Wall Street freaked out last year when the Federal Reserve cut interest rates aggressively to combat COVID, and some are freaking out again now that Federal Reserve Chair Jerome Powell intends to keep rates low. That was Jim Cramer's take on Thursday's head-scratching selloff. Low interest rates are historically good for stocks, but not for all stocks.
Cramer explained to his Mad Money viewers that when inflation is on the rise, future earnings from high-growth tech companies become less attractive. That means money managers rotate out of growth and into cyclicals and the financials.
Normally, that wouldn't be a big issue, but with so many tech stocks flooding the market, there's a lot of selling left to do.
But the bigger issue remains, are investors right to be worried about inflation? Cramer thinks not. He said many of the rising commodity prices are only transient. Oil prices have already begun to decline as OPEC loosens restrictions. Plastic prices will come down once many of the plants in Texas come back online after crippling storms. And the lumber shortage could be fixed with a call to our neighbors to the north, Canada. Interest rates can't grow trees, after all.
Even the shortage in semiconductors is partially a short-term problem, as many chips are stuck on ships due to labor issues at our ports. Chips are also typically shipped in the cargo holds of commercial flights, and we still have a shortage of those.
Cramer said Powell is right to prioritize unemployment over inflation. Jobs are a long-term issue, inflation is not. In the meantime, investors need to remain patient until this wave of selling subsides.
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Executive Decision: Magna International
In his first "Executive Decision" segment, Cramer spoke with Swamy Kotagiri, CEO of Magna International (MGA) - Get Magna International Inc. Report the auto parts and assembly giant with shares up 250% over the past year. Shares of Magna currently trade for just 12 times earnings.
Kotagiri explained that Magna is not just a car-parts assembler anymore. Instead, they call themselves a $40 billion technology startup with a 60-year history. All of Magna's end markets add up to over $3 trillion.
Despite popular belief, Kotagiri said Magna is actually agnostic when it comes to propulsion systems. He said 70% to 80% of the parts and systems they manufacture appear in both combustion engines and electric vehicles.
When asked about electric vehicles, Kotagiri said they're very excited about their partnerships with Fisker (FSR) - Get Fisker Inc Class A Report. He said they've been partnered with the electric vehicle maker since the early stages, and Fisker has benefited from their vast knowledge of systems and integrations. Magna currently works with dozens of OEM partners and there's nothing preventing them from working with additional partners in the future.
Executive Decision: Williams-Sonoma
For his second "Executive Decision" segment, Cramer also spoke with Laura Alber, CEO of Williams-Sonoma (WSM) - Get Williams-Sonoma, Inc. Report, the home goods retailer that surged 18.4% on strong fourth-quarter results.
Alber said while 2020 was a difficult year for everyone, it was also a year when Williams-Sonoma got to clarify their values to customers. As a result, customer satisfaction has never been higher.
Williams-Sonoma spent a lot of time working on their namesake brand, Alber added, and all of their initiatives have paid off. The company saw e-commerce sales jump 47.9% in the quarter.
Alber said they're a purpose-driven company. Customers care about things like sustainability, she said, and now that there are more people buying sustainable products, the prices for these goods are starting to come down.
It was only one year ago today that Williams-Sonoma closed their stores across the country for the pandemic. Thursday, she said, they're ready to welcome customers back as restrictions lift and the economy reopens.
Executive Decision: AppHarvest
For his final "Executive Decision" segment, Cramer checked in Jonathan Webb, founder and CEO of AppHarvest APPH, the sustainable farming company that recently came public via a reverse merger with a special purpose acquisition company.
Webb said that everyone knows the U.S. has problems with our food supply. Most of our fruits and vegetables are grown in Mexico and spend days or weeks on trucks before they arrive in stores. In many cases, these items are genetically modified, not for taste or nutrition, but so they can better survive their journey, he said.
The best place to grow fruits and vegetables is in your own backyard, Webb said, but the next best place is AppHarvest, located in Kentucky. Using sustainable techniques, AppHarvest is growing 30 times more per acre than traditional farming using 90% less water. He said the company is only one day's drive from most major markets.
AppHarvest was created as a public benefit corporation, one of only a handful where purpose leads and profits follow, Webb said.
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Too Good to Be True?
In his No-Huddle Offense segment, Cramer said he learned an important lesson about curbing your enthusiasm Thursday. Sometimes, he said, a story can indeed be too good to be true.
On Nov. 17, Cramer interviewed Lordstown Motors (RIDE) - Get Lordstown Motors Corp. Class A Report CEO Steve Burns, who indicated the company had orders for 500 vehicles at a time, all of which were signed by CEOs. However, as we have learned, many of those orders may only have been letters of interest.
Cramer said he's very excited for electric vehicles and is hoping that every manufacturer is ultimately successful. But when a CEO changes his definition of what an order is, you simply cannot be a part of that story.
Here's what Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Thursday evening:
Linde LIN: "This has been a monster good stock. I'd encourage you to buy Linde."
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At the time of publication, Cramer's Action Alerts PLUS had no position in the stocks mentioned.