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Charles Schwab Market Update Host (0:30)
This episode is brought to you by Schwab Market Update an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com market update podcast or find Schwab Market Update Wherever you get your podcasts.
Jim Cramer (1:00)
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 to Mav Money. Welcome to Kramerica. Other people make friends. I'm just trying to make a little bit of money here. My job, not just entertain, but to educate. Maybe throw in some teachers. Call me at 1-800-743- CNBC. Tweet me imKramer. You might not know this, but I'm a gardener. Pretty lame. Tame hobby by Wall street standards. Built my first garden in 1988. We gardeners, we love sun. We love our flowers. Basking in the glow on a sunny day, we can almost feel the plants grow. But too much sun scorches the heck out of the plants. You can burn out the tomatoes, zucchini leaves, those white freckles that you hate so much. Beanstalks may never appear. So we want rain. We don't just accept it. We coveted I bring this up because rain is to gardening. A sell offs are to the stock market. You should expect them, maybe even hope for them. We just don't realize it at the time. Like today. Dow dip 26 points. SB lost.49%. Nasdaq said.9% was uglier at one point. Pretty ugly. So tonight I want to sing the praises of rainy day sell offs like this. When explain how to use them and why you should like them. First let's look at what happens when you don't get enough rain. That is the Story of the great run up at the end of the dot com bubble from 1999 through the first quarter of 2000. People always referring to but they didn't live through it like I did. If you weren't around back then, you might not know that there was almost no rain in that market. Just scorching sunshine. Day after day we had stocks of worthless companies going up and up and up, nurtured by the sun of reckless bull buying by both individuals new to the market and growth craving mutual funds who just were the scourge of the market. These buyers never took a break. If you got a sell off, it was only for just a couple of hours, not days as buyers could not resist throwing money at anything that looked like an Internet company when that helped them. It was a market full of what we call parabolic moves. That's where stocks go straight up and never even go stairstep. This is a pattern by the way. I don't mind at all what only happened in this Mojave Desert style of bull market. Pretty simple. We went up so much that we were deluged with two things. Secondary offerings from companies. That's right, raising new money. And massive insider selling. Now these bogus stocks moved up on very little by so when they were finally inundated with insider and corporate selling, the stocks just wilted. More than 300 of this newly minted companies in the 1999-2000 period embarked on these wild and crazy trajectories where after gigantic moves, a torrent of selling hit the market and they crushed the individuals and the mutual funds that invested in this dross. People lost hundreds of billions of dollars and many never came back. Now I have spent the last 25 years trying to prevent people from sticking their necks out too far in these kinds of fly by night markets. And I will shout from the rooftops when I see one. When I saw a similar move in the chimerical stocks last year, I labeled it the year of magical investing. To make. To spoof it, make people aware that the whole she bang was living on borrowed time. Sure enough, the entire group collapsed in the fourth quarter. Many people again got hammered, but fortunately nowhere near the destruction of year 2000. Many of you are still with us despite what you may hear right now about the data center and the overextended nature of a handful of stocks. The this period is nothing like that one. Sure, we got too many parabolic moves. But unlike the dot com era, the year of magical investing, the companies that are moving up strongly are real meaning they have sales and earnings and their prospects are extraordinary. Many have great boundaries, especially if they're in memory or storage or processing of data. The bad news though is the if in that sense, Today the Wall Street Journal ran a story that basically said one of the chief pillars of the artificial intelligence rally open I may not be doing as well as you and I thought. It may not have hit key benchmarks as you and I thought. It may have over ordered as you and I thought. And to read between the lines, it may bring the entire edifice down when the company, well, let's just say, tells us the truth. How about that? When I read the piece I was reminded of all the amazing hatchet jobs that I was forced to write my multitude of journalist at haunts when I was younger. They ended up coming easy for me. You know why? Because you just have to pose enough truthful questions that the sum total is a death sentence for whoever