When it comes to the nascent U.S. economic slowdown, figuring out where to place the blame is more nuanced than it seems, CNBC’s Jim Cramer argued Tuesday.
President Donald Trump’s tariffs on Chinese goods and the Federal Reserve’s interest rate policies have emerged as the leading causes, he said. But when he talks to his sources on Wall Street, one heavily outweighs the other in terms of importance.
“I’m constantly talking to CEOs who do business both here and abroad. I always ask them about the tariffs, because tariffs do matter,” Cramer said. “But these executives are so much more concerned about the Fed’s rate hikes, they always change the conversation, particularly the threat of three more tightenings next year. That’s top of mind.”
The “Mad Money” host explained that even though Trump’s tariffs are putting pressure on parts of the economy, a number of business executives see them as necessary to push back against China’s unfair trading practices. Interest rates, on the other hand, bring up more of a debate, he said: why hike rates when tariffs are already slowing business?
“I’m OK with one last rate hike tomorrow,” Cramer said. “But believe me, if the businesspeople I deal with thought that the president’s trade wars were at the heart of this slowdown that I started predicting … in October, I’d be shouting it from the darned rooftops.”
“But they’re simply not saying that,” he continued. “I only know what they tell me: it’s almost all on the Fed. Yep, the Fed can make or break the economy here, and, of course, the stock market. That’s why tomorrow’s meeting is so darn important — the wrong decision could be disastrous for stocks, but the right decision will create, let’s say, a more positive backdrop and perhaps even an oversold rally that lasts into 2019.”
The stock market’s early-day rally on Tuesday was a “dress rehearsal” for what could happen if the Federal Reserve says Wednesday that it will take a “wait-and-see” approach on its interest rate policy, Cramer said as stocks reversed into the close.
On Wednesday, the Fed is expected to announce another interest rate hike in an effort to combat what it sees as rising inflation. Cramer has argued in recent months that while the U.S. economy can likely handle one more hike, the Fed’s previous projection of three more hikes in 2019 could dramatically slow business.
And while stocks rallied Tuesday morning for the reasons Cramer said Monday could turn the market around, the Fed’s upcoming meeting, “above all,” will determine whether the market can mount a “sustained advance,” he said.
“Today was a dress rehearsal for the kind of rally we can get if the Fed does the right thing tomorrow and repudiates the idea that we need a series of rate hikes in 2019, not just one more tomorrow,” Cramer said Tuesday. “If we get the Fed on board, expect more positive action like we had this morning before the market gave up much of its gains.”
Click here for the possible outcomes he could see from the Federal Open Market Committee’s pivotal two-day confab.
Strong demand for aircraft, plane parts and services and defense products led manufacturer Boeing to boost its dividend and share buyback programs on Monday, the company’s Chief Financial Officer, Greg Smith, tells CNBC.
Boeing’s board of directors voted Monday to raise the company’s quarterly dividend by 20 percent in 2019, bringing it to $2.05 per share. The board also approved a $20 billion share buyback program, replacing its prior authorization of $18 billion from last December.
The moves were seen as a sign of confidence in Boeing’s business, which produced a record amount of commercial airplanes by the end of this year’s third quarter and has exceeded cash flow expectations. In the last five years, Boeing has repurchased about 230 million shares and increased its dividend by about 325 percent.
“We’ve got about 5,800 airplanes in backlog, which is about seven years of production,” Smith told Cramer in an exclusive interview. “As we look beyond that, there’s a need for 43,000 aircraft over the next 20 years. So we see a continued growing market, and part of that growing market is a replacement element. And this is about having the right products and services in the marketplace to win.”
Click here to watch and read more about Smith’s interview.
The next steps in food delivery take “delivery” to a whole new level, Walmart’s e-commerce chief tells CNBC.
Marc Lore, the president and CEO of Walmart’s U.S. e-commerce business, told Cramer in an exclusive interview on Tuesday that “delivery right into the fridge” could be in the cards as Walmart expands its delivery services.
Lore, who co-founded Walmart subsidiary Jet.com, envisions consumers getting a “one-time code” at the start of the process.
Then, the delivery person arrives “with a camera on their chest,” he said. “You can watch it on your iPhone and see them come in, put it in your fridge and leave, to sort of build confidence and trust in these Walmart associates doing it. So, … imagine going out to work, coming home, and there it is. The stuff’s in your fridge already.”
Click here to watch and read more about Lore’s interview.
Shares of Trex Company, the largest wood-alternative product manufacturer in the world, have been falling due to weakness in the housing market. But Trex President and CEO Jim Cline suggested to Cramer on Tuesday that, in reality, the two aren’t that closely connected.
“We’re a 95 percent repair and remodeling play. Only about 5 percent is new construction,” Cline, whose company’s main products include decks and railings, said in the exclusive interview. “This is a time of year when normal deck building starts to slow down a little bit, so it’s a normal seasonal slowdown.”
Trex, which makes its wood alternatives from recycled materials, functions in 46 countries and is “heavily levered” to Europe and Australia, the CEO said, adding that Trex makes railings for “about 90 percent of the major stadiums and arenas in North America.”
Additionally, the company has seen “virtually no impact” to its raw costs as costs climb in other areas of the market and is on a path to take as much as 83 percent market share in its space, Cline said.
Click here to watch his full interview.
In Cramer’s lightning round, he zoomed through his responses to callers’ stock questions:
Kinder Mordan: “Kinder Morgan’s got … a 5 percent yield. Yield’s safe, but I just don’t really like the pipeline companies because they have been a huge disappointment. I like Enbridge. Enbridge is a 7 percent yielder. I think it’s better than KMI.”
Teladoc Health Inc.: “Teladoc is a good company. It’s the kind of long-term speculative company — because it’s not making any money — that I think that younger people might want to be in. But it is very speculative because, let’s say, it ain’t no Merck.”
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