Investors looking to bottom-fish the market selloff have a lot longer to wait, Jim Cramer told his Mad Money audience Thursday. Cramer reminded viewers there are five stages of grief, even in the financial markets, but most investors are still stuck in denial.
We all know the five stages of grief. It starts with denial, then anger, then moves to bargaining, depression and finally ends with acceptance. The market's recent scare over inflation and rising bond prices is one we've seen before, which is why Cramer cautioned that we're nowhere near the bottom.
"We need to see a lot more anger, more bargaining to get to acceptance," Cramer said. That process takes days and weeks, and it's painful. That's why Cramer said the only prudent move right now is to raise cash and sell on any strength and not to give in to "bounce buying."
There's only one shortcut to the bottom, Cramer added, and it's the one we saw in February 2016, when investors gave up en masse and stocks suffered a massive "crescendo" selloff over a two-day period.
It remains to be seen if we'll see a similar pattern this time.
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Executive Decision: Splunk
In his first "Executive Decision" segment, Cramer spoke with Doug Merritt, president and CEO of Splunk (SPLK) - Get Report, the data analytics company that saw its shares dip 2.6% Thursday after reporting a strong quarter Wednesday.
Merritt explained that as Splunk transitions from an on-premises to subscription-based cloud software, they really are a tale of two companies. On the cloud side, revenue grew by 83% in the quarter and sees no signs of slowing down. On the on-premise side however, they did see some delayed purchases as companies contemplated whether now was the right time to move to the cloud. Splunk has taken steps to assist customers who find themselves in these situations.
Merritt added that for customers like Shopify (SHOP) - Get Report, Splunk is proving to be an invaluable tool. Shopify is continually updating its platform and adding thousands of new customers, he said. And with all those changes comes terabytes of data that needs to be analyzed for metrics and insights to keep their e-commerce platform running at peak performance.
Cramer said Splunk is the perfect stock to put on your shopping list for when the market selloff is complete.
Executive Decision: FireEye
Mandia said he's been in the industry for 20 years and the attacks just keep on coming. Right now, FireEye is still working on cleaning up the remnants of the massive Solar Winds cyberattack and just this week, we learned of four new zero-day vulnerabilities on Microsoft (MSFT) - Get Report Exchange email servers. Zero-day exploits are those which currently have no patches or fixes available.
Mandia was quick not to place blame. however, stating that developing software is a lot more complex than most people realize and companies are well-intentioned and are doing the best they can.
When asked how FireEye is able to detect intrusions and attacks, Mandia explained that their entire organization is built for investigations big and small. As soon as an anomaly is detected, they spring into action and deconstruct entire systems until they discover exactly what happened and why.
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Oversupply of Shares
The market is already in rough and it's about to get a lot worse, Cramer cautioned viewers. Just as we saw in late-2016 and early-2016, an oversupply of new shares is about to overwhelm demand.
There are three things keeping Cramer up at night. First, the continued deluge of new IPOs continues. Today we saw shares of Oscar Health (OSCR) - Get Report plunge 7.8%, totaling over 11% in losses from its IPO. Investors are clearly losing interest in these deals, Cramer said, and there are more on the way including South Korean e-commerce and more crypto currency players.
The second troubling trend are ongoing SPAC attacks. There are simply too many of these deals as well, Cramer noted, and they're only getting sillier and more desperate. Investors have already begun to shy away after getting burned.
Finally, the worst offender will be the lockup expirations for the IPOs we've already seen. Stocks like Snowflake (SNOW) - Get Report and GoodRx (GDRX) - Get Report will soon be flooding the market with additional shares and there's simply no room in an already weakened market.
The stock market is after all, a market, Cramer concluded. Too much supply can easily overwhelm what little demand is left.
In his No-Huddle Offense segment, Cramer reminded investors that anything that soars like it has no ceiling can also fall like it has no floor. And falling happens a lot faster.
It's a dangerous game when stocks become untethered from reality, Cramer explained. Just look at the social media stocks. When Pinterest (PINS) - Get Report saw better-than-expected growth last year, shares jumped, valuing the company at 100 times earnings. But if Pinterest is worth $50 billion, then what is Snap (SNAP) - Get Report worth at with twice that growth rate? And if Snap is worth twice Pinterest, then clearly Twitter (TWTR) - Get Report is even more.
All of this thinking is great, Cramer said, until we have inflation fears and the value of those future earnings is suddenly worth less. That's why we're seeing the social media stocks plunge, because their valuations were never tied to anything concrete in the first place.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Thursday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position in AMZN.