you're writing about. After just a few months, you know what? I gave up fighting to be constructive and just decided if my editors wanted a hatchet job, I would give them a hatchet job. This Journal piece was right. My wheelhouse from the old days put the fear of God in people. And you know what? I loved the article. Loved it. Why? Because it gave us the rain I was looking for. We needed some rain to shake out the summer soldiers and the sunshine pictures. Thank you Thomas Payne. This article was filled with such a hailstorm of freight that it finally caused an air related sell off that this market needed so badly. Thank you Journal. It was like rain. But you know what it also reminded me of? Fertilizer. The natural kind. I found it hard to believe that things were as laughable and pathetic at OpenAI, the artificial intelligence kingpin as the article made it sound like what a laughing stock. Hey, maybe that's because. You know what I was thinking? Why do I like? It's because I trust the CFO of Open Air, Sarah Fryer, who I've known for ages and has never bagged me. Now it's entirely possible that she woke up this morning, she said today is the day I'll make a national fool out of Jim Cramer by telling him things are great when they're really awful. But one, I don't think I'm that much of a priority and two, she's too honest for her own good. Sure, open air issues. Oh yeah, but it has not paid to bet against it so far in practice or in theory. Still, if I thought that open I were lucid or nortel Or Global Crossing. This the real, let's just say the worst of the worst of that period. If I thought that you were going to lose money because of this, do you think I wouldn't shout it from the rooftops? I don't play for dinner. Let's go back to the rain metaphor for a moment though. We're on the cusp of the big four tech earnings. Amazon, Alphabet, Met and Microsoft. And that could all disappoint if this article is substance. Honestly that's exactly what this market may need though. We need a shake out of the fair weather soldiers and the fair weather shareholders and we actually need to have some short spilled in. That's what rain does. That's how market can continue. Otherwise it will go bubblicious. We're also seeing a host of other stocks that have gone Parabolic ARM holdings, which I we own for the trust, Dell amd, which I wish we own for the trust and Corning, which reported this very morning these stocks had threatened to touch the sun. Corning flew too close and had its Icarus moment today, tumbling nearly 9%. I told members of the investing club that it didn't really matter what Corning said because it's stocking going parabolic running so much that disappointment was indeed inevitable. Sell, sell, sell. It didn't matter. The company announced two huge clients, something that would have normally sent the stock barreling into the sun instead of reacting to the rain and got clubbed. I say good pointing. You did that too. Even though my trust owned it, owns it. It's what we needed to see. Now do all these power parabolas mean that the entire move is to put. No, not at all. What you can. What can you do to protect yourself from them? Here's an idea. The pros do what we call schnitzeling, taking a little bit out of the stock on each day of the parabolic move. You have 200 shares, you sell 50 and then you wait a little bit, then you sell another 50. If it keeps going higher, don't sell at all. But make sure that you've sold down some. Then if the stock drops 5 to 7% from where you first sold, then you can begin to buy it back slowly but surely 25 shares at a time. The goal is to be able to take advantage of the rain and do some planting further down. Otherwise these cells feel like a seal clubbing expedition where you are the seal. I don't want that. What makes me so certain things are okay? The fourth Industrial Revolution. That's what do I Know if Open Air is going to be the best investment ever. You know what? Frankly I don't care. What I care about is owning the stocks that are best prepared to benefit from the need to have compute, storage and power. The three shortages that are driving the moves like the one in Seagate this very evening. A memory disk drive which just reported the close is up 100 points. Of course I keep the chapter trust diversified. We own a lot of companies for the trust that are not in the more or less maligned datacenter space. We handled the nasty downdraft of tech innuendo when video was 40 or 50 points lower than it is now. We'll handle that too. Here's the bottom. I'm not worried about the rain. My bottom line says newspapers, hedge funds, managers, panelists, commentators, you name it, bring it on. Especially the gas bags who can drum up a storm if they have to. Instead I worry about a lack of rain that will cause this market to self immolate. Fortunately, today we got a nice shower of selling. Don't worry, more showers ahead. Can't handle it. Brian, Umbrella. Brian, North Carolina.