Mad Money w/ Jim Cramer 1/21/25
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My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bone working somewhere, and I promise to help you find it. Mad Money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. I call people my friends. I'm just trying to help you make a little money. My job is not just to entertain and educate, but to teach you about days like today. So call me at 1-800-743-CBC. Tweet me at Jim Kramer.

The last time President Trump was in the White House, you always had to buy the dips that he would periodically cause with his own saber rattling. You always had to purchase the stocks of companies he attacked because their stocks would inevitably go higher anyway. You had to see the opportunity that his bluster hit. Even it was painful to do so.

Those thought moments were the best times to invest, and that's what happened today when the Dow rallied 538 points, S&P gained 0.88%, the Nasdaq advanced 0.64%, because after months and months of talking high tariffs, President Trump was very measured about trade barriers in his inaugural speech. He didn't threaten primitive tolls at all.

Maybe four years is a long time ago, but people seem to forget the Trump drill. The president loves the stock market. He always loves to send signals that all hell is going to break loose. And when it doesn't, well, guess what? The market flies.

This rally is built on the back of tariffs, more specifically smaller than expected tariffs that could grow bigger if countries don't play ball. It's built on the backs of new projects like Stargate, a new AI infrastructure initiative that's backed by OpenAI, Oracle, and SoftBank to put up new data centers filled, no doubt, with orders from NVIDIA equipment.

And it's cemented by the appearance of all the big tech executives at the new president's inauguration. What a difference from 2017 when Trump's presidency was contentious and a lot of executives didn't want to have anything to do with him. But let's go back to what's really driving today's markets, the tariffs, which turned out to be all bark, no bite, at least so far.

Lots of people thought that Trump would kick off his second term by stoking a huge trade war against China. The repercussions would be gigantic. Sure, some money would come into the Treasury thanks to the tariffs, but China might then retaliate and then we come right back and tit for tat for tit for tat and who knows where it would go. I didn't see it that way because Trump told me that it might not happen. I want you to take a listen to what he said right after he was elected when I asked him right here on the floor of the exchange about China.

We're having a lot of talks with China. We have a good relationship with China. I have a surprising relationship. Now, when the COVID came in, I sort of cut it off. That was a step too far. That was, as they say, a bridge too far. But we've been talking and discussing with President Xi some things and others, other world leaders. And I think we're going to do very well all around.

Well, he said it, but for many, it's a remarkable turn of events, a light hand when it comes to China, maybe even lighter than President Biden, who, through his assistance, would constantly hector the Chinese, chiefly about advanced semiconductors, but also about their dubious trade practices. I think Trump finally realized that we never really got anything from the Chinese by playing tough.

They didn't even try to appease us. They gave us nothing. Maybe he's got a plan. But no matter what, the actual tariff plan was a pure under-promise, over-delivered riposte that got Wall Street very excited about a new, more flexible Trump regime when we saw the smoke clear. Many investors were concerned that Trump was going to go after Mexico and Canada with everything he had, because he'd eventually do that at one point. No. Before taking the White House, he talked about putting 25% tariffs on our two longstanding trading partners immediately.

But then when the America First trade policy memo came out, we saw that the administration wants to study the situation. Sure, he's still talking about renaming the Gulf of Mexico the Gulf of America. But when it comes to actual policy, it sounds like if he can find someone in Canada to negotiate with, he'll do it. And he's already getting a pretty businesslike set of answers from Claudia Shyam on the president of Mexico. Again, the rhetoric was hot.

But the reality was cool. Sure, there are some real harsh words for a lot of the environmental rules and regulations and grants that President Biden jammed through the last four years. Trump has no time for these. He says that oil and gas are integral to making America great again. If you drill enough and produce enough, you're going to get lower oil prices, along with American hegemony overseas. Because without high gas prices, Russia's got nothing.

