Cramer’s Crazy Money Recap: Evergrande, Debt, Delta

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People need reasons to buy stocks and this market just doesn’t give them them, Jim Cramer told his Mad Money viewers after a sell off Monday.

If you want to be a buyer, you need a reason to buy, he said, and right now the market isn’t giving you any.

Buying dips has been a strategy that has worked for the past 15 months, but it will no longer work. That’s why Cramer came up with his list of reasons not buy stocks now.

The first is what he calls the Chinese conundrum of Evergrande, a huge real estate developer, with debts the size of a country. No one knows what the Chinese regime plans to do with Evergrande, leaving investors to wait and see what happens next.

Next is the impending debt ceiling debate in Congress. The only thing we’re sure is that the problem will eventually be fixed, but we just don’t know when.

As if that weren’t enough, there is also the continuing COVID crisis. Has the Delta variant peaked? Then there’s the timeline, where the end of September has proven to be a stock meltdown every year for the past 20 years. Investors also continue to be concerned about the Federal Reserve and how they will handle inflation.

Finally, Cramer said the relentless stream of new IPOs must stop because it puts undue pressure on existing shares. And then there’s the problem of all these new investors, many of whom haven’t seen a sell-off and act like stocks can only go up.

For all of these reasons, Cramer advised viewers not to get sucked into buying the dips. He said he can’t go bullish until everyone else turns bearish, and we’re still a long way from that.

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Executive decision: Airbnb

In his first segment “Executive Decision”, Cramer welcomed Brian Chesky, CEO of Airbnb (ABNB) – Get an Airbnb report, at the show to discuss the company’s most recent results. Airbnb shares have risen 138% since their IPO in December.

The company announced last month that its second-quarter loss fell sharply on rebounding revenue, but warned that the rapidly spreading delta variant of the COVID-19 virus was starting to affect its business.

Chesky said Airbnb just completed its billionth guest arrival and 500 millionth guest review this quarter, a fantastic achievement for the 14-year-old company. Airbnb has more than six million locations in its network and more than 55% of its hosts are women.

Chesky attributed Airbnb’s success to its adaptable business model and diversity of its listings, which includes properties in hundreds of thousands of locations and at all prices.

When asked about market dynamics during COVID, Chesky noted that with people unattached to the desk, they would try new locations more often and stay longer. People live in houses for a reason, he said, and that is why people prefer to rent a house rather than just a hotel room.

The impact of Evergrande

How does a failing Chinese real estate developer rock the entire market? Cramer explained that Evergrande has 1,300 projects in more than 280 cities across China. The company is about the size of IBM (IBM) – Obtain the International Business Machines (IBM) report, but unlike IBM, it has to pay over $ 300 billion in debt. The company’s bonds are all over China, but not a big threat to US markets.

The standoff between Evergrande and the Chinese government began in August and September of last year, when the government instituted new rules for companies like Evergrande.

This was followed by stress tests in June this year, which led the company to warn last month that it could default on its obligations. Earlier this month, the company suspended interest payments and began to show more and more signs that it was in financial difficulty. With a Chinese bailout in question, only time will tell how this saga unfolds.

But while Evergrande poses systemic and economic risks to China, Cramer has not seen the contagion spread to American soil. He said if the huge default sent the Chinese economy into recession, it would impact mining and minerals companies like FreeportMcMoRan (FCX) – Get the Freeport-McMoRan, Inc. (FCX) report, which fell 5.6% at the close, along with companies exposed to Chinese retail, like Nike (OF) – Get NIKE, Inc. (NKE) Report or Starbucks (SBUX) – Get the Starbucks Corporation report. But US banks, he reiterated, probably won’t notice.

Executive decision: Beauty Health Co.

For his second segment “Executive Decision”, Cramer also spoke with Clint Carnell, CEO of Beauty Health Co. SKIN, one of the few winners to come from a PSPC merger.

Carnell explained that Beauty Health is creating a whole new category of skin care. At the bottom of the scale, there are “lotions and potions”, many of which provide little evidence that they actually work. Then, at the high end, there are medical companies that deliver results, but make the process inaccessible and expensive.

Beauty Health, he said, straddles the line between the two with the HydraFacial product.

Carnell added that because the company defines its category, the company’s biggest competition is brand awareness, which is why it has doubled its spending to get the word out. Those who have tried HydraFacial, he said, continue the treatments six to eight times a year.

Beauty Health has a great business model, Carnell continued, with 50% of revenue coming from distribution systems and the remaining 50% from consumables. The company is also diversified on a global scale with many growth levers at its disposal.

Cramer said there are a lot of things going wrong in the market right now. Beauty Health is one of the few things that is.

Evergrande or Crypto-currencies?

In his No-Huddle Offense segment, Cramer said that while most investors are worried about the collapse of Evergrande, he is more worried about something else, a collapse in cryptocurrencies.

Cramer reiterated that in the long run he is a strong supporter of crypto. But in the short term, the price of Bitcoin is tied to the price of stablecoins like Tether, and Tether is backed by Chinese commercial debt.

And while Tether has announced that he does not own any debt from Evergrande directly, Cramer has said it’s a safe bet that the debt he does hold is exposed to it. It doesn’t take much to knock the dominoes off, he said, and a huge flaw like Evergrande could certainly start the process.

If you hold a lot of crypto, Cramer advised to lock in some profits and lighten your position until we know for sure what the scale of Evergrande’s impending collapse will mean.

Lightning tower

Here’s what Cramer had to say about some of the actions callers came up with during the “Mad Money Lightning Round” on Monday night:

MasterCraft Boats (MCFT) – Get the report from Mastercraft Boat Holdings, Inc.: “It’s a tribute to the belief that boats were just a COVID thing, but we know differently. I love Brunswick (Before Christ) – Get the Brunswick Society report. “

Nokia (QUITE) – Get Nokia Oyj sponsored ADR report: “I’m warming up at Nokia. It’s gone down a lot and we’re almost there.”

SoFi Technologies (SOFI) – Get the SOFI TECHNOLOGIES INC report: “I think at $ 13 you want to pull the trigger.”

AutoNation (A) – Get the AutoNation, Inc.: “Everything about used cars is a great deal right now.”

Raytheon Technologies (RTX) – Get the Raytheon Technologies Corp report: “But some on the way down.”

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