How worried should investors be about the weakness in the Chinese economy? Jim Cramer told his Mad Money viewers Tuesday that the Chinese economy is increasing in importance, but not for the reasons you may think. When it comes to the stock market, what matters most is the outcome of the ongoing trade wars, Cramer explained, and it's easy to think that with the Chinese economy slowing, President Trump may decide to play hard ball and walk away from the current trade talks.
Conventional wisdom has always said that the Chinese had the upper hand in the trade war. As an authoritarian regime, the Chinese could simply wait out the changing political climate in America, the theory went. But as the Chinese economy continues to deteriorate, it creates instability that could upset President Xi's balance of power.
Cramer said it's completely logical that Trump, after learning of this instability, may decide to start making impossible demands and simply walk away from the current talks in order to procure a better deal later. That would be great for the U.S. economy overall, but could spell bad news for stocks in the short-term. Cramer said he's worried about Micron Technologies (MU) and the semiconductor equipment makers, along with 3M (MMM) , Caterpillar (CAT) and Boeing (BA) , as well as Apple (AAPL) , an Action Alerts PLUS holding.
Cramer recommended investors look at companies without Chinese exposure, such as the FANG stocks. Amazon (AMZN) doesn't worry about China, he said, and you shouldn't either if you own the stock.
Executive Decision: Intuitive Surgical
For his "Executive Decision" segment, Cramer sat down to speak with Gary Guthart, CEO of Intuitive Surgical (ISRG) , the surgical robotics maker that recently posted a minor earnings miss, but has still seen its shares rally 14% for the year.
Guthart said his company's products help hospitals deliver better outcomes for patients at lower costs. Doctors performed one million procedures using Intuitive's DaVinci robot last year alone. Overall, DaVinci has been used over 6 million times and is growing at 18% annually.
Intuitive's latest robot, called Ion, is expected to be a game changer for lung cancer, Guthart explained, as it allows definitive diagnoses to be performed faster than ever before. Guthart said Ion is expected to do well in markets like China, where air pollution has caused an increase in lung cancer and lung diseases. He said overall, Intuitive Surgical has a great business in China.
Cramer said whenever the broader markets decline, investors should be looking at companies like Intuitive Surgical.
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Off the Charts: FANG
Looking at a daily chart of Facebook, Fitzpatrick noted the stock has finally risen above its key 200-day moving average. The chart's Bollinger bands suggest a volatility squeeze may propel the stock above $170 a share. But Fitzpatrick also noted that a fall below $150 would invalidate his bullish thesis.
Alphabet displays a similar pattern, with the stock rising above its 50-day moving average in January and above the 200-day last week. All of this action has been on rising volumes, which confirm the move.
Finally, there's Amazon, which has been struggling to break above its 200-day average. Fitzpatrick felt it was too early to buy Amazon, but Cramer took a long-term bullish stance on the company and said he'd be buyer.
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Executive Decision: Square Capital
In his second "Executive Decision" segment, Cramer sat down with Jackie Reses, head of Square Capital, the lending arm of payment processor Square (SQ) .
Reses explained that Square Capital is empowering small businesses by providing access to capital where previously there had been none before. Because Square can see a merchant's payment activity as it happens, they know that small business better than anyone else, she said. Loan offers appear right on the payment terminal and cash can be made available the next business day.
Best of all, merchants can pay back their loans using the swipes, Reses said, paying nothing on slow days and a percentage of sales on busier ones. The average time to repay a loan is 10 months, she said, and the default rate is below the industry average at just 4%.
Square is also helping small business with their Square debit card, which allows businesses to spend against their daily receipts, giving the the most flexibility possible to buy more supplies, make repairs and grow faster than they could otherwise.
Cramer said Square truly is empowering the new economy.
Bears Making Noise
In his "No-Huddle Offense" segment, Cramer pondered why the bears always seem so passionate about their position, while the bulls waver.
Just look at Salesforce.com (CRM) , which delivered a great quarter, but with tepid guidance for the next quarter. The bears immediately pounced on the stock, driving shares lower. But Cramer reminded viewers that Salesforce has been delivering on its estimates for over a decade and all along the way, the bears have been dead wrong.
Every time there's a decline, the bears are quick to make noise, Cramer said, but ultimately, every decline has merely been a speed bump on the company's path to revenues and later, to profits. This time, he said, will be no different.
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