The stock market doesn't represent the real economy, Jim Cramer reminded his Mad Money viewers Tuesday. That's why while the stock market is hitting new highs, vast swaths of the real economy are in dire need of additional stimulus.
If you only look at our economy through the lens of the stock market, you'll only see strong earnings from Adobe Systems (ADBE) - Get Report sending shares up 2.1% and blowout earnings from FedEx (FDX) - Get Report signaling that commerce is strong. It's easy to look at data like these and think that our economy is strong and COVID-19 is in the rearview mirror.
But underneath our nation's largest publicly traded companies there is a lot of rot, Cramer said. Nearly two-thirds of our economy is service based, Cramer told viewers, and that means that some 15 million retail and restaurant jobs are at risk as social distancing makes small business unprofitable.
Small businesses don't trade on Wall Street, so they're often out of sight of lawmakers. But the fact remains that until we have a vaccine, social distancing and other pandemic restrictions will strangle many small businesses -- and we won't see the impacts until the banks start seeing loans default. By then, it's already too late.
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Executive Decision: Union Pacific
In his first "Executive Decision" segment, Cramer spoke with Lance Fritz, chairman, president and CEO of railroad operator Union Pacific (UNP) - Get Report. Shares on Union Pacific are up 41% over the past six months, including 7% this week after the company reported another strong quarter.
Fritz started off by saying that Union Pacific is celebrating its 150th anniversary as a publicly traded company on the New York Stock Exchange. Not many companies can boast about that kind of legacy and commitment to their shareholders and employees.
Fritz added that their continued strong results come from operating their railroad for maximum efficiency. They are constantly improving and reducing costs, and lower costs open up new opportunities and new markets that rivals cannot match.
When asked about their business, Fritz explained that Union Pacific is seeing strength in several areas, including e-commerce parcels, intermodal shipments, and chemicals and plastics. They continue to see weakness in energy, mainly oil, gas and coal-related shipments.
Fritz was proud to detail their commitment to double the number of women in their organization by 2020. He said railroading has traditionally not been an industry that attracted many women, but they aim to change that. He also touted the company's commitment to the environment. Trains are far more efficient than trucks and anyone who cares about their carbon footprint should be shipping via rail, he said.
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Executive Decision: Lennar
For his second "Executive Decision" segment, Cramer also spoke with Stuart Miller, executive chairman of homebuilder Lennar (LEN) - Get Report, which saw its shares plunge 3.9% despite a better-than-expected quarter that included strong guidance for the rest of 2020.
Miller said there's no doubt that COVID-19 has changed the home market and has caused a recalibration of the industry. Consumers are looking for homes that meet today's needs, and that includes floor plans with room for home offices, home gyms and even home schools for their kids. All of those spaces are made possible by smart technology like wifi throughout the home, without dead spots.
Lennar continues to focus on their strategy of driving gross margins and cash flow, Miller said. That's how they've been able to deleverage their balance sheet and reduce their debt by $2.8 billion so far.
When asked why the home builders are building a ton of new homes to meet surging demand, Miller said everyone learned their lessons in 2008, and both lenders and builders are proceeding with caution. He said Lennar will always take a measured approach to production and sales to ensure they never get ahead of themselves.
Off the Charts
In the "Off The Charts" segment, Cramer checked in with colleague Bob Lang for a technical read on three hot stocks: D.R. Horton (DHI) - Get Report, Caterpillar (CAT) - Get Report and home furnishings retailer RH (RH) - Get Report.
Lang said he liked D.R. Horton the best of all the home builders, as the stock just rebounded off of its 50-day moving average with a strong relative strength indicator (RSI). Lang felt the next stop for Horton will be in the mid-$80s.
Lang also liked the strength in RH. The stock continues to run higher with few pullbacks and chances to buy. The RSI is signaling the stock is overbought, but Lang felt the stock could stay in overbought territory for a while before the stock needs to consolidate its gains.
Finally, Lang felt that Caterpillar was a gorgeous chart with higher highs and higher lows and a bullish crossover in the MACD momentum indicator. Lang felt the stock was a buy if it falls back to its 10-day moving average.
Cheap Today, Cheaper Tomorrow?
In his No-Huddle Offense segment, Cramer reminded viewers that a cheap stock today can still get cheaper tomorrow. Just because a stock looks cheap, it doesn't mean it should be bought.
Case in point: the banks and the oils, two sectors that can't seem to find their footing. Cramer said he sold shares of Citigroup (C) - Get Report for his charitable trust, Action Alerts PLUS, because even the bank's bountiful dividend yield isn't enough to shield it from continued losses. It doesn't matter if you're considering Citigroup or First Horizon National (FHN) - Get Report or Wells Fargo (WFC) - Get Report, nothing appears to be safe.
Then there are the oil stocks. Cramer said the removal of Exxon Mobil (XOM) - Get Report from the S&P 500 isn't getting enough attention. Exxon used to be the bellwether stock that everyone thought was safe to own. Today, the stock isn't important enough to include in the S&P. From oils to pipelines to natural gas, Cramer said he just can't think of any reason to own these stocks.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Tuesday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position in AMZN.