After news that the United States and China reached a momentary truce on trade pushed stocks higher on Monday, CNBC’s Jim Cramer broke down some of the side effects of better relations.
“Right now, many of our companies are forced to have these 50-50 joint ventures with local Chinese affiliates if they want to operate in China. That, of course, crimps their profitability,” the “Mad Money” host explained.
“More important, though, is that the Chinese get invaluable information about what our companies do and how they make what they make,” Cramer added. “Those joint venture partnerships are then able to pretty much steal our intellectual property. That’s a major sticking point.”
But after National Economic Council Director and former CNBC host Larry Kudlow told CNBC’s “Squawk on the Street” that these joint ventures could potentially unravel, Cramer got more bullish on the prospects of trade talks.
“Maybe [U.S. companies] can go solo. They might be able to simply sell their products without giving away the store,” Cramer said. “That would be huge.”
Cramer also wanted to verify the strength of Monday’s rally.
“While we often act like only the large-capitalization stocks like Caterpillar and Boeing … are really in the crosshairs here, the truth is it’s much, much bigger than that,” he said on Monday. “So […] let’s talk about why this rally actually makes a lot of sense.”
Cramer argued that in reality, China’s influence over the U.S. economy largely hinges on what Chinese companies sell into the U.S. market.
“A full-blown trade war could make life very, very expensive for most Americans,” he said.
As the Dow Jones industrial average crossed the 25,000 level for the first time since March, Cramer zoomed in on a group that reflected investors’ relief over the temporary truce: retail.
Epic Games’ “Fortnite” has taken the world by storm, slashing gaming giant Activision Blizzard’s market value by billions and becoming the biggest esport on the planet.
But if you ask Strauss Zelnick, the chairman and CEO of video game developer Take-Two Interactive Software, the free-world, survival-based mega-hit is actually helping the industry.
“There seems to be a good deal of evidence that those who are playing ‘Fortnite’ are new to the category,” Zelnick told CNBC in an interview with Cramer.
“It apparently speaks, at least anecdotally, to a younger audience,” Zelnick, whose company makes the popular Grand Theft Auto and NBA 2K franchises, said on Monday.
Shares of Zillow sank when the company said it would start flipping homes, but Zillow Group CEO Spencer Rascoff told CNBC that the move would have a bigger payoff than investors might think.
“We think of it like Netflix moving into originals,” Rascoff told Cramer in a Monday interview. “They used their data advantage and then they built that muscle memory, that DNA, to be creative. And it was a big swing for them and obviously it’s created a huge business.”
Zillow’s plan, called Instant Offers, will allow home sellers to use the company’s online database to compare offers from potential buyers including Zillow itself.
If Zillow wins the offer, the company will aim to flip the home within 90 days and re-list it as quickly as possible with one of its premier real estate agents.
Cramer also heard from International Flavors & Fragrances Chairman and CEO Andreas Fibig, whose specialty chemicals company recently purchased competitor Frutarom for $7.1 billion in cash and stock.
“It’s very complementary,” Fibig said of Frutarom, which will make IFF the No. 2 flavor and fragrance producer in the world. “We believe that this can help us a lot to accelerate our profitable growth going forward.”
Frutarom will give IFF access to smaller companies and more “naturals,” both of which are becoming increasingly popular among consumers, Fibig told Cramer.
“I would say we have done a very good job already [with] naturals, but they have some supplemental platforms we don’t have,” the CEO said. “That could be very, very helpful for us going forward to satisfy that consumer demand, which is probably here to stay with all the millennials and all the consumer interviews we are doing every year.”
In Cramer’s lightning round, he zipped through his take on callers’ favorite stocks:
Valeant Pharmaceuticals International: “No, [don’t ring the register]. [CEO] Joe Papa’s doing a great job. Now, it is not going to run fast, OK? But it has had a great move, Joe is doing so much good, he’s got a good pipeline, fixing the balance sheet, got ’em out of legal trouble. I can’t tell you to take profits. I think it could still go higher.”
Okta, Inc.: “I can’t tell you to pull the trigger. It’s up almost 100 percent. It’s a very good company, but that is way too much for me to be able to come in and say buy, so I’m going to say hold.”
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Source: Tech CNBC
Cramer Remix: Joint ventures in China may be a thing of the past