highlights Elon Musk's criticism of the F35 program, calling it “broken at the requirements level” and arguing for a shift towards drone technology. This has created uncertainty among defense contractors about future procurement processes and budgets. “Lockheed Martin CEO responded that drones cannot fully replace manned fighter jets,” Cramer recounts a recent panel discussion (15:20).

• Wall Street’s Response: Analysts at Barclays have expressed concerns over budget risks and fiscal realities, advising caution with defense stocks. “They don’t see disproportionate budget Doge risk,” he quotes Barclays’ 2025 outlook (16:50).

• Cramer's Stance: While acknowledging the sector's challenges, Cramer advises a wait-and-see approach. “For the pure plays, we've just got to wait a bit to see if Trump must. Doge and the rest administration are truly serious about making meaningful cuts to defense spend,” he concludes (20:10).

Caller Interactions: Stock Recommendations and Insights

Throughout the episode, Jim engages with callers seeking advice on various stocks:

1. Frank from Texas on Netflix:

   • Position: Owns Netflix shares with a cost basis of $892.
   • Cramer's Advice: “I buy more. I think they are still the national water cooler stock,” he recommends, despite concerns over recent stock rollbacks (09:50).

2. Dan from Illinois on Lyft:

   • Position: Successful with Lyft shares and praises driverless car initiatives.
   • Cramer's Advice: “You bet I am. I think it looks really terrific here,” affirming a bullish stance on Lyft (29:30).

3. Another Frank on Carvana:

   • Position: Significant investment in Carvana with shares soaring.
   • Cramer's Advice: Suggests managing investment by adjusting cost basis and potentially leveraging gains, emphasizing caution with high-flying stocks (30:16).

In-Depth Analysis: Uber Technologies

A substantial portion of the episode is dedicated to dissecting Uber's stock performance, presenting both bullish and bearish perspectives:

• Bear Case – JMP Securities:

  • Concerns: Autonomous vehicles (AVs) from Waymo and Tesla pose threats to Uber’s ride-sharing dominance.
  • Recommendation: J.P. Morgan has downgraded Uber from “outperform” to “market perform,” citing potential regulatory challenges favoring Tesla (28:50).

• Bull Case – Goldman Sachs:

  • Growth Potential: Strong mobility bookings growth, expansion into less dense geographies, and diversified services like Uber for Business.
  • Strategic Partnerships: Collaborations with Waymo for AV integration in Atlanta and Austin cities.
  • Financial Health: Consistent free cash flow generation and an accelerated $1.5 billion buyback program announced (29:00).

• Cramer's Verdict: Balancing both perspectives, Cramer leans bullish, highlighting Uber’s expansion and strategic initiatives as key drivers. “Despite the sell-off, there were some huge positives in this quarter,” he concludes, recommending Uber as a buy at discounted prices (43:00).

Lightning Round: Rapid Stock Picks and Insights

In the high-paced Lightning Round segment, Jim addresses quick stock inquiries:

1. Lincoln Electric Holdings:

   • Issue: Revenue misses have dragged shares from the high $260s to $180s.
   • Cramer's Take: “It's a great manufacturer... I think you can buy,” suggesting a buy-on-dip strategy (40:40).

2. Caesars Entertainment:

   • Issue: Operating amidst a turbulent gambling sector.
   • Cramer's Take: “I'm not that high on the gambling stocks right now,” indicating a cautious stance (41:37).

3. CRISPR Therapeutics:

   • Issue: Despite strong technological advancements, the stock struggles.
   • Cramer's Take: Advocates for reducing cost basis and maintaining positions, emphasizing long-term potential (42:14).

4. Seagate Technology:

   • Issue: Historically a value trap with stagnant performance.
   • Cramer's Take: Labels it a value trap, advising skepticism (43:07).

Spotlight: CERN's AI Partnership with Nvidia

Cramer interviews Brian Krasanich, CEO of CERN's AI division, discussing the company's strategic partnership with Nvidia to enhance AI-driven automotive technologies.

• Innovative Solutions: CERN is developing advanced large language models (LLMs) tailored for the automotive sector, enabling more natural and proactive human-car interactions.

• Strategic Partnerships: Collaborations with Microsoft and Nvidia are pivotal in refining performance and expanding OEM partnerships.

• Future Roadmap: Upcoming releases of Gen 2 agents promise more intuitive and responsive in-car experiences, positioning CERN as a forward-thinking player in automotive AI (33:08).

Final Thoughts: Tesla and Palantir – Double-Edged Swords

As the episode wraps up, Cramer delves into the polarizing stocks of Tesla and Palantir:

• Tesla:

  • Performance: Continues to defy traditional valuation metrics by being viewed as a tech company rather than just an automotive firm.
  • Political Leverage: Strong ties with prominent political figures like Trump bolster its strategic positioning in the evolving self-driving landscape.

• Palantir:

  • Valuation Concerns: Despite strong execution in AI and data analytics, Palantir's stock remains highly valued with high premium multiples.
  • Investor Behavior: Compares Palantir’s retail investor enthusiasm to that of a “cult,” but emphasizes its real growth potential through robust contracts and technological advancements (43:50).

• Cramer's Stance: Advises caution for regular portfolios, suggesting these stocks are better suited for hedge fund strategies focused on momentum trading rather than long-term holds (44:30).

Conclusion

Jim Cramer's January 6, 2025 episode of "Mad Money" provides a comprehensive analysis of the current market landscape, highlighting the resilience of the tech sector amidst broader bearish trends. He offers insightful commentary on sector-specific challenges, strategic company partnerships, and navigates through investor inquiries with a balanced perspective. Notably, Cramer emphasizes the importance of strategic wait-and-see approaches in volatile sectors like defense and advocates for informed, research-backed investment decisions in high-growth areas such as autonomous vehicles and AI-driven technologies.

Notable Quotes:

• “These tech plays are so strong that they end up buoying the averages.” – Jim Cramer (04:25)

• “Why isn't stock of Procter Gamble down another 2.7% today? That's a great company.” – Jim Cramer (06:15)

• “Sector ETFs are like gravity. They pull all their subjects down.” – Jim Cramer (08:00)

• “Lockheed Martin CEO responded that drones cannot fully replace manned fighter jets.” – Jim Cramer (15:20)

• “Despite the sell-off, there were some huge positives in this quarter.” – Jim Cramer (43:00)

• “It's a great opportunity to really showcase what Sarin can do with you today.” – Brian Krasanich, CEO of CERN's AI (33:12)

• “No price is too high for the buyers of Palantir.” – Jim Cramer (43:50)

This summary captures the essence of the January 6, 2025 episode of "Mad Money with Jim Cramer." For full details and in-depth analysis, listeners are encouraged to tune into the episode.