As stocks turned positive towards the end of Friday’s trading session, CNBC’s Jim Cramer warned investors not to get too cheery about Wall Street shrugging off the escalating trade war.
“Many bulls were heartened that the stock market clawed its way back up and at one time was almost even, despite the tariffs. I question that logic,” the “Mad Money” host said.
Going over his weekly game plan, Cramer expected Washington’s “tit-for-tat tariff situation” with Beijing to come into focus on Monday after President Donald Trump’s Friday statement in which he revealed plans to place tariffs on up to $50 billion worth of Chinese goods.
China swiftly responded to the release, placing its own tariffs on a host of U.S. products including automobiles that were slated to take effect on July 6.
And while some market-watchers think the trade debacle with China could dissipate because of its negative impact on geopolitical relations and stocks, Cramer wasn’t so sure.
“Trump believes that we need to stand up to China, even if it ends up hurting business here in the United States and sending the stock market down,” Cramer said.
He added that Trump’s seemingly unwavering position would likely continue to weigh on stocks as the market entered Monday’s trading session. And even if news that China approved Qualcomm’s purchase of NXP Semiconductors turns out to be true, Cramer didn’t expect the president to budge.
“If we come in on Monday and we hear that that deal is done, that will be viewed as a signal that China doesn’t want any additional escalation,” he said. “The thing is, while that signal may send a positive message to Wall Street, I don’t think the intended audience — President Trump — will actually even care.”
Sign up and buckle up: consumers are embracing a new long-term trend that has become so powerful and pervasive that Cramer can’t ignore it.
“The best secular trend out there right now? … I think it’s the rise of the subscription economy, the legion of companies that make their money by selling some kind of subscription service, often in industries where we never even realized subscriptions could make any sense,” Cramer said.
After speaking with the founder, Chairman and CEO of Zuora, a newly public software company that sees itself as a “pure play” on the subscription economy, Cramer’s perspective on the trend completely changed.
“Like it or not, the subscription economy is the future and the companies that understand that are making a fortune,” Cramer reflected before getting into his favorite stocks in the space.
Cramer has spent hours trying to figure out why the bank stocks failed to rally after the Federal Reserve’s announcement that it would hike interest rates four times in 2018 instead of three.
He reviewed all the conventional wisdom: that a flatter yield curve is suppressing what would otherwise be stronger lending revenues; that mortgage loans are tapering off because of higher rates; that Wall Street is still awaiting the Fed’s stress tests to make a lasting determination on stocks like Citigroup, J.P. Morgan and Goldman Sachs.
But the “Mad Money” host still wasn’t totally satisfied.
“As I wrack my brain, I come up with one plausible — and yes, existential — answer,” he said Friday.
“There are plenty of younger portfolio managers who think the banks are like Sears and J.C. Penney: they’re old-line brick-and-mortar stores that are about to lose their relevance thanks to all sorts of new technologies from bitcoin, blockchain, PayPal [and] Square,” he said.
For more of his analysis on why the bank stocks are sliding, click here.
With Centene’s acquisition of rival health insurer Fidelis Care nearing a close, Centene Chairman and CEO Michael Neidorff sees his enterprise-facing company reaching new heights in the year ahead.
“We know the contracts we’ve sold, the deals we’ve done,” he told Cramer in a Friday interview. “You take that going into ’19, it says we’re going to be a $69-plus billion company next year, up from $60 [billion] this year.”
The strength will likely center around the Fidelis acquisition, which Neidorff said will elevate Centene’s already massive business even more.
“They’re really happy to be joining us because they know the systems we have. Our systems are going to help them do a better job medically managing,” the CEO said. “It’s just a great combination, great people, it makes us No. 1 in New York [and] it puts us as the largest player in the four largest Medicaid states.”
Cramer also heard from Barry Pennypacker, president and CEO of The Manitowoc Company, in an exclusive interview. Pennypacker said that while the rest of the market frets about tariffs, his crane manufacturer is taking them in stride.
“We’re not really too worried about that,” he told Cramer. “If you were a good leader of a company and you realized that President Trump wasn’t going to put the tariffs in place when he was being elected, then you were living in a bubble. So we put contingencies in place right then and there.”
As a result, Pennypacker’s company, whose cranes are used to build wind-power mills and in the oil and gas industry, was able to stem the impact of Trump’s steel and aluminum tariffs.
“We knew exactly what was going to happen, we looked at the particular areas that we thought we were going to be affected by and we’ve changed around the different sourcing methods and, you know, we’re not worried about it,” Pennypacker said Friday.
In Cramer’s lightning round, he shared his take on callers’ favorite stocks:
Celgene: “It’s just a weak hold right now. I’d rather own a Super Bowl ring, frankly, from the Eagles than that one. I just don’t think that that company has any momentum and any new drugs that I really am excited about.”
Altria Group, Inc.: “I think it is not a buy. I don’t even know if I want to hold it here because there are technical challenges now that hurt PM that eventually could hurt Altria and I’m not recommending any tobacco stocks. It’s just too late in the game for me. I’ve seen too much, too many people dying. I’m not going there anymore. Sometimes I don’t play for dinner on this show. I can take a stance like that because there’s just been too much bad that I’ve seen in my life.”
Disclosure: Cramer’s charitable trust owns shares of Citigroup, J.P. Morgan, Goldman Sachs and PayPal.
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Source: Tech CNBC
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