Sell or Hold?: Cramer is "Mad Money"; Recap (Monday 10/29/18)
If the Federal Reserve does not change the course soon, we may be on the way to a new decline, Jim Cramer warned his Mad Money viewers Monday. The current weakness of the market has all sores of past recession, he said, as well as some that we have never seen before.
In October 1987, the machines were unable to work and the market stopped, Cramer recalled. In today's market, these machines have been replaced by algorithms, and nobody really knows what to do next.
In 1998, a company called Long Term Capital imploded, which led to forced sales days, just like markets experienced last week. A year later, in 1999, Fed again indicated that interest rates were headed higher, but days later, the course changed, something Cramer said that Fed is left in today's market.
In the dot-com collapse in 2000, tech shares were highly overrated and crashed back to earth in spectacular ways. Today's market has some of the technological revaluation, but today's prices are not close to the levels they were in 2000.
The last major market decline was in 2008 when a fed Fed chose to raise interest rates, ignoring all warning signs. Cramer said he hopes the Fed will not take this route again and sees the current weakness of homes, cars, oil, paper and other goods.
While we do not have systemic risk today as we had in 2008, the signs of a cyclical downturn are visible in the commonplace.
But what might be the scare of all tariffs, Cramer concluded. The markets have never seen anything like our current trade war, he said, and it should give a Fed break, as Trump's continued tariffs probably already have the same effects as all of Jay Powell's promised interest rate hikes for the whole of next year. [1[ads1]9659002] About Real Money, Cramer talks about what can happen if the Fed does not change the course. Get more of his insight with a free trial of real money.
What's worse: Tariffs or Fed?
With a president and a federal reserve that seems unable to change, it does not look good for shares that Cramer admitted. But what's worse for the market, more fares or higher interest rates?
Cramer said today's market was cruised quite well before the news broke that President Trump plans to beat charges on all Chinese goods if the next round of conversations did not yield results.
In the meantime, we heard more hard chats from Fed on Friday that today's market failure will not affect their interest rate decisions.
Cramer said it is clear that both Trump and Fed are focused on their goals and both are bad for Wall Street, especially in combination. The reaction of the market to these threats is quite rational, he said, as apparently there is nothing to hide.
The good news, if you can call it, is that both of these situations are man-made and are easily reversible. We can only hope that one or the other (preferably both) will change soon.
Executive Decision: IBM
For its Executive Decision Segment, Cramer joined Ginni Rometty, CEO, IBM (IBM), and Jim Whitehurst, President and CEO of Red Hat (RHT) to discuss today's announcement that IBM will acquire Red Hat. Shares in IBM dropped 4% on the news, Red Hat increased 45%.
Rometty said that when businesses move to the cloud, the first 20% were simple, but the remaining 80% would be much harder and that's where a combined IBM and Red Hat can help. IBM continues to reinvent itself, she said, and this acquisition is the latest disturbance in the cloud computing landscape.
Whitehurst explained that Red Hat will be Red Hat and help customers grow on any skate platform they choose. The acquisition is only about scale, as IBM can help Red Hat to get into the corners of the business that were unavailable to them.
Rometty assured investors that IBM will continue to increase the yield and remain in a strong financial position, with $ 15 billion in cash and strong cash flows for the future. She said that there is plenty of capital to drive both organic growth and further acquisitions.
Cramer and AAP team trimmer Kohls (KSS) on strength. Find out what they tell their members of the investment club and get in touch with a free trial subscription to Action Alerts PLUS.
Resolution: Columbia Sportswear
In his second "Executive Decision" segment, Cramer checked back with Tim Boyle, president and CEO of Columbia Sportswear (COLM), a company reporting the accident in the middle of the previous week's brutal selloff.
Boyle began to say that Columbia takes its commitments to its shareholders seriously and after 80 years in business, has a solid management team and board that is able to lead the company through any environment. In the summer of 2017 Columbia stared at a new initiative called Connect, which aims to streamline their global operations for optimal efficiency. Boyle said that the return from these measures just started now and will be fully realized in 2019 and beyond.
When asked about the impact of tariffs on their business, Boyle said that tariffs have the potential to make significant damage to the US economy. Only 30% of Columbia's sales are outside the US, but their products are collected globally. Any trade barriers will have an impact, especially on footwear and clothing, which already have high tariffs to begin with.
But regardless of tariffs, Boyle suggested that Columbia differs from innovation and a brand as opposed to others. Cramer agreed to call the company a modern technological clothing art.
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