Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, December 4.
U.S. markets had a huge sell-off on Tuesday with the Dow down 3.1%, S&P 3.24%, and Nasdaq 3.8%, as there was no certainty and the markets hate 'master-blaster, Mad Max confrontation'.
Trump made positive comments over the weekend that a trade deal with China has been reached, but it seems investors are not sure. Economic advisor Larry Kudlow and Treasury Secretary Steven Mnuchin want a deal because it's good for business, while Robert Lighthizer wants no deal because it's not about trade, but about slowing the rise of China as a global superpower by not funding that rise with the USA's input.
"The president seems to actually enjoy these face-offs. They've become his style. The White House is the Thunderdome: two policies enter, one policy leaves. But the markets crave certainty," said Cramer.
"I think it's starting to dawn on major-league money managers that maybe they misjudged the President. Maybe he simply doesn't take this stuff seriously enough to be considered dependable, even as what really matters to his base is the ratings, which means the White House version of 'The Apprentice'," he added. The Fed is on auto-pilot as well with its agenda of pushing a December rate hike.
Money managers take a cue from bonds which are showing signs of a slowdown. The Fed is expected to raise interest rates in December and this means banks will pay out more on short-term deposits than they make on long-term loans.
The Fed isn't thinking about Toll Brothers (NYSE:TOL) which had the lowest orders in the housing business in four years. They are not thinking what the cloud can do to white-collar employment. They are also not thinking about what the firing of a huge number of people by General Motors (NYSE:GM) and Ford (NYSE:F) is doing to blue-collar employment.
"The bottom line is this: the president's worrying people, the Fed is worrying people, and yet, somehow, they both think they're being reassuring. They couldn't be more wrong. Today wasn't a decline, it was a free fall," concluded Cramer.
CEO interview - Marathon Petroleum (NYSE:MPC)
The stock of Marathon Petroleum is down 23% YTD. Cramer interviewed Chairman and CEO Gary Heminger to find out what the Andeavor acquisition means for the company.
Heminger said that the Andeavor acquisition will yield over $1.4B in synergies. Oil prices are going down which leads to a higher margin as it's the primary input cost which will benefit in the short and long term.
Commenting on the administration's policy he said, "When I look at the president's theme to begin with and the beginning of his administration, he wanted to have energy dominance in the U.S. and I believe that we are well on our way. We're the largest producer in the world today."
Despite oil prices going down, the U.S. producers haven't stopped pumping oil ahead of the OPEC meeting which is expected to announce a production cut. "The U.S. refining system is second to none of anyone in the industry, so I believe we're well on our way now to global energy dominance," he added.
Heminger expects crude prices to be at $65-70. "I believe we've averaged almost about $64.50 YTD, so we think we're being conservative looking at that number for next year," he added.
They expect an increase in distribution of 5-6% next year, but he believes the best thing is to buy back some stock. The company expects to buy back an additional $2.5B of shares in 2019.
The market's decline on Tuesday can be attributed to algorithmic trading - "the complex algorithmic programs set up by professional money managers to sell when the odds of future market losses increase," said Cramer.
The bond yield curve signaled a slowdown. If short-term interest rates are higher than or equal to long-term interest rates, it indicates recession. Hedge fund managers will be inclined to sell S&P futures and banks will be negatively impacted as long-term rates are lower and they end up paying more on short-term deposits.
Many funds likely will sell if the S&P 500 dips below its 200-day moving average because future outcomes reflect downside. The computer program helps managers to sell before other managers do, but the problem is that everyone uses the same program which means there is a lack of buyers that pushed the index down further.
CEO interview - Coupa Software (NASDAQ:COUP)
Coupa Software reported a great quarter and Cramer interviewed CEO Rob Bernshteyn to hear what led to their strong performance.
The company had top-line growth, gross margin expansion, subscriber expansion and is currently managing $1T of customer spending. They added 100 customers this year including companies like United Airlines and Procter & Gamble in the last quarter.
Coupa's platform uses AI to help companies manage risk and adjust their spending in real-time. In a world where companies want to operate faster and smarter, Coupa Software starts providing value in a few months.
CEO interview - Anaplan (NYSE:PLAN)
Anaplan is an enterprise planning software provider that went public on October. Cramer interviewed CEO Frank Calderoni to hear about the company's roadmap.
Calderoni said that planning allows companies to make faster decisions and yet many companies are still in the transition stage to make their planning systems predictive.
"Many people think about planning as financial planning. We sell it as enterprise planning. It's planning that's used in finance, in sales, in supply chain, in HR," said Calderoni. "We use custom technology called HyperBlock as a calculation engine to forecast future events more accurately and efficiently for companies that need instant predictions," he added.
"Think about this like algorithms that allow you to use those calculations to predict based on information, data that you have in your organization that allows you to be more accurate in your forecasting."
Cramer thinks Anaplan is a good company and CEO Calderoni has a good track record working with the likes of Red Hat, Cisco and IBM.
Viewer calls taken by Cramer
Annaly Capital Management (NYSE:NLY): The stock is down 15% YTD which doesn't cover yield of 12%. Don't buy.
Aphria (NYSE:APHA): The charges of mismanagement of funds are made by short-sellers. In the cannabis market, Canopy Growth (NYSE:CGC) is the only stock Cramer recommends. Also, cannabis stocks are going down.
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