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Hey, I'm Kramer. Welcome to Bad Money. Welcome to Kramerica. My dear friends, I'm just trying to save you some money. My job is not just to entertain, but to explain. So call me at 1-800-743-CBC. We meet you in Kramer. Look, panic is not a strategy. Okay?
I make that point over and over again because I don't want you to sell when maybe you should be standing back or even doing some buying. And today was a day to prove my point. Today was the average to open down horribly, right? The ninth straight lower opening, only to rebound. And the Dow finished down 349 points. S&P slipped 0.23%. The Nasdaq actually eked out a gain of 0.10%. Now, at this point, wouldn't it have felt great just to sell everything, to liberate yourself from your losses, to pick up the pieces and go home? And you would have been dead wrong.
Dead wrong, which is why I counseled not to do it. Yet this morning, when faced with a hideous opening with most indices down almost 5 percent, it sure looked like we're going to have another black money in our hands, didn't it? That's when we're stocks closed down more than 20 percent. Now, if you thought we're headed for black money, then you would have happily sold down 4 percent near the open. But I didn't make that call. Why not? Well, let me walk you through it.
Full disclosure, there's no certainty we won't face the same situation again, but you and I will do it together. I'm certainly not calling a bottom here, not with this trade team's ill-advised strategies. I mean, I don't even know if they know what they're doing. The endless down openings also can't last. I am saying that it might be too late to sell, though. And you have to start thinking about what you might be worth buying on the next dip, as there will be one. I think there's plenty of bargains after the sell-off, especially with the oscillator at minus 8.7. Buy, buy, buy!
So why didn't we panic this morning? Why did I say stay the course? First, I assessed what kind of sell-off this is. Do we have a problem that's systemic? Meaning there's actual weakness and a rot in our institutions that can't easily be undone.
Now, my partner, David Faber, and I discussed this very point this morning. We agreed that we needed to take the financial crisis scenario off the table because our institutions are strong. And we look, we don't believe that the whole economic system is in jeopardy. We don't believe that major banks will fail. We definitely don't like the situation, for heaven's sake. And it's likely we're headed for recession because of the president's ill-advised plans. But we'll pull out of it one way or another. It's not going to be the global financial crisis number two.
And that's important because if you look at the 15 percent downturns we've experienced the last four years, vast majority of times you had to buy, not sell. Normally, when we're down 15 percent, we actually have seen the worst of it or the market becomes viable again. Unless it's systemic problems like the financial crisis, you have to assume that, yes, indeed, the worst may indeed be behind us.
Second, you had to assess the approximate cause of what happened. In 2007, it was the massive leverage in the system that affected a huge number of financial institutions. Now, looking back at most 15% declines, approximate causes were usually because the Federal Reserve tightened too much or there was a one-off event that eventually resolved itself. Right now, we're clearly looking at a one-off event, the president's decision to enact shockingly high, perhaps unforeseen,
let's just say even dangerous high tariffs. As long as the tariffs stick, our economy is in real trouble. But it looks like the president doesn't care. He should always care, both short and long term. That's part of his job.
That said, the stock market almost always bottoms before the economic indicators like employment, industrial production, GDP growth, before they start rebounding, the market bottoms. I want to thank Michael Sembliss, the unbelievably good strategist at J.P. Morgan, who actually pointed that out in a remarkable talk that also had some humor to it that he gave today. He noted that the administration lacked rationality in the way it went about the
this very suboptimal plan. And while it hurt the economy, it's not the beginning of a nuclear spring. Thank heavens. Third, when you just look at things purely historically, you can figure out where we might eventually bottom if things go south from here. At one point, for instance, some companies in the S&P 500 could collectively earn $300 per share. That's what I thought.
and it might have traded at 24 times earnings. And that would have taken the S&P to 7,200. Yes, when the market peaked on February 19th, about 1,000 points below 7,200, it seemed perhaps that we can get there. So therefore, we're sticking around for it. Why not? Wall Street was very bullish on Trump's administration's plan for deregulation for lower taxes and pro-growth policies. Well,
Well, it turns out we weren't paying enough attention to the actual words out of Trump's mouth. Now, this was a moment where the president decided to rearrange the entire world order, albeit in a very slapdash plan that I think could torpedo the economy.
He decided we needed extremely high tariffs in order to stop our trading partners from ripping off America. I like that. Not this high. It was not thought through. And he blindsided our friends and our companies. And yes, most importantly, you and me, the shareholders. And we count on this market for our retirement hopes. We bank on the stock market. Could be foolish, but we bank on it.
So in the new regime, we have to factor in the unfathomable. Let's be clinical for a moment. Let's go over the numbers. Instead of 300 in earnings per share, we have to give the S&P earnings a $60 haircut, my judgment shared by others in the street, taking it down to 240. Keep that number in mind for a second, 240. Then we have to figure out where the price-to-earnings ratio might bother us.