Makes a ton of sense, unless you're concerned about the environment, in which case there are obviously some real tradeoffs. Of course, it's not clear how much Trump can influence the oil and gas companies. They need more pipe to bring natural gas to market, both overseas and domestic. The oil CEOs know that if they lose discipline at the behest of the president, prices will plummet and they'll miss their quarters. But you never know. The oil executives were so disrespected under the Biden administration that maybe they could be a little more pliable and jolly when it comes to Trump.

Which brings me back to this start to Trump's term versus his American carnage days from the previous administration. In the first go-round, Trump really actually didn't have a lot of context with businesses we know. Outside of real estate and entertainment, they didn't know him and he didn't know them. This time around, business people know one thing very clearly. They felt targeted during the Biden administration. The agencies where the real power is seem to be stocked with people who had tremendous antipathy toward business, in particular

Typically, they really had it in for any company that was extremely successful and it made a lot of money for its execs and you, a shareholder. The second thing business people know, Elon Musk. Look, I don't know a lot of executives who behind the scenes actually like Musk personally, but I also don't know a soul in business who doesn't respect him. Musk is incredibly successful. There's no denying that track record.

We don't really know how much he can get done in Washington. Seems like he lacks a real power base to make changes. I figure he'll end up just being a consultant with no influence. But just the fact that he's in the room makes CEOs more comfortable than they ever felt with Biden, who seemed to recoil from them for fear

saying the wrong message to the rank and file. He never wanted a photo op with any business people. Lots of executives could see that Trump not only has no problem with rich people, but he sought them out for advice. Remember, at the end, Biden's agenda was controlled not by the Commerce Department's Gina Raimondo, who was relatively business friendly, but people like Jonathan Kanter and the Justice Department's Annie Truss Division, Lena Kahn, the FTC, Jennifer Granholm, the Energy Secretary, who warned of exporting too much liquefied natural gas. The real energy regulators, the EPA, are

Merrick Garland, the attorney general who was deeply focused on Apple's powerful grip on cell phones. Shh, don't tell the Apple sellers who drove the stock down 3%. More on that later. Now, if you don't trust big business, you probably like the heavy hand. You like the regulation. But if you ran one of these companies, you were often blindsided by a subpoena or maybe even a lawsuit. No dialogue ahead of time. That's not how things have been done in this country until Biden.

There had always been dialogue, unless you thought that you were a crook. If they thought you were a crook, no dialogue.

These execs felt like they were all treated like crooks, though, under Biden. Maybe you think that's a partisan thing, but I never heard anything like this about Obama ever. He was all business. In the last go-around, Trump did lay into companies that were moving operations to Mexico. He did opine that Amazon abused the post office, but those were all buying opportunities. This time he carried a big stick going into the White House, but spoke softly once he was ensconced in 1600 Pennsylvania Avenue. We'll stay this way.

What did we learn about Trump the first time around? You could never be sure. The difference on day one, he knows business people, Silicon Valley. He knows how things work. You may like him, you may hate him, but the bottom line, if you're a tech titan, Trump will take your call. In fact, he'll call you. Biden, I don't know if he knew who they even were, and he certainly didn't bother to call them. In the end, I think he preferred to sue them. If you own stocks, which is why you watch me, Trump's method is a heck of a lot better for your portfolio.

Brian in Colorado. Brian. Hey, Jim. I just recently read your book, Make Money Carefully. It was really great. I really hope you consider writing another. Stay tuned. Helped me make a lot of money. Thank you. How can I help you now?

Hey, so you've been consistent in your general caution regarding investment in the automakers lately, but I wanted to ask you about one of them that's recently set some optimistic goals going forward and also made it clear that they're looking well beyond auto manufacturing with a recent large investment into space tech. Jim, I'm looking for your current thoughts on ticker TM Toyota.

Look, I like Toyota more than I like many of the American automakers. But again, it's still in the auto business, and that's a real tough neighborhood, and I care about the neighborhood. Joe in Georgia. Joe. Kramer, how's it going? Not bad, Joe. How about you? I'm doing great. I've got a question. I've started a small position in Progressive.

