Money Is In Bonds - Cramer's Mad Money (11/15/16)

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Includes: AAL, BRK.B, DAL, LUV, SWN, TLND, UAL
by: SA Editor Mohit Manghnani

Summary

Natural gas is bottoming.

It's too late to piggyback on Warren Buffett's holdings in airlines.

Southwestern Energy will be worth buying after natural gas prices fall further.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, November 15.

Tuesday was one of the most bullish days since the election. Even the pre-election stocks took part in the action. Interest rates have risen after the election because Trump plans to do some serious spending and big-league tax cuts. Bonds are controlling the market as well. Higher interest rates will help the banks as well as the economy. Tax cuts will help the retail sector as it will put more money in the pockets of consumers.

The problem is that new money is not entering the market and it is being rotated out of high growth stocks. "We have to stay close to equities, the real tide is the bond market, and today that tide turned bullish for both the post-election stocks and even the pre-election winners, too," said Cramer.

Natural Gas

There is volatility in natural gas price so Cramer took a technical view with the help of technician Carley Garner to see where it is headed. "One of the largest natural gas collapses in recent memory, a crash of epic proportions that no one is talking about," said Cramer.

Garner had predicted the decline in natural gas price but she was surprised with the velocity of the decline. She sees natural gas hitting a bottom. She thinks it will be complicated by contango. "Contango is the idea that the spot price of a commodity will be cheaper than the first expiring futures contract, which will be cheaper than the second expiring futures contract, and so on," said Cramer.

For instance, December futures contract made a low of $2.50, while January contract made a low of $2.72. Garner thinks that natural gas will bottom once January contract hits $2.50. "The issue with contango is that just when investors think natural gas will bottom, the futures contracts will roll over. Because the price one month out is higher than the spot price, that means natural gas has to go down again," said Cramer.

He also said the investors are taking Trump's stance on coal seriously and hence shorting natural gas. Many coal plants have been retired already but they will come back with utilities only gas prices spike up.

Bottom line is that natural gas will go lower before it rallies higher.

CEO interview - Talend (NASDAQ:TLND)

Talend is a data analytics firm that had a successful IPO in July at $18 and the stock has risen to $26. It helps to integrate data and applications in real-time across traditional, modern cloud or big data environments. Their platform lets businesses see how they are performing and what their customers want. The company reported strong earnings recently. Cramer interviewed CEO Mike Tuchen to hear more about the quarter.

"Right now, companies are trying to do more and more decision-making based on data, not heuristics, not gut feel. And they are doing that because the world is becoming more and more digitized," said Tuchen. He also said that IBM and the likes are good with traditional data, but Talend is a specialist in the social, mobile and cloud data space.

When asked how pollsters got the election wrong, he said that the models were correct but it missed a key data point of who would turn out to vote. The metric was off by 2% but it was enough to swing in the other direction.

Warren Buffett and the airlines

SEC filing showed that Warren Buffett bought stakes in four airlines - American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), United Continental (NYSE:UAL) and Southwest Air (NYSE:LUV). What changed Buffett's stance on airlines?

Firstly, Boeing's (NYSE:BA) order book is stretched for decades which shows lack of new capacity. Jet fuel prices are expected to be lower for longer and that accounts for 25% of the airlines' costs. Lastly, mergers in the space have reduced competition.

Cramer had recommended buying the airlines recently, but he thinks it's too late to piggyback on Warren Buffett's holdings as many stocks have rallied. Wait for weakness to buy them.

Viewer calls taken by Cramer

Southwestern Energy (NYSE:SWN): Buy the stock after natural gas falls a little more.

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