That's usually at 14.5 times earnings. That's right. That's where they bottom. That would put the S&P 500 at 3,480. That is very far from here. Now, at the ugliest today, we were at 4,835. We closed back above 5,000. That means there could be considerable downside. Yes, it could be down 30%. I'm trying to give you the negatives. If President Trump continues to press these tariffs,
We've got to keep that on the table. You can't dismiss that $3,480 figure because historically that's where stocks would go in this kind of worldwide trade war. One that, by the way, exceeds the smooth holy tariffs that preceded the Great Depression. Then we get back to the proximate cause of decline. It's all man-made.
Wall Street's terrified by the tariffs, but we have an arbitrary, mercurial president who can declare victory, roll these tariffs back with a struggle to defend, and then where would we be? We'd have bought nothing. And at some point, the White House won't be able to tolerate a crashing stock market. I know this because if you're at all prominent, you mostly got called about the topic of the logic and the moves and how, look, if you criticize them, you were wrong.
For instance, I talked about, for instance, what were the odds of a crash? People didn't like that administration. Now, I think the potential downside will come from a president who refuses to blink. If Trump's not about negotiations or getting better deals, but just about bringing China to its knees worldwide, the market's got a problem. That's how you would see that low end number. Of course, if you really wanted to go after China, maybe this isn't the best way to do it. Let's say you believe that China's behind the success of the iPhone and you want that to end, as I believe key people in the administration think is the case.
President just placed huge tariffs on Vietnam and India, besides a humongous tariff on China, in order, for example, to force an Apple to build its iPhones here in the U.S., despite Tim Cook's pledge to spend more than $500 billion in the U.S. In other words, the job isn't just to coerce China. It's to coerce U.S. manufacturers to come back here, away from Vietnam. That's why Vietnam had that huge tariff.
Those are two agenda items, not just one. That's important. It means there's no possible negotiation because that would encourage companies not to come back here. Sure, the tariffs could raise some revenue or promote domestic manufacturing, but they can't reverse history. And Trump wants to reverse history. It's a tall order. It'll advise one. It wants to do it quickly.
Which brings me to the last bullet point. There are many things that have to go right for Trump to successfully reorder the global economy in order to bring back domestic manufacturing and bring China to its knees. First, the high tariffs can't cause a spike in inflation or else the Fed won't be able to bail us out with rate cuts.
Second, he has to negotiate new trade deals very quickly for congressional members who are supposed to control the tariffs wake up. The lower the market goes, the more likely the Republicans in Congress actually throw the president's agenda under the bus. Third, he has to do it without causing a big spike in unemployment. I think if he does get all three, he isn't going to press his bet with these tariffs. Instead, he'll find some reason to declare victory and roll them back, which is why the market didn't collapse today. Bottom line.
That's why you can't panic and sell them in negativity. It's why you have to stay the course. Maybe even do some buying if the averages go appreciably lower than they did at the opening this morning. That's what we're going to do. That's what I intend to do for the Charitable Trust. Do some buying. You should be a member of the club. You'll find out. Heaven knows there are plenty of stocks that are down enough to do some buying after today's action. Paul in Texas. Paul. Yeah, Ski Daddy. Yeah.
Go ahead, Paul. So the tariffs President Trump imposed on steel should reduce foreign competition and boost demand for domestic producers. Being down 30 percent in the last month, is the market getting it wrong on ticker CLF, Cleveland Cliffs?
I think the problem, Cleveland says, one, is the balance sheet's not that good, but two, there's got to be demand. I mean, if the auto companies are really cutting back, and I think you're going to have to after initial spurt, that is going to make it so the numbers have to go lower. If the numbers go lower at Cleveland Cliffs, then the stock's going to go to 6.5. That's what happens. Let's go to Trevor in Wisconsin, please. Trevor. Trevor? Hey, Jim. How's it going? Hey, Trevor. All right. How are you?
I'm doing well. I just want to give a quick thanks to your staff. You got a really great group there. No, we do have a great group. And this is pressing times. And I want to thank them myself. I have not done enough to do that. I've got my head in the sand here trying to get this show done. How can I help?
Of course. Well, obviously, with all the uncertainty that's looming here, I know that's not good for markets and usually stocks. But I did want to ask you if there's a potential path for this to increase some momentum for Bitcoin and therefore maybe Coinbase. What do you think?
Not a bad idea. Bitcoin's down a lot. But why don't you do this? Why don't you buy Bitcoin? Why buy Coinbase? You can just go buy Bitcoin. And I think that's a good idea all the way down here. I prefer that to actually buying the stock of Coinbase. Let's go to Julio in Pennsylvania. Julio. Hey, booyah, Jim. Booyah, my friend. What's happening?
Hey, my friend. Hey, we've been following you for 20 years now. My mother-in-law. Thank you. Oh, yeah. Betty from Centralia, Pennsylvania, first turned me on to you and just want to thank you for inviting me. Centralia? Has the fire been put out yet in Centralia? Oh, not yet. Still hot as all day. All right. 100-year fire. I never heard anything like it. How can I help you?