And I'm very interested in this. It looks like they're taking market share from Geico, consistently raising sales and free cash flow. And I want to know, is this a good one to add to a more? I hear behind the scenes over and over again that they are the most AI related auto insured. They're the best at pricing. I salute you for going with Progressive. I need to go to John in South Carolina. John.

Hey, Jim. Glad to be on the call on the show. I'm glad to have you. Glad to have you on the show. What's up? Long-time listener, second-time caller, member of the club. All right. Thank you very much. Don't forget our Thursday meeting at noon. How can I help? There you go. My question is about CrowdStrike. I've established a position with a cost basis just below $320. Did I trade and take some of the profits? Hold on.

I think CrowdStrike is going up big from here. I think that cybersecurity business is terrific. I think that they are just now beginning to play offense after that glitch that occurred. I do think that this is the time to own

CrowdStrike and to own what George Kurtz has built. All right, this time around, Trump knows more people, more business people, and they know him. If you own stocks and if you're watching me, you probably do. That's a good thing. I mean, everybody, tonight, Taiwan's semi-earnings sparked a broader run-up among the semi-captain...

conductor cap stock, capital equipment stocks. I'm breaking down its report and the fact and the best pin action I've seen in ages. Then I'm taking a closer look at the leader of last week's rally and revealing what stocks I think could build higher in a lower rate environment. And after my time at the J.P. Morgan Healthcare Conference in San Francisco, I'm giving you my takeaways and eyeing the road ahead for the sector. So stay with Kramer.

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Look, there are a lot of great things going on last week. So, so many that we really didn't get to cover them all in depth. So aside from the cooler than expected inflation readings and the terrific bank earnings, why not let's talk about another huge positive. Last week, we had a very encouraging earnings report from Taiwan Semiconductor Manufacturing Company, aka Taiwan Semi, or just TSMC for short. The world's leading semiconductor manufacturer reported excellent numbers early last Thursday.

which were strong enough to spark a strong rally for basically the entire sector. Yes, this stock is that important. While Taiwan Semi itself was only up 1.5%, by the end of last week, the company's commentary was so positive that the Philadelphia Semiconductor Index finished the week a 5.5%.

up 5.4%. Even Loly Worm Intel managed to become one of the five best performing stocks since we got more than 12% and many other chip plays had huge gains, especially the semiconductor capital equipment names. Let's talk about those. There's a reason these stocks ran. Taiwan Semi delivered 39% revenue growth year over year, 57% earnings growth. These are extraordinary numbers. Neither of those were big surprises because the company releases monthly revenue results. So we had a very good idea of how much money they were really making.

But you know what was the surprise? Taiwan Semi's guidance for the first quarter of 2025. In the first quarter, Taiwan Semi expects revenue of $25 to $25.8 billion, which would represent an increase of 33 to 37 percent year over year. And based on the company's exchange rate assumptions, they're expecting gross margin profits between 57 and 59 percent, up from 53 percent in the first quarter of last year. Now, AI and all these numbers, they were substantially ahead of expectations. That's what you need to know.

Matchman explained that the company's strong results in the fourth quarter were driven, not surprisingly, by the high-performance computing division, which encompasses the AI and smartphone and markets, and made up 53% of their sales in the quarter. Taiwan Semi's leadership in manufacturing AI accelerators, like NVIDIA's best chips, remains the key driver of their success. The best analog is indeed NVIDIA. Taiwan Semi said that after AI accelerator revenue tripled and accounted for about 20% of revenue in 2024, they expect

to double again into 2025. Imagine thinks the strength in this theme will continue for a while. Over the next five years, they expect the revenue to rise at a 20% compound annual growth rate. And AI is the main catalyst for that growth, as Taiwan Semi expects a mid 40% growth rate for AI accelerators during the same period. Now, like I said earlier, the pin action.

