Believe it or not, prudence is still a virtue, Jim Cramer told his Mad Money viewers Wednesday. He reminded them that while bulls make money and bears make money, hogs always get slaughtered.
In his 40 years on Wall Street, Cramer said he's learned a few key lessons. The first is that no one ever got hurt taking a profit. You can bet with stocks. You can bet against stocks. But when you make some money, take some to the bank.
This is a hard lesson for the meme stock traders, who believe that selling is a sin and anyone who cashes in is the enemy. But contrary to their beliefs, it's not a sin to take profits in GameStop (GME) - Get Report, AMC Entertainment (AMC) - Get Report or even Wendy's (WEN) - Get Report after Tuesday's big gains.
"Caveat emptor," (buyer beware) reigns supreme on Wall Street, and while it may not seem likely, it's actually quite possible you can lose everything if you're not being prudent with your money.
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Executive Decision: CrowdStrike
In his first "Executive Decision" segment, Cramer spoke with George Kurtz, co-founder and CEO of CrowdStrike (CRWD) - Get Report, the cloud security provider that reported strong earnings last week with 74% annual recurring revenue growth.
Kurtz said cybercriminals are very resilient and have now latched onto the software-as-a-service trend to offer hackers ransomware-as-a-service. He said these services provide even novice hackers all the tools and techniques they need to deploy and activate attacks on a scale we've never seen before. They even go as far as taking a percentage of the ransom collected.
Hackers have also moved upstream to target the largest enterprises with sophisticated attacks that offer big paydays. However, for most attacks, older technology is still the target as there are plenty of holes to exploit.
CrowdStrike sets itself apart however, as it uses both artificial intelligence and the power of the crowd to detect attacks and protect against them faster than any other provider.
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Cryptocurrency and Stablecoins
What's the weakest link in the largely unregulated cryptocurrency market? It could be a stablecoin known as Tether.
Cramer explained that many cryptocurrencies are simply too volatile to use as actual currency. It's pretty hard to pay for something when the value of your tender changes by 5% or 10% a day. Enter the so-called stablecoins, which are pegged to "stable," non-digital assets, like the U.S. dollar, and act as an intermediary.
The most popular stablecoin is Tether, which now accounts for 14% of all Bitcoin transactions. The company behind Tether however has been embroiled in a fight with the New York Attorney General and is currently banned from doing business in the state of New York.
Tether USDTUSD is a cryptocurrency with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex.
The issue lies in Tether's disclosures and the nature of its reserves. While telling investors that its coin was 100% backed by dollar reserves, the company now claims its reserves "may sometimes include" other assets. In reality, only 75% of Tether's coins are backed by cash, with the rest in commercial paper of unknown origin, Cramer said.
This is a big problem, because if the U.S. economy tanks, Tether's reserves and its business could evaporate.
Cramer reiterated that he's a big believer in cryptocurrency and that's why he's so worried over the lack of transparency at Tether. The crypto market needs legitimate, stable players and not these types of shenanigans. He told viewers that they should have up to 5% of their portfolios in cryptocurrencies, but he'd steer clear of Tether until the company comes clean about their holdings.
Continuing with his focus on cryptocurrencies, Cramer spoke with Timothy Massad, former chairman of the Commodity Futures Trading Commission and a leading expert in cryptocurrencies.
Massad explained that stablecoins act like the chips you get in a casino. They're an easy way to move money around from table to table and they make cashing out at the end of the night. Tether has become a very important player in the stablecoin market, with a market cap of $60 billion.
The problem with Tether lies in its holdings, Massad continued. It's quite possible that if everyone decided to cash out all at once that one Tether dollar might not equal one U.S. dollar as they claim. Some 13% of Tether's $60 billion holdings are in secured loans, but no one knows loans to who.
Massad said that integrity is an important part of any financial system, and we simply don't know all of the linkages that exist between Tether and the rest of the crypto market. Without better regulations, we could be putting the entire system at risk.
Anecdotal Evidence and Real Data
In his "No Huddle Offense" segment, Cramer said that sometimes, anecdotal evidence can pile up and turn into real data. Case in point, Activision Blizzard (ATVI) - Get Report and Thor Industries (THO) - Get Report, two companies recently featured on the show.
After airing the piece on Activision, Cramer said he's been inundated by family, friends and viewers all confirming the company's view that a big part of gaming is the social element of playing with others. He also heard from a slew of people that they too are trading up the RVs, as Thor explained, now that the pandemic is finally receding.
Yet both of these stocks remain in post-pandemic ruts, as many investors feel the best days have already passed.
Cramer said he's received enough feedback to believe the contrary. Both Activision and Thor Industries remain terrific long-term buys, he says.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Wednesday evening:
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At the time of publication, Cramer's Action Alerts PLUS had no position in the stocks mentioned.