Mad Money w/ Jim Cramer 9/16/26

Mad Money w/ Jim Cramer

Jim Cramer delivers a West Coast edition of Mad Money, analyzing the impact of a surprise Federal Reserve rate hike and its implications for

Key takeaways

• The Fed's latest quarter-point rate hike triggered market sell-offs, especially in non-tech sectors.
• Tech stocks showed resilience due to ongoing data center build-outs and AI-driven growth cycles.

Main topics

• Federal Reserve rate hikes
• Inflation drivers (oil, fiscal deficits)

Notable quotes

I'm not going to sugarcoat it. It's hard, but it's so worth it.

Conclusion

Despite short-term market turbulence from aggressive rate hikes, Crame

Transcript preview

Speaker 6 (0:00) It's all about the money. I Speaker 7 (0:01) want to be the person in my family that creates generational wealth. How Speaker 6 (0:05) they earn it, spend it, and make dreams come true. I'm Speaker 7 (0:08) not going to sugarcoat it. It's hard, but it's so worth it. Speaker 6 (0:11) Millennial Money. All new Saturdays, 3 Eastern, CNBC. My mission is simple. To Speaker 8 (0:17) make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere. And I promise to help you find it. Mad Money starts now. Speaker 8 (0:32) I'm Kramer. Speaker 2 (0:33) Welcome to a special West Coast edition of Bad Money. Welcome to Kramerica. Other people want to make friends. I'm just trying to save a little bit of money. My job is not just to entertain, but to do some teaching, too. So call me at 1-800-743-CBC. Tweet me at Jim Kramer. If you buy stocks here, you are now, as of today, officially fighting the Federal Reserve. That's what happens when the Fed decides to raise rates as it did this very afternoon. The first rate hike, a quarter of a percent, creates a lot of confusion and often a quick dive, which is exactly what we saw today. I mean, just. Speaker 2 (1:09) And that produces selling. We aren't sure if there's going to be multiple hikes, which would be really bad for the stock market, or we're only going to get one, maybe two. Not so bad for the market. From the looks of things and the harsh words we heard today from the new Fed chief, Kevin Marsh, we're going to get many hikes until the job is done. The job being slowing inflation appreciably. And that is why the Dow plunged 631 points. The S &P lost 0.45 percent, but the Nasdaq fell only 0.01 percent. And that was a nice comeback. More on that in a moment. So even as I'm out here on the West Coast, where these rates mean very little because tech does thrive no matter what, let me explain why this decision was right for the longer term but miserable for the shorter term and why the stock market may need to take a hit beyond today if inflation doesn't settle down. Big if. First, understand this economy does have a real head of steam, mostly because of the great data center build out. These behemoths are beasts when it comes to capital expenditures. And you know what? I still think they will be. Speaker 1 (2:05) pleasure when the smoke clears from the rate hike. See, they're distorting the economy, but there's no sign that the data center's strength is slackening and rates. won't impact it all that much. And that's true for tech earnings. The growth will most likely continue apace. Employment is full, which is fantastic for the stock market. Lots of discretionary income, lots of savings and lots of spending. I know we keep waiting for AI to destroy jobs, but right now the cycle is creating jobs by the second, mostly trade jobs. And the economy does keep strengthening. Speaker 2 (2:38) But there's a real downside to the build-out, too, and that's what we heard today from Warsh. We have an economy that isn't used to working with its hands. Service jobs make up two-thirds of the workforce. When you have the biggest capital expenditure cycle in history, one that involves endless bond sales, referenced today by the Fed chief in his speech, and lots of stock offerings, you're going to get hit with too much inflation, and the Fed does have to pump the brakes. And that's Speaker 1 (3:00) what started today. Ordinarily, we could probably handle that level of inflation and the build-out causes, but these are not ordinary times. We already had... good, you know, I'd say pretty predominant inflation. We're three and change. That's way too high historically. Our new Fed chief is a serious person and he's been on bringing the rate down to two percent by twenty twenty nine. Even though President Trump picked him Speaker 2 (3:19) to cut rates. Well, he knows that we need to keep inflation down to preserve the buying power of the dollar and the net worth of your savings. There are