Fed chair Jay Powell made one thing clear Wednesday, he's willing to crush inflation by any means necessary, Jim Cramer told his Mad Money viewers. And if history is any guide, that means this is the beginning of a great buying opportunity.
Cramer said for as long as he's been investing, the market has always had a love-hate relationship with the Federal Reserve. Fed chiefs are always criticized at the time, but remembered fondly years after they stop down.
Powell will likely be no exception. It's easy to say today that Powell was too slow to act, but years from now he will be remembered as the one who took a tough stance on inflation and issued the biggest interest rate hike in nearly 30 years to put it to rest once and for all.
Powell signaled that he's not worried about unemployment and will risk job losses in order to cool the economy. That tough stance gave the Fed a lot of credibility, which is why bond prices immediately responded to the news.
Powell is betting that job losses will be followed by a quick job recovery, but only after inflation is stopped in its tracks. Historically, that's great news for high-growth tech stocks, which should be among the first sectors to recover.
One sector that should also recover, but didn't Wednesday, is the banks. The banks will be making a lot more money with higher interest rates, and loan losses are likely to remain low as the consumer is, by and large, in great shape.
The markets demanded that Powell get inflation under control, Cramer concluded, and that's exactly what history will remember him for doing.
Why Isn't Gold Higher?
With fears of recession growing by the day, why isn't gold trading higher? Gold is the go-to commodity when times get tough, but gold prices have barely budged this year. Shares of Cramer's favorite gold miner, Barrick Gold (GOLD) , are up just 3% for the year.
Gold prices topped out in 2020, as the pandemic began, and have been range-bound since then. That top perfectly correlates with the rise in cryptocurrency, which has been long touted as "digital gold" and the hot, new thing that will make gold obsolete.
But with cryptocurrencies collapsing around the globe and a recession on the way, Cramer said it might be worth taking a second look at Barrick Gold, as the company remains the best gold producer in the world. Barrick is expected to earn $1.15 a share this year, which puts shares at just 17 times earnings.
With Barrick's current valuation, and its new variable dividend strategy, Cramer said the stock is a steal at current levels.
Watch Out Below
"We don't care where a stock has been, only where it's going," Cramer is fond of saying. But sometimes, a stock that's come down a lot can still go lower, which is why investors need to watch out for the warning signs.
Cramer recalled how he invested in the old Bethlehem Steel, which had fallen precipitously and was trading at just two times earnings. After making the trade, the stock never recovered and Bethlehem Steel filed for bankruptcy.
That hard lesson reminded Cramer of another steelmaker, Cleveland-Cliffs (CLF) , which has been cut in half, from $34 a share to just $18 where they represent just three times earnings. Cleveland Cliffs loses money as the economy cools, which means the stock can sink even lower if the economic slowdown is worse than expected.
There are better stocks to play, Cramer said. If you want steel, go with Nucor (NUE) at four times earnings. You can also consider Toll Brothers (TOL) , also at four times earnings. The housing market is cooling, but this high-end home builder may come out unscathed.
Executive Decision: Dutch Bros.
In his "Executive Decision" segment, Cramer spoke with Josh Ricci, president and CEO of Dutch Bros. (BROS) , the coffee chain that cut its forecast earlier this year as the economy slowed.
Ricci admitted that the slowing trends they saw in the second quarter are continuing, although May sales saw some improvement. He said sales from regular customers in the mornings remains strong, and it's only the afternoon discretionary business that has softened.
Dutch Bros. has already raised prices to combat inflation. Ricci noted that materials prices are starting to drop, but labor prices remain high.
Speaking of labor, Ricci noted that after the "great resignation," Dutch Bros. has seen a "great application" as people realize the company is a great place to work.
Despite the slowdown, Dutch Bros. is continuing with its growth plans. The company plans to open 130 new locations this year and Ricci said they are still on track to deliver.
In the Lightning Round, Cramer was bullish on Woodside Energy Group (WDS) , Eli Lilly (LLY) , Applied Materials (AMAT) , AMN Healthcare Services (AMN) , Planet Fitness (PLNT) , SoFi Technologies (SOFI) , Medical Properties Trust (META) and Meta Platforms (META) .
Speculators or Investors?
In his "No Huddle Offense" segment, Cramer said it's imperative the Federal Reserve turn speculators into investors. The way to do that, he said, is to wipe out the speculators.
Over the past two years, we've seen a scourge of SPACs and IPOs come to the market, many with little more than a name and a business plan. This is a symptom of easy money, Cramer explained, and now that interest rates are rising, the market is finally getting some discipline.
But there's another area of speculation that the Fed has in its sights and that's cryptocurrency. There's nothing tangible behind the sky-high prices Bitcoin has seen in recent years. That's been a hard lesson for crypto investors to learn, but it's a vital one for the health of our economy.