Investors who want to capitalize on the market have much longer to wait, Jim Cramer told his Mad Money audience on Thursday. Cramer reminded viewers that there are five stages of sadness, even in the financial markets, but most investors are still caught in denial.
We all know the five stages of sadness. It starts with denial, then anger, then moves on to negotiation, depression and finally ends with acceptance. The recent fear of inflation and rising bond prices in the market is one we have seen before, which is why Cramer has warned that we are not nearly down.
“We need to see a lot more anger, more negotiation to get acceptance,” Cramer said. The process takes days and weeks, and it is painful. Therefore, Cramer said the only sensible step at the moment is to raise cash and sell at any strength and not give in to ‘bounce-buying’.
There’s only one shortcut at the bottom, Cramer added, and that’s the one we saw in February 2016, when investors gave up en masse and shares had a huge “crescendo” sale over a two-day period. .
It remains to be seen whether we will see a similar pattern this time.
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Executive decision: Splunk
In his first ‘Executive Decision’ segment, Cramer spoke with Doug Merritt, President and CEO of Splunk (SPLK) – Get report, the data analysis firm that dropped its shares by 2.6% on Thursday after reporting a strong quarter on Wednesday.
Merritt explained that Splunk is moving from a local to a subscriber-based cloud software, a story of two companies. On the cloud side, revenue grew by 83% during the quarter and there are no signs of slowing. On the local side, however, they have seen some delayed purchases as companies have considered whether now is the right time to go to the cloud. Splunk has taken steps to help clients find themselves in these situations.
Merritt added it for customers like Shopify (SHOP) – Get report, Splunk is a valuable tool. Shopify is constantly updating its platform and adding thousands of new customers, he said. And with all the changes comes terabyte of data that needs to be analyzed for metrics and insights to make their e-commerce platform work at its best.
Cramer said Splunk is the perfect stock to put on your shopping list for market selling.
Executive decision: FireEye
For his second ‘Executive Decision’ segment, Cramer also spoke with Kevin Mandia, CEO of cyber security firm FireEye (FEYE) – Get report.
Mandia said he has been in the industry for 20 years and the attacks are just coming. At the moment, FireEye is still cleaning up the remnants of the massive cyber attack on Solar Winds and just this week we learned about four new zero-day vulnerabilities on Microsoft (MSFT) – Get report Swap email servers. Zero-day exploits are those that currently have no patches or fixes available.
Mandia was quick not to blame. however, it is much more complicated to say that software development is than most people realize and that businesses are well-intentioned and do the best they can.
Asked how FireEye can detect intrusions and attacks, Mandia explained that their entire organization is built for large and small investigations. Once an anomaly is detected, they jump into action and deconstruct entire systems until they discover exactly what happened and why.
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Oversupply of shares
The market is already shameless and it is going to get even worse, Cramer warns viewers. Just as we saw at the end of 2016 and early 2016, an oversupply of new stocks is about to overwhelm demand.
There are three things that stop Cramer at night. First, the ongoing deluge of new IPOs continues. Today we saw shares of Oscar Health (OSCR) – Get report decreases by 7.8%, with a total loss of more than 11% due to its IPO. Investors are clearly losing interest in these transactions, Cramer said, and there is more on the way, including South Korean e-commerce and more players in the crypto-currency.
The second worrying trend is ongoing SPAC attacks. There are also just too many of these transactions, Cramer noted, and it’s just getting weirder and more desperate. Investors have already started scrambling away after being burned.
Finally, the forged prosecution of the IPOs we have already seen. Stocks like Snowflake (SNOW) – Get report and GoodRx (DDRX) – Get report will soon flood the market with additional stocks and there is simply no place in an already weakened market.
After all, the stock market is a market, Cramer concludes. Too much supply can easily overwhelm the demand that remains.
Relative investment
In its No-Huddle Offense segment, Cramer reminded investors that anything so high has no ceiling, can also fall as if it has no floor. And falling happens much faster.
It’s a dangerous game if shares are cut off from reality, Cramer explained. Just look at the social media shares. When Pinterest (PINS) – Get report last year was better than expected growth, the shares jumped and the company valued at 100 times earnings. But if Pinterest is worth $ 50 billion, what’s Snap? (SNAP) – Get report worth twice the growth rate? And if Snap is worth Pinterest twice, then it’s clearly Twitter (TWTR) – Get report is even more.
All of this thinking is great, Cramer said until we have inflation fears and the value of those future earnings is suddenly worth less. That’s why we’re seeing social media stocks go down, because their valuations were never linked to anything concrete in the first place.
Lightning Round
Here’s what Jim Cramer had to say about some of the stocks the callers offered Thursday night during the “Mad Money Lightning Round”:
Equinix (EQIX) – Get report: “People do not want to own REIT when interest rates rise. I can not recommend it.”
Walgreens Boots Alliance (WBA) – Get report: “The model has changed and Amazon (AMZN) – Get report is the way most people want to buy. ‘
CEL-SCI (CVM) – Get report: “I think this one is good.”
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At the time of publication, Cramer’s Action Alerts PLUS was a position in AMZN.