Hey, listen, Tarjay, TGT, I've been looking at the chart, and it seems to be back where it was back in March 2020. Low P-E ratio, especially compared to its competitors like Walmart. It looks compelling, got a value opportunity right now. Do you think it's a good time to start a position, or is the market seeing something that I'm not? Okay, it's really interesting because it is a 10 times earnings, and it does trade with a 4.75% yield. I think if you're ever going to buy it, you would probably have to buy it right here, frankly. It is...
It is cheap historically. How about that? All right. Now, look, panicking is not a strategy. Sorry to go on so long about this, but I'm glad that we both did this together. Got to stay the course right now and get ready to do some buying. If we do go lower, then today's open. That's the game plan. OK, retest.
Maybe go down a little, do some buying. Be a member of the club. You'll get the point. You'll get it before we do. On Mad Money tonight, Levi's Trouser Company is on the move after earnings. I've got the CEO to break down the numbers and the state of the consumer, too, and for the tariffs. Then could Mach 7 stocks stand strong in this market? I'm going to reach one. I mean, yes, I will admit to being puzzled by Apple here. Then I'm taking calls from all across America. Hear what your eye in the days ahead. So don't miss it.
Don't miss my take on your very pressing questions and stay with Kramer. 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.
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The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world. U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will.
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Indeed.com slash mad money. Terms and conditions apply. Hiring Indeed is all you need. After a bunch of insane sessions driven by tariff headlines, I can't wait for earnings season. If only because we'll be able to hear directly and more for once from the companies themselves rather than speculating. Tonight, for example, Levi Strauss and company.
Put it right, I thought it was a darn good solid quarter. Denim classes delivered solid results. Sales good, paired with a big 10 cent earnings beat off a 28 cent basis, thanks to much higher than expected margins. In terms of guidance, LeWes basically kept its outlook unchanged. Fortunately, management, like everybody else, said specifically that the guidance does not reflect any impact from the not so reciprocal tariffs that were announced, and they sourced from all over the place.
At this point, the stock's down roughly 45% from its high since last June, but it's starting to pick up after the close. So here's what we're going to do. Let's check in with Michelle Goss. She's the president and CEO of Levi Strauss. Find out what the hell is going on. Mr. Goss, welcome back to Mad Money.
Thanks, Jim. It's great to be here. OK, I've got to tell you, Michelle, I'm so glad we get to speak to you because there's such confusion going on. And I want to clear up one thing, first of all. There was this notion that your revenues were not as strong as the estimates. I think that's completely wrong. I think it has to do with a discontinued operation because your earnings are so strong. But let's clear up the revenue so people know why the stocks should trade up.
Yeah, no, that's exactly right, Jim. We guided the quarter to be up three and a half to four and a half, and we ended up at plus nine percent. So the little bit of maybe confusion is because we did move Dockers into discontinue operations. You have it absolutely right. We had a strong quarter. I mean, a big beat on the top line, record gross margins. And as I think you just said, a very strong beat on EPS. Now,
Everyone's so gloomy and everyone's telling me that everything's so bad. Levi Strauss is a great American company that should not have been able to deliver such a great number of things are so bad. Tell me what's what's differentiating you from the let's say the media out there that is just doing OK.
Well, I'd say it goes back to our transformation. You know, we have a very strong strategy in place, which is always leading with our brand and becoming a DTC first denim lifestyle operation. And those strategies are working. I mean, from a brand standpoint, we have never been as firmly placed in the center of culture as we are today. We're gaining market share. Men's, women's number one in the U.S.
We are making this pivot to be DTC first. 52% of our revenues this quarter were from our DTCs that's in our stores and in e-com, up 12%, the 12th consecutive quarter of positive growth.
All regions around the world and all categories were positive this quarter. And it is a testament and a proof point that these strategies are working. All right, so Michelle, people want to own this stock. They know the brand. They like the brand. They hear you talk about DTC. Remember, we have a lot of retail investors, but they don't know why that's better than dealing with, say, a department store. Can you explain the gross margins? How much more you make on DTC than if you sell it to a department store?
Well, what I'd say is from a gross margin standpoint, as we sell directly to our consumers, it does actually help the gross margin line. You know, our focus and our transformation is to continue to improve the productivity of our stores and our e-com channel so that we will drive over time EBIT expansion. And you're seeing that. If you remember last year,
Q4, we ended strong. Our EBIT was up for the year and the quarter. And in this quarter, again, we expanded EBIT margin significantly. So that's coming off the leverage we're seeing in the top line, largely from the DTC channel, which is driving the majority of the growth, as well as all the initiatives to address the structural economics of the business. And we're making great progress. And then I would add, in terms of direct-to-consumer, I mean, that's where we get to touch and interact with that consumer directly and bring the fullest impact
expression of Levi's to them. As you know, in addition to focusing more on DTC, we're also expanding what Levi's represents, going from not only being the best pair of jeans in the world, but being head-to-toe denim lifestyle. And on all fronts, we're making great progress. And the proof is the quarter, once again, coming off of a strong quarter last Q4. Definitely the case. Now, you have what we're all going to have to get used to. You source everywhere.