two things making worse-is-life difficult here. The first is man-made, the relentless run in oil prices. You could say that when the war with Iran ends, inflation will go Speaker 1 (3:35) down, but who the heck knows when it will end? If anything, the longer higher oil prices last, the more likely it embeds itself in the system and makes everything expensive. Oil prices are passed on to you, the consumer. The Fed can't change that unless it raises rates to the point where we can't afford to drive as much or we don't need to drive because we Speaker 2 (3:52) all lose our jobs or because we don't spend that much. I don't think we're going to reach that point. But the longer oil stays up, the more likely it is that we'll see more rate hikes. And every hike from here, well, it'll be something that's going to knock down stocks. The other spread of inflation is the real bear. Speaker 2 (4:09) The printing press. We're running a distinctly suboptimal budget Speaker 1 (4:12) deficit. Neither the president nor Congress seems to care. Our government has a trillion dollars in interest payments alone. That's hideous. A serious person like Warsh Speaker 2 (4:19) doesn't want the presses to print because printing money is inflationary. I think he'd smash them if he could, but that's beyond the Fed's control. All they can do is raise rates until Congress and the president get serious about spending. If they did, look out. That would be... Speaker 2 (4:35) Fantastic. When you raise rates, the economy slows. If you can combat the printing presses and help keep inflation down, stocks can go up. But can it keep the president down? I know that Warsh is doing what's right. But what happens when the president goes ballistic? He could be about, you know, he might be like a swarm of AI agents penetrating the walls of Hugginface. In the end, I don't think it matters what the president says because Warsh is such a gamer. He knows what he wants, and it isn't necessarily good for business or the stock market. We're serious about this. He said at one point, we're serious about this. I like that. I don't think anyone, especially the president, doubts now. I hope Warsh has skin like tungsten because he's going to need it. Do all stocks go down when the Fed tightens? For many, the stock market is a commodity like bonds, like real estate, like the dollar. When you learn to be a professional money manager, you recognize that the Fed can crimp credit creation. Fed chief reference the hyperscalers as companies that can crowd out a lot. of borrowers. You raise rates, you can shut the spigot off. So there are managers who are taught to sell all stocks when the Fed tightens and go into cash. Because you sell stocks when the economy slows. Warsh made it clear that's the plan. That selling crushed us today until tech rallied at the end of the day. But there are other managers who say stay the course. I'm picking the stocks of companies that can do well regardless of what happens with interest rates, like pharma. There are other things you can do okay here, like tech. And then there's the rest, financials, retail, travel, leisure, so many others, all not so hot. The rest before this was small. Lots of stocks going higher, the rest small. But it's going to keep growing and growing and growing as long as inflation readings stay high. I just say it's just harder and harder to find good stocks. I hope the Washington comments might have calmed the bond market, which has been terrible with rates going up relentlessly. Nope. Interest rates were going down before the Fed chief started talking, and then they reversed and went up. Bad. And again, another thing that gives us fewer stocks to buy. Ultimately, I think I like it when the Fed chief shows gumption. But it's not good for the near term for most stocks. Long term, it's essential because it prevents runaway inflation. For now, though, look, if you're trying to manage money like I do with my travel trust, you can follow along at CBC Investing Club. There are fewer stocks to buy, fewer to hold, more stocks to sell. Did Warsh want us to lose money today? No. But whereas common interpreters meaning he wants as few stocks as possible going higher, for many, yes, makes it harder to make money. And making money with borrowed money is going to be a sin from now on. if it weren't already. But there's always a bull market somewhere, as I say at the end of the show. We just need to find one or two sectors that can thrive, even in this environment. It's harder, but it can be done. I've done it before. I hope we can do it again. The bottom line, I think the buyers will come back, especially the