from this Taiwan semi-quarter was extensive, and some of the biggest beneficiaries were the semiconductor capital equipment companies that, well, these are huge, huge,

makers of equipment that Taiwan Semi buys. Applied materials rallied 4.5% last Thursday and is now up more than 8% in the three trading days since the quarter. Amazing for a supplier. Land research gained 4% on Thursday. It's now up 7% over three days. KLA rallied 4.2%. It's now up more than 7% since Taiwan Semi's quarter. That is serious pin action. So why did Taiwan Semi quarter spark such a big rally for the Semi Capital Equipment Secretary?

Simple. In addition to all of its bullish revenue and margin guidance for the first quarter of 2025 and the positive commentary about its long-term revenue growth potential, Taiwan Semi also disclosed its capital equipment budget for full year 2025. It was enormous. The company expects to spend $38 to $42 billion in CapEx this year, which would be up between 28 and 41 percent from last year and was well above the $36.4 billion number that Wall Street was expecting.

By the way, management said that about 70 percent of his CapEx budget will be spent on, quote, advanced process technologies, end quote. And again, equipment to make GPUs and other accelerators, basically chips from NVIDIA and their imitators. I was very surprised that NVIDIA didn't go up even more last week. It's catching up now.

Just in case you were concerned, I'll add that Taiwan's semi-management expects this money to be well spent. They said, quote, a higher level of capital expenditures is always correlated with higher growth opportunities in the following years. End quote. These guys know what they're doing. That robust capital equipment expenditure guide is why the semiconductor capital equipment group has caught fire over the past few days. Capital spending from the world's largest foundry, and that's a name for a big manufacturing facility,

It means money spent on the massive big-ticket pieces of equipment supplied by the Applied Materials, Land Research, KLA, and Dutch ASMLs of the world. The fact that so much of Taiwan Semi's CapEx budget is going towards advanced process technology is also a huge positive because those are the latest and greatest and most expensive pieces of equipment these capital equipment companies sell. Now, but there was more to this move than just the explicit numbers that Taiwan Semi put out.

While the semiconductor capital equipment companies have been terrific long-term performers and started out last year hot, do you know they've basically been losers for the past six months or so? In fact, these stocks sold off in the second half of last year, so all the applied materials in Cali actually finished the year in positive territory. And all four significantly underperformed the S&P 500 in 2024. Maybe I haven't missed everything here.

Throughout that time, the narrative has shifted from immense opportunity represented by the latest chips like AI accelerators to concerns about why the full opportunity might not be realized. Whether that's because of some unsubstantiated rumor about delayed production for NVIDIA chips. We hear that constantly, right? That drove the stock down last week. Or more recently, the export controls that the United States was trying to impose to limit AI development by some of our greatest geopolitical foes, especially China.

These companies gave up billions of dollars in business when Biden cracked down on Chinese ordering. Periodically, concerns also emerged whether hyperscalers are certainly investing tons of money in AI infrastructure now. Maybe the investments aren't sustainable and will need to be pared back in the future.

perhaps substantially. And an uneven process in the market for some of the more basic chips hasn't helped the group either. Long story short, I think the breakout in the semiconductor capital equipment group is a reflection of investors starting to think once again about the scale of the opportunity, not

about what's dismal, but the opportunity ahead for these companies. Taiwan Semi's management team spelled out that opportunity so eloquently in its earnings report. And the Associated Conference called last week, and investors finally began to realize that some of the restrictions on some of our most advanced semiconductor technologies might soon be coming to an end.

as the Biden administration's time is over. I'm not sure about that, but that's what people are thinking. Oh, by the way, of course, on a day when Oracle, Salt Bank, and OpenAI also announced plans to spend $100 billion on new AI infrastructure, just for starters, I'm also not as concerned about the idea that the hyperscalers might need to slow down their AI spending.