I mean, literally everywhere. Wow. And so you have to try to figure out and you have an excellent CFO what to guide. And it seems like it's just better just to guide. Here's how businesses then try to figure out, navigate this. You can't really navigate it. Correct. It's just not fathomable right now. Well, you know, this this situation is just literally days old.
And so, you know, we are obviously focused on the underlying health of our business, driving our strategies. But I'd say more than a week ago, as we looked at the big beat we had in the quarter, we were contemplating actually increase our guidance. But on April 2nd, now we have a whole new level of uncertainty that's been introduced.
So we're getting our arms around it. As you can imagine, we're driving scenario planning and we have levers that we can pull as we better understand the current tariff situation. So let's say you and your CFO, Mr. Singh, were to be in the White House right now and the president said to you, what do you really want? What would bring back American greatness? What would make it so the consumer does well? What would you say? What would you ask for?
Well, first I would say that the tariff issue is an industry issue. And you talked about our suppliers.
We do source. We have a very diversified supply chain, 28 suppliers, manufacturers around the world. But 98% of apparel manufacturing is happening overseas. So we're not in the manufacturing business. You know, if that was available here in the U.S., we'd be open to it. It would take years. But I think, you know, the number one thing that everybody's wrestling with right now, ourselves, is
the industry and importantly, the consumer. Everybody's wrestling with the uncertainty that's out there. We need some clarity and uncertainty and certainty. OK, so let's talk inflation. If I were to look at your pricing five years ago and your pricing now, how much of you had to take it up?
We have actually taken up pricing over time. I think what's really powerful, Jim, is most of that has been driven by the consumer. So our average unit retail prices, AURs as we call it, has increased over time. And that's been about the consumer pivoting to elevated and higher price point goods. And that's great for the consumer and that's great for us and it's good for margins.
We've also, and we will reflect this in the quarter, or you'll see this in the quarter, is we're doing more full price selling. So we've actually been able to ease back on some of the promotions because the consumers are buying it. We don't need to promote it. We still do promotions at times, of course, but we're seeing more full price selling on our business. And a lot of that is coming through our direct to consumer channels.
Chip, your predecessor, Chip Berger, so terrific. He took me to a factory that was in San Francisco where you were making things. What happens if a trade representative, say someone like Peter Navarro, comes to you and says, hey, you're making stuff in San Francisco. I want you to make it all in the United States or else. What do you do to a trade dictator?
Yeah, well, first off, I think you're speaking to Eureka, which is a great innovation center that we have right nearby. And most of that is to help us innovate on product, et cetera. And they're doing a great job, as you can see, from our very robust product pipeline these days. We have a great design and development team. But, you know, as we were talking about earlier, 98% of apparel manufacturing is happening overseas. So we would be open to it.
if it was available, if there was capacity, and if it was economical. So, you know, what we really want is we want to be in the best interest of our consumers and our fans. And that's what we're focused on. Okay, so if you looked at your tariff situation, can you quickly shift to some of the lower tariff countries? Is that possible?
I mean, quickly, I guess, is relative. We do have a lot of agility. I'd say we have a much stronger, more agile supply chain today than we did even a year ago. And we've got long tenured, I mean, decades old relationship with our suppliers who have factories all over the world. So, of course, we've been doing this, frankly, throughout our history is pivoting where we need to. So we will look at that. I mean, we're in it together.
As an industry, we're all in it together. Excellent. Well, congratulations. Good quarter. We cleared up the revenue issue. And I think we also tried to get our best at clearing up the tariff issue. Michelle Goss, president and CEO of Levi Strauss. Thank you, Michelle, for coming on the show. Thank you, Jim. OK, Matt, Mike's back after the break.
Coming up, is the Magnificent Seven still all that magnificent? Kramer's taking a look at whether there's still opportunity in big tech amid this volatile tape. Next. Every day, thousands of Comcast engineers and technologists create connectivity solutions that change the way we work, live, and play. Like Kunle, a Comcast engineer who is focused on revolutionizing the in-home Wi-Fi experience today and for the next generation.
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The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world. U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will.
After a rollercoaster of a session following the S&P's worst two-day performance since the onset of COVID, what the heck were we supposed to do with this market? Dow's fallen almost 16% from its highest. S&P's off 18% in NASDAQ, bear market territory. Right at the center of the carnage, of course, is the negatives and sevens, all of which are now in bear market territory. All of them. Best performer, Microsoft, has pulled back almost 24%. The worst performer, Tesla, well, that one has been cut in half.
