Jim Cramer shares his views every day on RealMoney. Click here for a real-time look at his insights and musings.
Cramer: The Price of On-Shoring U.S. Auto Production
Posted at 11:03 a.m. EDT on Tuesday, Jan. 24, 2017
Tuesday morning, once again, the president met with the Big Three auto manufacturers to urge them to build plants here. I totally get that. Plants may be automated, but a new plant generates a lot of jobs to build and a lot of jobs to service and they can ignite tired towns, the kinds of towns where lots of people who voted for Trump live.
They could be winners.
But against that, if the president is only going after the domestics then they are going to be disadvantaged vs. the foreign auto manufacturers who build in Mexico where there are no unions, a workforce that costs about 10 times less per hour than even the lowest wages in the U.S., with light pollution control laws, medical care paid for by the government, and best of all, a currency that's at 21 to the dollar. The peso was at 4 to the dollar when NAFTA was struck so that, more than anything else, will make the U.S. companies losers if they bother to build more plants here. To me there's too much capacity already so this is a sucker's game for all the auto manufacturers in the room. The next targets need to be BMW, Benz, Toyota and the like, which are spending billions in Mexico to take advantage of ridiculous differential, one made even bigger by Trump statements about Mexico, including his campaign pledge to build a wall.
At the same time can we recognize that when you put on tariffs, like former President Obama did on steel dumped here, then the earnings of U.S. steel makers can jump, witness the fabulous numbers this morning at AK Steel (AKS - Get Report) but that the buyers of that steel will have to raise prices, causing their goods to be more expensive. Unless you shut down exports that are competitive or put a tariff on them then buyers of AK Steel's protected steel could be hurt competitively.
Now no one disputes that we need to hire more Americans. But the gains that come from free trade can't be disputed either: cheaper goods for all. Now if you don't have a job then you can't afford these goods. If you do, you are getting a break from globalization.
I am not picking sides here. I am saying that there's no free lunch in this business. I am a stock person, not an ideologue, and I can tell you that I simply can't recommend Ford (F - Get Report) or General Motors (GM - Get Report) , as cheap as they look, if they have to close plants in Canada and Mexico and bring back those jobs here or if they are the only ones--and not their foreign competitors--who are stuck building plants in the high cost U.S. vs. the ridiculously low-cost Mexico.
Now, if our companies get the big tax breaks that Trump wants and can repatriate capital and have less regulation then you might want to own these stocks. But right now they are in a no-win situation that could severely impact the affordability of their cars vs. those foreign automakers that weren't around the table today. We want to buy American, but we also want American companies to be able to sell American, and I question how they can do so if they are playing with one hand tied behind their back at a time when only 43% of the cars in the U.S. are made in the U.S. because--tax breaks and deregulation or not--it's just so darned expensive to build here.Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
Cramer: Big Run Isn't Over for These Stocks
Posted at 11:42 a.m. EDT on Wednesday, Jan. 26, 2017
The leader of the pack? United Rentals URI. That's superb because URI is about renting and selling equipment used to build things, whether they be a wall or streets or commercial properties or oil and gas lines. The company bested the estimates big time and put through an immediately additive acquisition.
Next up is Charter (CHTR - Get Report) . You can't get enough M&A if you are in a bull market and the stock of Charter is reacting to talk that Verizon (VZ - Get Report) might want to buy it. Given Verizon's pathetic showing yesterday--you can get a shorthand take on it by going to Twitter and reading what T-Mobile (TMUS - Get Report) CEO John Legere is tweeting in my column--you know Verizon has to do something to grow again. I think this is a dangerous one because of all the capital it would require, especially if the price tag is around $400 a share. Would it put Verizon's big dividend into question? Anyway, I like that Charter can run and it might have had a move anyway given how robust Action Alerts PLUS name Comcast (CMCSA - Get Report) is doing.
So many are worried about housing, I sure felt better when I saw the number Sherwin-Williams (SHW - Get Report) put up this morning. The paint company, which is on the verge of closing on its Valspar (VAL - Get Report) deal, needs to dispose of some assets. Could it come PPG's (PPG - Get Report) way? I think PPG is a buy on the earnings alone. Might be something to think about.
Royal Caribbean's (RCL - Get Report) gain shows me that people are still spending but they are spending on experiences, and these cruise ships are the biggest bargain when it comes to an experience with the family. It's incredible how well run they are and the forecast here, for 90 cents a share next quarter, is fully 19 cents more than what the Street was looking for.
EBay's (EBAY - Get Report) always been a hideous Internet 0.0 site and management has figured that out and made it more of a useable catalog. Thank heavens. Plus, the company is about to start doing machine learning like when Amazon (AMZN - Get Report) prompts "others who liked this bought..." No wonder it's having a good day, especially as we have learned that it was the second-most-used site for holiday gift-giving. (Amazon is part of TheStreet's Growth Seeker portfolio.)
Southwest Air's (LUV - Get Report) Gary Kelly came on Mad Money recently and said things were good and getting better as the quarter went on and he was optimistic that 2017 would be excellent. Well, I guess no one listened then. But today with the same rap and the numbers, people are going gaga for this important transport.
You want to see homebuilders do well at a time of rising rates because it shows there is plenty of demand. There is a brewing housing shortage in this country that is constraining sales. But Pulte (PHM - Get Report) has what people want and it is rallying in the wake of an excellent number from big dog D.R. Horton (DHI - Get Report) --$67 versus $59 tells it all. Just a fabulous quarter by Pulte with good revenue growth.
Textron's (TXT - Get Report) bouncing back after a so-so quarter and the acquisition of Arctic Cat (ACAT) , a snowmobile company we have liked but recognize that there are some real unknown variables to the biz, such as snow. Nevertheless, if you listened to Boeing's (BA - Get Report) call last night, you know that defense spend is going higher. That will cover Textron's 2017 numbers and then some.
Defense will remain a big theme now that the spend is back--nobody in the capital seemed to like sequestration and the spend for L3 (LLL - Get Report) could be very big given that it has a lot of stealth programs involving reconnaissance. Not cheap. But best of breed in its space.
Comcast's stock was all over the map this morning, which seemed silly as all get-out given how excellent the number was and how much of a Trump stock it is: made in America, hires in America, buys in America and exports movies! Can't beat that combination.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.