The markets are soaring to new heights and it's no surprise why, Jim Cramer told his Mad Money viewers Monday. Stocks have overcome a mountain of worries in recent weeks and when the skeptics turn bullish, stocks rise.
Impeachment was just one of the things the bears told us would tank the markets. But so far, investors have been largely ignoring the entire preceding as a non-issue. The bears were also fretting over recession fears, citing the inverted yield curve as proof positive the markets were doomed. But as Cramer noted, the yield curve inverted because the Federal Reserve raised interest rates too far, not because our economy was in trouble.
Then there were the worries over inflation and tariffs. But so far, Cramer said there's no sign of wage inflation or rising commodity prices. And the fears over tariffs were also overblown, as the industrial stocks have come roaring back this earnings season.
The same worries were overblown with Brexit and the upcoming 2020 elections. Neither of these events mater to stocks either, at least not yet. There are some risks for individual stocks, like we saw with McDonald's (MCD) - Get Report falling 2.7% today and with Under Armour (UAA) - Get Report and Twilio (TWLO) - Get Report both announcing accounting inquiries.
But outside of a handful of stocks, the markets are strong, Cramer concluded, so it only makes sense that we're hitting new all-time highs.
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The China Effect
What do all of this quarter's biggest winners have in common? Not much, Cramer told viewers, except for China.
The bank stocks should be falling along side interest rates, yet they were among the biggest winners with quarter. Cramer said that's because one of the promises China's made in our trade talks is opening their financial markets to U.S. companies. That's great news for the likes of JPMorgan Chase (JPM) - Get Report and especially Citigroup (C) - Get Report , which has a lot of Asian exposure. Even Goldman Sachs (GS) - Get Report could be a winner in China if Apple (AAPL) - Get Report decides to expand its AppleCard there.
Then there's agriculture, where John Deere (DE) - Get Report continues to be seen as the biggest winner from the end of the trade war. But while the algorithms and money managers continue buying Deere, Cramer said there is one big problem. The Chinese haven't shown us that they're actually willing to agree to buying more of our agriculture products. Until they do, the bulls in Deere may be waiting for awhile longer.
This market has grown sick and tired of companies with rapid revenue growth that are losing tons of money, Cramer cautioned viewers, and that's bad news for Wayfair (W) - Get Report , the online home furnishings retailer that's seen its stock plunge 50% from its March highs.
Wayfair has been the classic Internet growth story. The company has been growing like a weed while hemorrhaging cash and investors hadn't seemed to notice. But earlier this year, the story changed and Wayfair quickly became a momentum stock with no momentum.
Wayfair had been called out by rival RH (RH) - Get Report on the company's conference call earlier this year, noting that growth without profits isn't really growth at all. Since those comments in March, shares of RH have soared 71% while Wayfair's have plunged 40%.
Cramer said Wayfair has been borrowing money to fund its continued growth and been getting less return for every dollar it spends. The company took in $1.5 billion in 2017 and 2018, but is no more profitable today than it was two years ago. The company is also facing tariff headwinds and announced the departure of its COO and CTO earlier this year.
But most important is Wall Street's attitude toward unprofitable growth names. They simply aren't willing to tolerate them any longer. Cramer said that makes Wayfair's stock untouchable until the company can find a way to sustain a profit.
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Executive Decision: J2 Global
Shah explained that 60% of J2's revenue stems from recurring sources and most of the remaining 40%, which comes from advertising, also renews on an annual basis. He said J2 is not in the business of selling impressions or page views, they focus on performance marketing, providing customers with actual clicks, leads and client acquisitions.
When asked about his business model, Shah said that J2 is run for profits with slower revenue growth, not for growth at all costs. He said far too many companies are willing to spend a dollar to make 75 cents, but he's never been interested in those types of models.
J2 is also hot on the acquisition trail, having spent over $3 billion in acquisitions that are then improved and optimized for profits so they can add to the company's momentum.
Off the Tape: Ojo Electric
In his "Off The Tape" segment, Cramer sat down with Max Smith, CEO of Ojo Electric, the scooter sharing service that currently trades on the Toronto stock exchange under the ticker OJO. Ojo currently operates 1,250 scooters in Austin, Texas and Dallas, as well as in Memphis.
Smith said the revolution in mobility is here and it's not just about moving people, it's about moving everything, including food, parcels and packaging. His company is currently running pilots with delivery services that report their drivers are 30% more efficient on scooters, which translates to more deliveries and more tips per hour. Scooters are perfect for restaurants that need to deliver food to customers within a short radius.
Smith said he's also been humbled by stories of disabled riders using their network to get around where they otherwise couldn't.
Ojo scooters are currently manufactured in China and are subject to tariffs, but Smith said they're ready to move to suppliers in Vietnam if tariffs don't go away soon.
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At the time of publication, Cramer's Action Alerts PLUS had a position in TWLO, JPM, C, GS, AAPL.