To me, this looks like the end of The Magnificent Seven. Well, you know, he's not for the obvious, I guess. Remember when we watched the original movie, though? Only three of them make it out alive, Yul Brynner, Steve McQueen, and the kid. There's no longer anything helpful about the grouping, and President Trump's extremely high tariffs have made that even more obvious. However...
These are still some of the best companies in the world. Great balance sheets, lots of flexibility, great scale. And with seven in bear market territory, I think it's worth considering which ones you start picking out in weakness. Of course, some of the seven remain a lot more magnificent than the others. So I want to walk you through them. Let's go best to worst. Right near the top of the list is Amazon. That's down roughly 28 percent from its early February high. The main knock against Amazon is that the tariffs will crush their core e-commerce business. After all, most of this stuff is made overseas and it's about to get a lot more expensive.
But I think they've become more of a consumer staples business like Walmart because they sell so many necessities at the best prices. Plus, all retailers have to deal with the tariff problem. The question is, who is the scale to lean on their suppliers and force them to eat the cost of the tariffs?
Nobody has more bargaining power than Amazon. I think you can pull a lot of its orders with China. If Chinese manufacturers refuse to eat most of the tariffs, it has all the cards. It can, I tell you, it is tough enough to be able to get lower prices. But I expect a tug of war between suppliers in China and Amazon. But Amazon is going to be willing to walk away if it has to before it's going to eat that cost of tariff.
Keep in mind, this company has a lot going for it, from the sticky prime subscription business that engenders customer loyalty to the Amazon Web Services business that has enough growth to offset any weakness in retail with excellent margins. Amazon currently trades at around 25 times this year's earnings estimates, about half of its historical valuation. Oh, that makes it a steal, frankly.
Although anything can still get cheaper in this environment. I mean, come on, this is a stock that's come down a lot. We're up there with Amazon's Meta platforms, which looks like a relative winner from tariffs because they sell advertising, so there's little direct impact. Now, that could change if Meta becomes the target of European tariff retaliation, always a possibility. Or if the trade war throws our economy into recession, another real possibility.
But with Meta's stock now down more than 30% from its highs two months ago, I think many of these negatives, including a potentially soft advertising market, are already baked in. Plus, Meta's not getting enough credit for its AI growth opportunities. Stock sales were just under 20 times this year's earnings estimate. It sells below the average stock. Not much of a discount to a historical valuation, but it's one of the highest quality stores in the formerly made Division 7. Finally, yes, I would include Microsoft in the top tier, albeit somewhat grudgingly.
Microsoft has one of the most durable businesses in the group. Its core office software remains essential in the workplace, and its large cloud business adds to the company's overall growth. And that's why Microsoft's only down about 24% from its highest, best performance in the group. But on the negative side, the company seems to be a bit lost in this AI front. That co-pilot AI tools, I'm calling it somewhat of a bust. And its weird slow motion breakup with open AI, what's that about? But at 27 times this year's earnings,
I think it's justified picking some Microsoft up here. Again, you've got all the time in the world. No need to buy all at once. I do hope they stop shading down their forecasts. In the second tier behind those first three Magnuson 7 names, I'm going to put my two own-it-don't-trade-it names. And they've hurt me. NVIDIA and Apple. The mantra still holds, even though NVIDIA is down 36% from its high, and Apple is up more than 30%, and was down badly today. Think about that.
However, even if I can admit that you're swimming upstream of these two stocks here, it was just three weeks ago, for instance, that Nvidia's CTC event occurred where there was no sign at all that its AI theme was slowing. But investors want to throw in the towel. So there's just been a freight train of selling in anything AI.
Trying to buy these names as a weakness has gotten you steamrolled so far. So maybe you just have to step back and let the selling play out for NVIDIA. Look, let me give you some good news. It sells for just 21 times this year's earnings. This is the highest quality company in the world. It sells for less than half its average valuation over the past five years. That's cold comfort NVIDIA bulls like me. NVIDIA trades like there are cancellations of big orders out there. If that's not the case, I think the stock will fly. Buy, buy, buy! All right, Apple.
It's for Apple. Boy, I don't know. These tariffs are going to be a killer. According to an analysis at The Wall Street Journal, Trump's tariffs will take the cost of an iPhone 16 Pro from 550 to around 850. And that's not counting the new tariffs he threatened to unleash on China today. I think the real costs are lower because of Apple's manufacturing shift to India. But even if it only goes up by half that amount, it's still a huge increase. Although hopefully the companies will eat a chunk of it.
You know, there I'm thinking about phone companies, suppliers. Let's put it this way. There's a lot of stuff to spread around. Will Apple be able to pass that additional cost into customers, make its products even more expensive? Will it eat the cost, crushing its margins? That's a lose-lose scenario. Right now, Apple's caught in a crossfire of a trade war between the U.S. and China, which is not a good place to be. It's probably the toughest one, toughest one to really figure out what to do with.
