Market risk and systemic risk are two very different things, Jim Cramer told his Mad Money viewers Tuesday. Systemic risk is bad news that's so bad you can't profit from it. But market risk is the opposite. Market risk is bad news that creates opportunities to buy your favorite stocks at deep discounts. The key is knowing which risk you're dealing with.
For many investors, the impending collapse of Chinese land developer Evergrande is systemic risk, the Chinese equivalent of the collapse of Lehman Bros. But Cramer takes a contrarian view. The failure of Evergrande will certainly impact the Chinese economy, he said, but the Chinese government has the power to dictate how far the pain will spread.
Over on Real Money, Jim Cramer says there are rules to help investors win in markets like this. Read more as he explains why the bold ones who buy into the moment of ugliness get to score, but only if they follow this advice.
That means when the selling subsides over the next two days, it will be time to buy some of your favorite stocks. For Cramer, that means shares of Adobe Systems (ADBE) - Get Adobe Inc. Report, along with Airbnb (ABNB) - Get Airbnb Report, User (UBER) - Get Uber Technologies, Inc. Report and Doordash (DASH) - Get DoorDash Report.
Airbnb, which was featured on Monday night's show, is a real COVID winner, Cramer explained, and the company told us it has a lot of growth ahead. The same with Uber, which expanded from ride sharing into delivery, making it one of only two large-scale services left. The other service left standing is DoorDash, which has expanded beyond the big city and into the suburbs.
If you want to win in this declining market, you either go with stocks like these, the real winners, or you pack up, go home and wait for the selling to end.
Executive Decision: Salesforce.com
In his first "Executive Decision" segment, Cramer spoke with Marc Benioff, chairman and CEO of Salesforce (CRM) - Get salesforce.com, inc. Report, who was in the middle of the company's annual Dreamforce user conference.
Benioff said that at this year's conference, he's delighted to see more companies making trust and safety, along with equality and diversity, their top priorities. He said we all need to pull together and do what's right, which is why it's unacceptable for companies like Facebook (FB) - Get Facebook, Inc. Class A Report to continually let us down by allowing the spread of massive amounts of misinformation. People's lives and safety are at risk, he said.
Speaking of doing their part, Benioff called attention to Salesforce's philanthropic endeavors, including the company's non-profit foundation and commitment to help plant one trillion trees to help combat global warming.
Benioff also responded to criticism that platforms like Salesforce allow companies to downsize their workforce. He said in reality, by focusing on their customers, companies tend to add employees to their workforce, not lay them off.
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Off the Charts
In the "Off The Charts" segment, Cramer checked back in with colleague Larry Williams. Viewers may recall that two weeks ago, Williams correctly predicted the late-September swoon, a powerful 23-year seasonal trend. Cramer now asked Williams for his favorite stock to buy once the selling subsides. According to Williams, that stock is IBM (IBM) - Get International Business Machines (IBM) Report, which currently sports a 4.9% dividend yield.
Williams first looked at a weekly chart of IBM overlaid with a dominant cycle chart. He noted that a 72-week cycle worked best and predicted IBM will make its next low in late October.
That prediction fell in line with William's next chart, which overlaid IBM's share price with interest rates. This chart showed that more selling is likely in September, with a move higher likely through year end.
IBM's seasonal pattern also confirmed the October lows and rally going into the fourth quarter. Williams then used his proprietary Panic Indicator to note that any time the panic indicator tops 20, it's a great time to buy IBM. The panic indicator is not quite at 20 yet, but could easily get there as the market continues to sell off.
Executive Decision: Adobe Systems
For his second "Executive Decision" segment, Cramer also spoke with Shantanu Narayen, president and CEO of Adobe Systems, which just delivered a three-cents-a-share earnings beat. Shares of Adobe are up 29% so far this year.
Narayen explained that Adobe's vision is to allow companies to engage directly with their customers, whether that be through a digital presence, data and analytics, content, or commerce. Throughout the pandemic, companies have been creating more content and documents with Acrobat and expanding their digital presence with increased digital commerce, he said, all of which plays to Adobe's strengths.
When it comes to enterprise software companies, there are very few players that offer business and consumer products, Narayen added, but Adobe has a strong presence in both areas. That's why they have many A-list companies as customers, including Walmart (WMT) - Get Walmart Inc. Report, PayPal (PYPL) - Get PayPal Holdings Inc Report and many more.
As companies make their digital transformations, they need a playbook for success and Adobe provides them with that roadmap.
When to Buy Even if it Hurts
In his "No Huddle Offense" segment, Cramer told viewers the trick to understanding these bizarre market openings. He said when the markets are opening down more than 2% and there's a 10:1 sell-to-buy ratio, that's the time to buy, even if it hurts.
Cramer said at his old hedge fund, he'd buy deep-in-the-money call options with a strike price below where a stock currently trades. Then he'd short the stock against those call options.
Using options and shorting stocks is not for the novice investor, however. Cramer said to avoid selling short unless you really know what you're doing. That said, this strategy is a great way to make money in times of volatility
Here's what Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Tuesday evening:
Celularity CELU: "Nobody likes it, but if you buy it here you might get lucky."
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At the time of publication, Action Alerts PLUS had no position in the stocks mentioned.