tech, because it's not on a rate cycle. It's on an industrial revolution cycle. But a lot of groups simply don't work as long as Kevin Warsh is on the warpath, and Warsh is definitely on the warpath. Let's go to Jerry in Missouri. Jerry. Hey, Jim. Thanks for taking my call. Absolutely. What's happening? Well, Speaker 6 (7:25) Jim, just wondering, you talk to Michael Intrader often. I was just wondering if you think Corweave's going to break out any time soon. Speaker 8 (7:32) Okay, so Corweave's got a yin and a yang here. It's borrowing a lot of money. And that's going to be harder now Speaker 2 (7:37) if the Fed starts raising rates. But it's smack in the middle of Speaker 8 (7:40) a Speaker 2 (7:40) great industrial build-out. And so, therefore, I think it's going to be okay to buy. But it's become more speculative. As the Fed raises rates, it's become a more speculative situation. And you've got to think about that because that may not be what you really want. Let's go to Jerry in Florida, please. Jerry. Speaker 6 (7:56) Yeah. Speaker 2 (7:56) Hi, Jim. Speaker 6 (7:57) The company I'm wondering about is Raytheon, RTX. What's going on with Raytheon? Speaker 2 (8:03) OK, here's what's happening. We've been looking at companies that have high priced earnings multiples and we've been shrinking them. As the Fed raises rates, the multiple the people pay for earnings will go down. Right now, it's 27 times Speaker 8 (8:17) earnings. In a rate cycle where the Fed is raising rates, that... P.E. multiple, which is why I wrote my whole book about P.E. multiples. That has to come down. And that's why that stock is going lower. All right, listen to me. Buyers will come back, but they Speaker 1 (8:29) won't come back to the same place. And remember, from now on, we're fighting the Fed. On May 19th, the cyber stocks are unique in position in Speaker 2 (8:37) this market with all the talk of AI safety. They're not dancing to the Fed. I'm going to sit down and palo out with Alto Networks to find out how the company is staying ahead of the game. Then Arm Holdings is the center of what could be a multi-year chip shortage. I'm getting the latest from the company's CEO. And Okta has finally broken free of the AI displacement fears and is really starting to get a beat on the bad Asians. I've got to see you. Stay with Cranky. Speaker 6 (9:09) Don't miss a second of Mad Money. Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com. Speaker 6 (9:33) It's all about the money. I Speaker 7 (9:34) want to be the person in my family that creates generational wealth. How Speaker 6 (9:38) they earn it, spend it, and make dreams come true. I'm Speaker 7 (9:41) not going to sugarcoat it. It's hard, but it's so worth it. Speaker 6 (9:44) Millennial Money. All new Saturdays, 3 Eastern. CNBC. Speaker 2 (9:55) I came out this afternoon, this week, right as everybody started talking about the need to slow down AI development, prevent agents from running wild. But in the end, I think this whole issue comes down to great hygiene, cybersecurity. And that's why I want to check in with Palo Alto Networks, a cybersecurity leader that we own for the Travel Trust. This week, Palo Alto's stock caught fire up a quick 14 percent because Wall Street finally recognizes that you can't have powerful AI without equally powerful cybersecurity. Don't take it from me. Let's dig deep with Nikesh Arora, the chairman and CEO of Palo Alto Networks. and an expert on what's happening right now and many other things. Mr. Rourke, welcome back to Mad Money. Speaker 3 (10:30) Nice to see you, Jim. How are you? Speaker 2 (10:32) Good, Nikesh. Look, we've got Dario. Yes. We can trust first name people. Dario Speaker 1 (10:37) talking about pacing the frontier. And then we have Nikesh talking about the pacing is a ninja move. What does that mean? Speaker 3 (10:46) Well, Jim, I've been listening very carefully to all the rhetoric about what should happen, should AI be slowed down, and what are the bad effects of AI. AI is an amazing technology. I think what we have in front of us is a once-in-a-lifetime opportunity to embrace something that is going to be so impactful across the board. And I don't see how it's going to slow down. I don't see researchers not wanting to win. As I said, there is no competitive sport where I found people saying, oh, wait a minute, let's all take a break together because we should slow it down. I think the right conversation is how do we make sure all the power of AI can be harnessed for the right reasons and for good? And that's the conversation that should be had. I think the right conversation is how do you make sure that AI can be