Bottom tier, magnificent seven names start with alphabet. It's not that we just sold out of it entirely for our chapel trust. I feel good about that. We've owned it since 2014. My main concern, I think generative AI may pose an existential threat to the core search business. I think many younger people bypassing Google entirely going straight to chat GPT. Google searches $200 billion a year business. Plus, if the tariffs cause a recession, this is another advertising based business that will get crushed. I think it's more vulnerable than Meta.
Now, there are still plenty of reasons to like Alphabet. YouTube's arguably the most important force in media at this point. The Google Cloud platform is a top three or four offering in the cloud space and still growing nicely. Best of all, Alphabet now trades at just 16 times this year's earnings. That's a big discount to historical valuation.
I just think it's too risky. They all traded a big discount. Finally, there's Tesla, which has been cut in half from its highs. At a very high level, the bull case here is that the president's close relationship with Elon Musk should give the company major advantages as it moves into self-driving cars or humanoid robots.
But man, Tesla's core auto businesses collapse and the tariffs will be terrible for them. Must persona is a big negative for a huge swath of customers or potential customers. Worse, Tesla's still has the most expensive stock in the magnificent set by a large margin, trading at 87 times this year's earnings estimates. And I'm not even sure we can trust those estimates because their auto business is in such bad shape.
So here's the bottom line. In this ugly tape, the Magnificent Seven is no longer a useful framework because these stocks have much less in common when they're coming down. For me, there's a top tier of Amazon, Meta and Microsoft, followed by NVIDIA and Apple, which face real issues for the time being, and a final group of Alphabet and Tesla, the latter of which doesn't even really belong with the Magnificent Seven anymore. Let's go to Kenny in New York, please. Kenny. Hey, Jim. Thanks for taking my call. Sure, Kenny.
Just a quick question. MU, Micron Technologies. Good time, bad time? What do you think? All right, that's a great question because they have this high bandwidth business that is just on fire.
The stock has come down to the point where it is selling at like a steel, actually below a steel company. Even if they cut estimates big, I don't think there's a lot of downside and there will be upside. I'm a buyer of Micron here. And thank you for calling. The Magnificent Seven has been disbanded as tough tape because it's clear now that they have a lot less in common when they're coming down.
Apple, though, is the one that I'm working on and confused. Right in front of you, I'm telling you. It's in my mind right now. Boom, boom, boom. Trying to think. All right, much more Mad Money hit, including our latest edition of Voice of Cramerica, featuring your calls about the turbulence in this tape. Boy, do we need that, huh? Or maybe you do, or maybe I do. I don't know. Then as earnings season kicks off, I'm diving into the domino effect that these new tariffs could have on stocks and the broader economy. And all your calls rapid-fire in tonight's edition of The Lightning Round. So stay with Cramer. ♪
It's been a volatile few days here on Wall Street. It can be tough to keep your head when the losses start piling up, as I know from my charitable trust. But tonight, I want to open up our phone lines to hear directly from you, from the people of America, so we can get through this sell-off together and to come out stronger on the other side of it. Remember, I have seen many crises in my time. It's good to have a little perspective. So with that, let's take some calls. Let's start with Patty in Illinois. Patty.
Hi, Jim. Thank you for taking my call. I've been watching you for years and I have fond memories of some very animated conversations you had with Mark Haynes about the church of what's happening now. Oh, I miss Mark. Yeah, that's how it all started when he used to come in. Reverend Jim Bob, I'm glad you remember that. Those were good times. How can I help you?
I do remember. Well, my question is, you know, given the tariff policy, the market volatility and all the trade disruption going on now, I've been an S&P index investor for a long time and that served me well. But I'd like your opinion on diversifying into a European or perhaps Brazilian market.
S&P equivalent. Look, I have to tell you that Europe is in better shape right now than we are, if only because they have a much more
expansive policy right now, in part because Germany has finally let loose. I don't think that's wrong. I will say, though, they're much ahead of us in terms of their stock market. They've had big, big gains. I think that you should wait till we play a little bit of catch up and then do it, because I don't want you to get into a situation where you're buying their profit taking to come into our market. Let's wait on that. And thank you for the kind words. Perot's in California. Perot's.
Hey, Jim. Thanks so much for taking my call. How's it going with these markets? It's going well. How about you? Pretty good. I just wanted to get your thoughts on this. So I know with the tariffs going on, it's a pretty difficult market and maybe we'll have another sell off tomorrow, but we'll see. I just wanted to see your thoughts on with the tariffs happening and people kind of dipping in their toes to get a
better price. Do you think that the Russell 2000 with 81 percent of the revenues coming from domestic sources and 819 from international would be a better opportunity compared to the S&P 500? You know what? It would be if that if it weren't for the fact that there's so many horrendous stocks in that Russell horrendous. That's why I've got to pick among things like an Intuit, which is not Russell, I know, but or a Cintas, a Paychex. Those are domestic stocks.
