Stocks will only recover from Monday’s dramatic sell-off if seven key things happen to brighten the outlook for the broader market, CNBC’s Jim Cramer said as the major averages pulled back.
“The thinking behind today’s action is surprisingly simple: money managers are buying the winners and selling the losers,” he said on “Mad Money.” “Unfortunately, there are a heck of a lot more losers than winners, and I want to put that into context because such behavior, frankly, is highly unusual this close to the end of the year.”
One of the things that needs to happen, Cramer said, is the FANG stocks — his acronym for Facebook, Amazon, Netflix and Google, now Alphabet — have to stabilize.
But of all the FANG members, “Alphabet is the biggest conundrum,” he said. Class A shares of the Google and YouTube parent ended Monday trading 2.57 percent lower, at $1,049.36.
“Their stock is pretty inexpensive. They have more than [$]100 billion in cash. They own search. They own online video. They own the self-driving car market, at least for now. I think it’s an outright buy. But no one cares. All this will start mattering at some lower price, though,” he said. “I suspect the bears will come to regret selling it.”
While Starbucks can’t shield itself from the outcomes of the U.S.-China trade war, the company can continue to play “the long game” when it comes to China, Starbucks CEO Kevin Johnson told CNBC on Monday.
“We haven’t seen any significant impacts from the geopolitical situation between the U.S. and China, but that said, we’re not immune,” he told Cramer. “But because we really have built Starbucks in China for China, it really is operating as an entity in China that’s relevant to the consumer, to the culture, and we’re playing the long game.”
China has been a focal point for Starbucks as the coffeemaker’s second-largest market after the United States. In August, Starbucks announced a partnership with Alibaba Group, China’s largest technology company, to boost its digital and physical presence in the People’s Republic.
Click here to watch and read more about Johnson’s interview.
In times of stock market volatility, investors tend to flock to “safe” stocks that offer steady growth and high dividends. But high-yielding securities can come with unexpected risks, Cramer warned Monday as stocks traded lower.
“The risks are enormous if you don’t know the pitfalls,” he told investors. “As much as we love dividends, they’re only worth chasing after if your payout is safe. So if you want some income from your stocks, you need to watch out for red flags.”
The first red flag is when a company has a very high dividend yield, Cramer said. That tends to mean that investors, worried about potential dividend cuts, have been selling the stock and pushing the dividend yield percentage higher.
But the more insidious warning sign is when a company offers an attractive dividend, but can’t pay it consistently because it has loads of debt and poor fundamentals, like the ailing General Electric, the “Mad Money” host said.
Click here to read his full take.
The 2016 presidential election may have sparked concerns about the U.S. voting system’s cybersecurity, but this time, the industry was prepared, FireEye CEO Kevin Mandia told Cramer in an interview.
“We were armed and prepared for this election, and that’s across the board,” said Mandia, whose company provides cybersecurity for enterprises. “That’s FireEye, that’s industry, that’s the operating system companies, that’s the state officials — everybody was shields up, borrowing the old Star Trek term, for this election.”
But while the elections were “pretty darn secure,” in Mandia’s view, the CEO had a lingering worry: cyber-operations that seek to influence voters’ opinions rather than change an election’s results outright.
“That’s a concern that we all should have. It’s very hard, on an anonymous internet, to police that to make sure that not only are we getting truth in what we’re being told, but also getting truth about people’s identities,” he told Cramer. “It’s going to be hard for us to combat those folks that want to influence the hearts and the minds of the American people in an inappropriate way.”
Click here to watch Mandia’s full interview.
Finally, in unpacking Monday’s downward swing in the stock market, Cramer saw some of the leading stocks sending worrisome signs.
“We have precisely the wrong leaders in this market. The toothpaste stocks are going higher; everything that does well in a strong economy? It’s going lower,” he said.
The “Mad Money” host warned when sectors like health care, utilities and consumer packaged goods are strong while the technology cohort is weak, it tends to signal that the economy is approaching a slowdown.
“We need to see a trade deal with China or some sign that the Federal Reserve will wait and see before it hits us with more rate hikes next year,” he said. “The problem? We’ve been getting weaker for some time and the Fed doesn’t seem to care — they’re still very committed to the ‘destroy the economy in order to save it’ approach.”
In Cramer’s extra-special lightning round, he answered current and former U.S. Armed Forces members’ stock questions:
Prudential Financial Inc.: “I like Prudential here. I like the insurers. We are in a deflationary environment, not an inflationary environment. The Fed’s got it wrong and I would say buy, buy, buy!”
Micron Technology Inc.: “No. Not cheap yet. I think that you haven’t seen the estimates cut. As soon as the estimates are cut, then we can look at it. Until then, it can continue to go lower.”
Disclosure: Cramer’s charitable trust owns shares of Alphabet, Facebook and Amazon.
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