Hidden Recovery; Intel Back in the Fast Lane: Jim Cramer's View

Jim Cramer shares his views every day on RealMoney. Click here for a real-time look at his insights and musings.


Cramer: There Is a Hidden Recovery in Consumer Spending

Posted at 7:24 a.m. on Friday, March 16, 2017

Totally hidden from view. A recovery totally hidden from view. Think about it: we have lending growth plateauing. We have consumer spending pretty much invisible. We have Janet Yellen herself explaining that yes, indeed, we have to raise rates but, no, the economy isn't growing that well.

To me, it's all about employment and the couch. People are being hired all over the country and jobs are plentiful in lots of parts of the nation, even if they aren't jobs you might want to take.

But they aren't spending like they used to, and that's got so many money managers and business people concerned that they are baffled and know that they either shouldn't be positive or that they are too giddy if they buy stocks up here or raise forecasts.

But I think that's all because the change in consumer spending is happening way too fast for pretty much everyone.

Now, today's not the day to fret about consumer spend, because it's 15 degrees out and Canada Goose is coming public and it will be a monster deal. A monster deal for a company that sells $1000 coats with the insignias right in your face. A red hot outerwear company mocks the whole supply chain of retail woe.

Nevertheless, what I think so many continue to miss is that they conflate traditional consumer spending with job growth, and they think there is something very wrong if we have job growth and no traditional consumer spend.

Some say that's because of health care costs. Others say it is because of student loans. Then some say it is because of stunted household formation from the Great Recession. Still others say it is all about new frugality, because it's only been a few years since the wipe-out. And then we have the plain oil "Chinese and Mexicans took our jobs" thesis that elected a president.

To some degree, all of these are true. But I think that it is how money is spent and where it is spent that matters. For example, if you listen to the CEOs of the cruise companies or if you listen to the CEOs of theme parks, including Disney  (DIS) , the numbers are ripping. Just fantastic. But if you listen to the managers of any stores in the mall save Children's Place  (PLCE) and Foot Locker  (FL) , they think it is the end of the world. They actually can't believe you when you say things are good.

If you look at the numbers for Action Alerts PLUS charity portfolio holding Apple (AAPL) and for Apple services, you know that a gigantic amount of money goes toward that device.

If you look at the numbers from Activision Blizzard  (ATVI) and Take Two  (TTWO) and Electronic Arts  (EA) you think the same.

But if you sell apparel, unless it has the Canada Goose insignia? You are thinking, how can I con Burlington  (BURL) and TJX  (TJX) into taking all of my winter merchandise today?

It's a spending pattern that begins with the concept of the cellphone. It's your mall, it's your order in restaurant, it's your entertainment and it is entirely zero sum.

The only thing you need is a house that is as comfy as possible, because you don't leave it much, so you go to Home Depot  (HD) and you watch Youtube videos to show you how to make things.

Is it all that simple?

Yes.

It's just that it's not part of a rich portfolio manager's life, and anyone who is a CEO of a major company involved with consumer spending can't believe it because the whole thing, the whole change, took place in about 18 months.

Bezos saw it coming a half-dozen years ago.

Maybe 317 million other Americans didn't, including the CEOs of most companies involved with that greatest of all U.S. growth engines: consumer spending.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL, TJX.

Cramer: Mobileye Deal Puts Intel Back in the Fast Lane

Posted at 6:24 p.m. on Monday, March 13, 2017
 
I've said it before and I will say it again, autonomous driving is perhaps the biggest tech opportunity on the horizon. Anyone who can get a piece of this market is going to do incredibly well and anyone who can dominate it is going to coin money.

Today Intel (INTC) took a step toward dominance with its $15 billion agreement to buy Mobileye  (MBLY) , the Israeli manufacturer that is one of the leaders in Advance Driver Assistance Systems. Mobileye currently works with 27 car manufacturers and has already worked with Intel including on a groundbreaking deal announced last year with BMW.

Now Intel's stock got hit today even as the company is using its ample spare cash to make the acquisition, not its stock. Perhaps investors dumped Intel because $15 billion seems like a large price to pay for a company with only $360 million in revenue and 660 employees.

I think that's totally the wrong way to look at it. What matters here is that Intel is challenged for growth, as that last quarter showed, and the best growth it has is in the overall Internet of Things and this acquisition fits right in.

As CEO Brian Krzanich told employees in an email, "Many of you have asked why we think autonomous cars and vehicles are so important to Intel's future. The answer is DATA. Our strategy is to make Intel the driving force of the data revolution across every technology and every industry. We are a DATA company. The businesses we focus on and deliver solutions to, create use and analyze massive amounts of data. "

Krzanich had made this point to me when I spoke to him last month. He said he wanted to change the perception of Intel. "Thirty two billion of our $60 million is the p.c. but as I go through the rest of the decade, by 2002, the data center, the autonomous car all of these other things will be bigger than the p.c. so we have to start shifting people's thinking that we are a data company because that is where we're headed not where we are."

He went on to explain how autonomous cars fit in with the fast-growing cloud business. "Today I talk about the cloud; it's based on people. It's your tweets, it's your e-mails. It's your Facebook posts. The cloud of tomorrow is going to be based on those autonomous cars."

How big is that market? Brian told me "The autonomous cars put out as much data as 3,000 people. One car is 3,000 peoples worth of data. Put a million cars on the road, that's equivalent to half the population of the world in data."

Yep, it's a huge market.

Intel's not alone. Nvidia's  (NVDA) got fantastic chips for autonomous driving. NXP Semiconductor  (NXPI) , which is being acquired by Qualcomm (QCOM) , has them too. Perhaps most important, Google's got its own chips as part of Waymo, its autonomous driving division that I think is going to turn out to be the biggest winner in the space. Action Alerts PLUS, my charitable trust, which you can follow along if you join the club, owns NXP and Alphabet (GOOGL) , parent of Google and Waymo because we think this market is the biggest out there. You have more than a million fatalities a year from car crashes. You have as many as twenty million people in this country alone who are disabled and can't drive who could with autonomous cars. It is a fantastic opportunity.

So, I know that the market didn't like the deal. But I think that's viewing it way too short term. When you see the new Intel, the one that's a dominant data center business because of this acquisition, you will want to pay much more for the stock than you would now. I say congratulations Brian on taking the big step to get Intel to be viewed as far more than just a personal computer parts company. It was already more than that in many ways, but this will cement the changed legacy.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long NXPI and GOOGL.

 

Action Alerts PLUS, which Cramer manages as a charitable trust, is long AAPL, TJX, NXPI and GOOGL.

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