The problem with that index, and everyone wants to do that, is because there's so much junk in it that you end up being hurt by the actual companies. Let's do individual stock selection and stay away from that index, which is so pathetic and horrible. Staying in the West Coast, let's hear from Ruben in California. Ruben.
Good.
if you can explain it to me, like if I'm a small child or a golden retriever, I want to know what to do here. I want to know, should I buy right now? I want you to fetch some stocks, okay? Fetch. All right? I mean, look, I want you, you met my friend in video. We, you know, have some fun together. This is a great time if you are just now starting out because you've gotten your first real break in the market and that's what people are waiting for. So,
layer in. In other words, don't buy all at once. The reason I say that is because if President Trump tomorrow says, listen, I'm done with China, no more trade with China, which he could do because that is a completely lunatic thing, but he could do it. Then I think we're down back to where I expect that we could go, which is all the way down a thousand points or more for the S&P. So I think you've got to buy some tomorrow. Expect the fact that the Europeans are going to come out hard. Expect the fact that the president could do something that is, let's say, ill-advised and
And believe plenty of money for the rest. So you had $1,000 to invest. You invest $250 tomorrow. OK, wait till it's down. It's down every single morning. You have to worry about it. Then $250 on Wednesday, $250 on Thursday. Layer in and then come in. Wait on Friday because it tends to go down and then come back Monday. You understand what I'm saying is don't do it all at once. That's what I'm trying to make out. But I do think that this is the right time, provided that it is down tomorrow. If it's up, we're going to hold on.
We're just going to hold off. All right. Up next is Kyle, my homestead in New Jersey. Kyle.
My best friend, Jim Kramer. How are you, sir? I'm doing fine, partner. How about you? I'm hanging in there. I'm a bit terrified right now, but... No, don't be terrified. Do not be. Wrong reaction. Okay, go ahead. I want to thank you guys. Last night, you know, everybody on the whole network's coming on. You called in, like, taking time out of your weekend to help us guys, man. It's just... Well, no, it's not that. Look, I work for you. I mean, you know...
At this point, do I really work for anybody other than you? Honestly, God. I mean, whatever it is. No, I work for somebody in Philadelphia who's getting rid of me. No, that's not happening. It's a privilege to be talking to you on a historic time. I think we'll be talking about this five years from now, you know. Well, that's fine. That's me ringing the bell. We won't be talking about this for a long time. And I think it's like you and I will be talking about it. We're going to try to do it together.
Yeah. So here's my thoughts. I'm trying to have a contrarian view. And I really think that possibly with the tenure coming down, it was up today, coming down and people doing a little bit of maybe panic buying of maybe cars. Yeah.
Right. That's happening. That's definitely happening. And I know there are more European cars that are going to be tariffed. But, you know, I'm thinking we might get a little bit of a boom here. And I'm thinking about averaging into some steel companies, domestic steel companies. Okay. Now, here's your problem with the domestic steel companies. The horrendous – the people who are against them right now around the world –
are going to be blunted. I think the president's going to do a very good job of stopping them. But I feel that the actual demand problem for Nucor, which is the one I look at, could be problematic. And for Cliffs, Cleveland Cliffs, the balance sheet's not that good. So you're running into a demand problem even as we stop or throttle back
are horrible enemies. And if Nippon Steel is allowed to get U.S. Steel, they're going to flood the world with their cheap steel. They'll have a backdoor. So we've got to hold off. But Nucor would be the one I'd want to buy because, man, has it come down. All right, look, I want to thank everybody.
for bearing with us. Look, it's been a hard couple of days. I'm upset with some of the stocks that I've chosen to own, and you are too, but we're going to get through this together. I mean, this is like the seventh big downturn of my career, and frankly, you know, I just say at this point, bring it on. Thank you for all your calls. Mad Money's back after the break. Coming up, Kramer takes your calls, and the sky's the limit. It's a fast-fire lightning round. Next.
Before we get into the lightning round, I want you to scan this code here. This is big news from the investing club. Our third annual meeting is happening soon, May 2nd in Orlando. And it is open to everyone, members and CNBC fans alike. I want to see you there. Get your tickets now. And now it is time for the lightning round. Crazy Batch, right? We're close to an unreadable scene this time. I'm Ted Abab. I buy, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell, sell
And then the lightning round is over. Are you ready? Ski, diving time for the lightning round. My name is Go Will with Dave in Kansas. Dave. Mr. Kramer, it's Double Diamond Dave from Overland Park, Kansas. How have you been, Porter? I like it. Go ahead. Excellent. I have an equity that's down almost 30% from its recent highs. Wow. Gap below its 233-day moving average. Woo!
