The true enemy of the stock market isn't inflation, it's froth, Jim Cramer warned his Mad Money viewers Monday. That's because froth only appears at the end of a rally, Cramer explained, and it always involves a lot of pain for shareholders.
The markets are already down big from their November highs, and many speculative investors from last year's wave of IPOs and SPACs have either taken huge losses or have exited the market altogether. That's why it's cringeworthy to see stocks like Tesla (TSLA) rocket up 8% on just the rumor of a possible stock split. Gains made on rumors, Cramer explained, will easily evaporate during the next downturn unless there is something solid to back it up.
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Cramer was equally cautious about the 45% move in AMC Entertainment (AMC) on the company's speculative investment in a gold mining company.
What investors should be investing in are boring companies with low price-earnings ratios and actual profits. In times of rising interest rates, pharma companies like Eli Lilly (LLY) should be bought. Retailers like Costco (COST) should be bought, and oil and energy names like Chevron (CVX) and Devon Energy (DVN) won't do you wrong.
Cramer recommended agriculture stocks like AGCO (AGCO), which was featured on the show last week. If investors must invest in tech, stick with the big boys like Alphabet (GOOGL), which we know can weather any economic downturn.
Retail and Consumer Spending Outlook
In a special interview, Cramer checked in with Adrianne Shapira, former retail analyst and now managing director at the privately held Eurazeo Brands, for a read on what's hot in retail and consumer spending.
Eurazeo recently acquired a controlling stake in the clean beauty brand, Beekman 1802. Shapira said that consumers are discovering the importance of skin care at an earlier age and they want brands they know and trust. Kindness never goes out of style, she said, and Beekman 1802 offers kindness to yourself and the environment at the same time.
Shapira characterized Eurazeo as value-added investors, building on the strong foundations of great people and brands, leveraging their network and resources to execute even faster.
When asked about the health of the consumer, Shapira noted that consumer spending is strong and will only get stronger as the world emerges from the pandemic.
When Good News Is Bad News
When it comes to inflation, we're in a good-news-is-bad-news situation. If our economy can cool itself, then the Federal Reserve won't need to get super aggressive with interest rates. But if the economy continues to be red hot, then watch out below.
This push-and-pull of supply and demand is especially important for the housing sector, which delicately balances rising interest rates against rising commodity costs and supply chain disruptions.
The home builders have been minting money since the pandemic began and our society adjusted to working from home in a hybrid economy. But when KB Home (KBH) reported a top- and bottom-line earnings miss, analysts and shareholders grew wary, sending KB's stock down 10% last week.
But despite only delivering 2,868 homes when Wall Street was looking for 3,180, KB Home's management did not lower its forecasts, citing a 22% uptick in the average selling price and rising backlog.
But make no mistake, housing is cyclical, Cramer reminded viewers. Eventually, interest rates and inflation will cause housing to slow, even if KB Home's management doesn't see it yet.
Executive Decision: Abiomed
In his "Executive Decision" segment, Cramer spoke with Mike Minogue, chairman, president and CEO of Abiomed (ABMD), the medical device maker that was last featured on Mad Money almost a decade ago.
Minogue said a lot has changed since then. Back then, Abiomed had $126 million in sales with 70 patents. Today, they're over $1 billion in sales with 1,300 patents and another 1,300 pending. More important, Abiomed grew from just 7,000 patients to over 220,000 patients today.
Minogue said Abiomed is the heart recovery company. He showed off the world's smallest heart pump, one that doesn't require cutting open the chest, but instead can be inserted via catheter through the leg or even the shoulder in just minutes.
Heart disease is still the No. 1 killer in the U.S., but heart attacks are no longer a death sentence for patients, Minogue said. Abiomed is growing every quarter and is helping patients both at the bedside and also via the cloud, with patient monitoring solutions.
Lightning Round
In the Lightning Round, Cramer was all bulls, recommending Wells Fargo (WFC), Enbridge (ENB), NXP Semiconductors (NXPI), InMode (INMD) and Bausch Health (BHC).
There Are Mergers and Then There Are Mergers
In his "No Huddle Offense" segment, Cramer said there are many types of mergers. And while AMC Entertainment's nonsensical investment in a penny-stock gold miner doesn't make a lot of sense, it's hard to argue with the results. He said you have to give AMC CEO Adam Aron a lot of credit for moving his company's stock higher and making money for shareholders, even if the move doesn't seem to make sense from a business perspective.
AMC's acquisition comes on the heels of HP's (HPQ) recent acquisition of Poly, a company that makes products that fit perfectly into its product line. That deal sent shares lower, despite making perfect sense from a business sense.
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