Jim Cramer: What Bond Yields, Tariffs and Tesla Tell Investors About This Market

Jim Cramer tackles the headlines of the day from the bond yields to China weaponizing its rare earth dominance and, finally, why that matters for Tesla.

Author:: Katherine Ross
Publish date:: May 29, 2019 1:26 PM EDT

TheStreet

Happy hump day.

Jim Cramer takes a look at the declining bond yields and China's move to possibly weaponize its rare earth dominance.

Why do rare earth elements matter? The materials have wide applicability from smartphones to electric cars, bringing us right to Real Money Stock of the Day Tesla (TSLA) - Get Report .

The Sinking Bond Yields

With the Treasury bond yield inching toward 2%, Jim Cramer tackled what sinking bonds mean for the markets in his daily Real Money column. The source of the decline might not be what you think.

Cramer said that he believes that the reason for the decline is the lack of demand, not the tariffs:

Taking the foreign money off the table leaves you with a belief that the strong dollar and the yield differential mean nothing, even though you have to believe that there is as least some part of this incredible rally fueled by foreigners.
Which leaves, of course, a lack of demand. There simply isn't belief in the future, no matter what, to warrant borrowing -- and that's the real reason for the decline.

"The problem is that the market is interpreting the interest rate decline as no confidence in the future. No confidence in the future means no expansion. I find it so antithetical to the facts that it drives me crazy. That's why I think that everyone has gotten a little too gloomy," explained Cramer.

Even More Trade Headlines

China may be making moves to ban the export of rare earth materials.

"Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery," wrote the People's Daily, a Chinese newspaper.

The article then used the Chinese phrase "don't say I didn't warn you," which is most commonly used as a military phrase.

"We always feel like in this trade war, I always feel like we're one step behind them. I just feel like every time that we do something, they do something very clever. And this would be the one if the president comes out today and say, look, I'm not the least bit worried about rare earth. We have a deal with X, Y, Z, but he seems off his game," said Cramer.

Why Tesla Is Impacted By Rare Earths

Real Money Stock of the Day Tesla is back in the headlines again after the possible ban on rare earths.

Why?

Well, rare earth materials from China help to make wind turbines, smartphones, and, of course, electric vehicles.

Tesla's battery is made of cobalt, which is imported from China.

So, investors--and Elon Musk--should be taking a look at the possible risk that the ban creates.

More importantly, did Elon Musk anticipate this risk? Here's what Cramer thinks.

"[Tesla] is building a lot of cars in China. Now Elon Musk, because of that SEC ruling cannot tweet that he's got a store hold of rare earth. I would say that should be an exception where he could talk about it," Cramer said.