Something will eventually go right in the stock market, it always does, Jim Cramer told his Mad Money viewers Tuesday, after a hideous day on Wall Street. Until it does, however, we need to understand exactly what's going wrong.
There are a number of things wrong with our economy at the moment, Cramer explained. First is inflation, which is looking a lot less transitory than we thought and is instead, beginning to accelerate. New homes in particular are still in high demand and mortgage rates are beginning to rise.
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Next is the rising price of natural gas. Prices are soaring and that's going to crush homeowners with sky-high winter heating bills. There's also the COVID-induced labor shortage and supply chain disruptions. Just about everywhere is hiring, Cramer said, and we're unable to move goods from our ports to where they need to go.
Investors are also worried about the impact of the proposed infrastructure bill. Will the bill, if it passes at all, have any meaningful impact on construction? And if it does, will there be enough workers to build anything?
Finally, Cramer called out the chip shortage. Chips for the auto industry, for example, make up just 4% of the semiconductor industry. It seems like prices will need to rise substantially, or these chips just aren't going to get made in the quantities we need.
Cramer concluded that eventually, at least some of these things will get fixed. Until then, we're likely to see more selling and more chaos in the markets.
Executive Decision: Sonos
Spence said that despite challenging supply chain issues, the future still looks bright for Sonos. The company is still only in 10% of their total addressable market, and once customers start with one Sonos product, they're more likely than ever to expand into other rooms with additional products.
Spence added that we're in a golden age of audio, with more music, streaming and podcasts than ever before, and that doesn't even count first-run Hollywood movies, which demand the best audio experience.
As for those supply chain issues, Spence sees them as short-term delays and nothing that will impact their trajectory long term. He said Sonos customers have thus far shown a lot of loyalty and patience.
Finally, Spence commented on their ongoing patent fight with Alphabet's Google (GOOGL) - Get Alphabet Inc. Class A Report. He said the preliminary ruling came out in favor of Sonos and he expects the final ruling will also declare that Sonos' five patents were infringed by the tech giant.
Off the Charts
In the "Off The Charts" segment, Cramer checked in with colleague Bob Lang to find out what growth stocks investors should be buying into the market's weakness.
Lang first looked at a daily chart of Affirm (AFRM) - Get Affirm Holdings Report, a stock which just made a monster move higher before plunging 11% in today's session. He noted that Affirm has very strong technicals, including the Chaikin Money Flow CMF and MACD momentum indicators. Lang felt that $200 a share is not out of the question.
A similar pattern emerged with the daily chart of Asana (ASAN) - Get ASANA, INC. Report, the work management platform. Shares of Asana dipped 10% Tuesday, but also have strong volume and bullish CMF and MACD indicators.
Investors rarely get a chance to buy shares of online lender Upstart (UPST) - Get Upstart Holdings Inc. Report on weakness, but Tuesday gave them a shot at buying down 5.6%. Lang noted this stock has a near-perfect chart that includes a tight base before exploding higher prior to Tuesday.
Eyes on Warby Parker IPO
IPOs have been having a tough time as of late. With a seemingly endless flood of new offerings, investors are quickly souring on new issues, Cramer said, which is why they need to be wary of the upcoming Warby Parker direct listing which will have the ticker WRBY.
Cramer said Warby Parker has built a great business selling glasses and eyewear direct to the consumer. The company aims to disrupt and modernize the glasses business with innovative technologies and low prices. But despite 25% revenue growth expected in 2022, Cramer said he's worried about the company's listing.
First, Cramer said online eyewear just doesn't seem to be catching on in a big way. Warby Parker still only has 8% market share after 11 years and the company is expanding its retail presence to compensate. Second, Warby is listing as a "B" corporation, which has a "social good" component. While B corps are great for society, they typically tend to be less so for shareholders. Third, Cramer said direct listings tend to fare worse than traditional IPOs or even SPAC deals, although that is not always the case.
But the biggest issue that worried Cramer was valuation. Based on the estimated range, Warby will be coming public at seven times sales, which is far too much for an unexciting Internet retailer, or worse, a brick-and-mortar eyeglass seller with low prices. He advised staying away from Warby Parker.
In his "No Huddle Offense" segment, Cramer asked the question, where have all of the workers gone? Company after company is raising wages to lure workers back, but labor shortages continue across the board.
There are many theories as to why this is happening. First are stimulus checks, which are allowing workers to be picky about the jobs they accept. Another theory is that the tightening of immigration over the past few years has removed a lot of people from the job pool.
But ultimately, Cramer said he thinks COVID is the most likely reason. Many people with kids or elderly parents at home simply cannot go back to work. Others have used the pandemic to rethink their careers, determining that even with higher wages, risking your life by standing next to unvaccinated coworkers just isn't worth it.
What we need is to beat this pandemic, Cramer concluded. Once we have herd immunity things begin to get back to normal.
Here's what Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Tuesday evening:
Matterport MTTR: "This one is too hot. I'm going to take a pass."
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At the time of publication, Action Alerts PLUS had no position in the stocks mentioned.