As an RFI of about 24, what do you think of GLW Corning? That's called Glowworm where I'm from. And Wendell Weeks was on TV. I thought he was excellent. I know everyone hates a data senator. I'm back in with Corning right here, right now. I like your call. I like your style. Go to Kellyanne, Arkansas. Kelly.
Hi, Jim. I'm long on Aurora Innovation, AUR. You know, it's not making money. And if we have a recession, all those companies that don't make money, they lose you money. So I'm not going to let you be in that one. Let's go to Pierce in Texas. Pierce.
Jim, during the COVID dip, a wise friend from Houston turned me on to a great Dallas company called Copart. It's been a... Oh, my God, I love that. Salvage Vehicles. Oh, no, I'm not kidding. It's a very solid company. Look, it's got a Carvana aspect to it. I like that, too. Let's go to Ross in Alabama. Ross. Hey, Jim. How's it going, bud? Not bad, Ross. How about you?
Oh, hey, bud. I mean, every day is a good day. I like that attitude. What's happening? Oh, man. Hey, looking, trying to look forward through all the chaos going on and trying to see maybe if some of these industrial bills may have a good limelight going to them. The question I'm asking is L-I-T-E.
No, no, they've missed too many times. I'm going to have to say no to that one. Even though it's come down a lot, it had a nice bounce today. I'm going to say forget about it. And that, ladies and gentlemen, concludes it of the Lightning Round. The Lightning Round is sponsored by Charles Schwab. Coming up, what actually happens to a company when it has to absorb a new tariff? Kramer is breaking it down and what it means for your stocks. Next.
What happens in the real world that can justify such horrific, moldy day decline in the stock market? Okay, let's say you're a buyer of goods in China for a major American retail chain. President Trump has cumulatively raised tariffs to 79%.
You'll hold a lot of cars. But the manufacturers in China know you have no other place to go for the vast majority of the things you need because nobody else can make this stuff as cheap and at scale. Chinese manufacturers might say, you know, we're not playing ball. We aren't paying for those Trump tariffs. It's on you. So in response, the retailer simply cancels all the orders. They can't afford the 79% either. The chain decides it'll just declare itself out of stock on those items. Ideally, the Chinese companies teeter, then give in. They eat the tariff after realizing the retailer means business.
Of course, the retailer has to cut numbers and pull its guidance, though, because it doesn't have the merchandise to sell. You don't want to own that retailer's stock, do you? Now let's say a different retailer is faced with the same set of circumstances but doesn't want to play hardball. That chain splits the tariffs 50-50 and then chooses to raise its prices to you to offset most of the damage. Sales go down, inflation goes up. You don't want to own that retailer's stock either, do you?
In fact, who wants to own any stocks when these situations are occurring all over the globe? When the earnings come out, you'll see lots of numbers being lowered, lots of forecasts being pulled, and lots of buys going to holds. These are the kinds of reverberations that we're all going to have to get used to. If you can't handle the missed quarters, the inflation, the tension, well, you're now getting a bounce. You'll be able to do some selling tomorrow if you want to, especially if you need, let's say you need the money in the next year.
But I believe you can ride through the inflation and the incessant talk about a stagnation because these tariffs are one off, even if they are enormous. Now, all of this will play out in earnings season, which is fraught in itself. The banks start. We know there hasn't been a lot of capital markets activity. IPOs, M&A. What can we what can they say about the future?
Nothing good. Then we have the capital goods companies like Caterpillar, Cummins, United Rentals. What are they going to say? They can't be bullish. How about the consumer product stores? Too much China. We keep hearing that the homebuyers are something good to say because of the dramatic decline in rates, except rates actually went up a lot. Then there's tech. We could have a very similar situation to what I described with retail. Presidents exempted Nvidia's chips from the tariffs. That's because of defense issues. But if those chips are in a server made in China or a package made in Vietnam or Taiwan, well, that's not exempt.
Anyone who's buying that stuff will see their earnings go down. Maybe the customers pull their orders. How about Apple? It's moving away from China for its phones, putting them in India, and it makes accessories in Vietnam. We know that President Trump doesn't like Vietnam, though, because he thinks it's a backdoor for Chinese exports. The White House isn't appeased by India either. They want everything built here in America, and they will not relent, which then raises the cost of an iPhone to potentially astronomical levels. Unfair to Apple, a great American company, but this trade team just doesn't care.
And Apple loses sales and it makes less money on the sales it has. Do you really want to own Apple knowing that? Hence, Wallet has shed so many points. In the end, we need to know how much of this negativity is already baked into the price of Apple and so many other stocks. I think you'll see many more days like today where we're going to have to wait and see for weeks as things play out.
The averages are way down. That's positive. The inability to know the reaction of your fellow shareholders, well, that is the problem. All I can say is get used to this. It's the new world order, whether you like it or not. And I got to say it, it's awfully hard to like. Like I said, there's always bull market somewhere. I promise to find it just for you right here on Made Money. I'm Jim Craver, and I'll see you tomorrow.
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China will.