Probably because I've heard from NVIDIA Jensen Wang over and over about the impressive returns on investment that customers can get from their purchase of his most advanced AI product. Frankly, I don't think the opportunity for these semiconductor capital equipment companies was ever really that diminished, even when their stocks were getting clobbered last year.

There was just a perception problem, and it's always hard to move the crowd when a group's out of favor. But with its bullish report last Thursday, Taiwan Semi was able to remind investors how powerful this theme is, remind you how powerful this theme is, essentially resetting the entire narrative for everyone operating in the high-end semiconductor world, including the semiconductor capital equipment companies that stood out as some of the biggest beneficiaries.

Bottom line, I want you to keep in mind, as we hear from the rest of the industry, that Taiwan Semi has a tremendous understanding of the business, and they're insanely positive about the future of chips that can power AI. I know the action of the group seems long in the tooth, but in truth, maybe we're still in the early years of a once-in-a-lifetime new industrial revolution, and you need this equipment to stay ahead of the crowd. Van Money's back in a minute.

Coming up, could a decline in interest rates get the housing sector back on track? Kramer's giving you two names to play the move. Next. If your small business has a problem, you could say, Ugh, just my luck. But you should say, Like a good neighbor, State Farm is there. And we'll help get you back in business. Like a good neighbor, State Farm is there.

Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson Report. ♪

Last week, we finally got some positive action for the stock market in 2025, with the S&P 500 gaining nearly 3% and turning positive for the year. Cooler inflation data pushed down long-term interest rates, and we got flooded with great earnings reports.

So what performed best during last week's rally? When you look at the top performers, there are really some interesting patterns here. Two of the big banks that reported strong quarters made the list, both Goldman Sachs, which we know for the Chapel Trust, and Citigroup, rallying 12%. A couple of semiconductor names, like their applied materials, which makes semiconductor capital equipment. And even the lowly Intel, both

Also roughly 12% higher thanks to the amazing quarter that I just talked about from Taiwan Semi. Oil service giant SOB was in third place, up almost 13% after reporting a terrific quarter on Friday that nobody was looking for. United Rentals was in second, gaining nearly 15% on the news that it's trying to acquire its competitor, H&E Equipment Services. You rarely see an acquirer rallying on Takeover News unless the shareholders really believe in it, right? But at the very top of the list was a name that I've talked about a lot that

Most people don't even put in the conversation, which is wrong. It's a company called Builders First Source. That's the nation's largest supplier of building products, prefabricated components, and value-added services to home builders and contractors. I've been recommending Builders First Source for years now as a play on the idea that we have a structural shortage of single-family homes. And even if everybody builds like crazy, it'll take years to fill that shortage.

However, Builders First Source has been a tough stock to own when interest rates go higher, like they've been doing for the bulk of the past four months. When rates go higher, mortgages and home equity loans get more expensive. People buy fewer houses, and so the builders don't need to buy as much stuff from Builders First Source. When you look at its stock versus the yield in the 10-year treasury, you can see that it peaked in mid-September at just over $200 and then fell more than 30% from its highs.

for poor bottom earlier this month. That's entirely because the yield in the 10-year went from 3.6% to 4.8% during that time. Remember, percentage gain is really huge on that. Last week, though, long-term interest rates pulled back and builders' first source came back to life. So to make things crystal clear, this stock will only keep working if the bond market plays ball. If long rates start rising again, well, then it's done rallying. But last week showed that even a relatively modest pullback in rates can send this stock soaring.

And if you're willing to believe that rates can keep falling, then I have to say that Builders First Source is a fantastic stock for this environment. Of course, last week's 70% rally wasn't entirely about interest rates. On Thursday night, the stock caught a very enthusiastic coverage initiation from Raymond James with an outperformed rating. They argue any bad news is already baked in and Wall Street's not giving Builders First Source enough credit for what it does well. I think they're going to be right.

The very next morning, we learned that December housing starts came in well above expectations. Overall housing starts were up 15.8% month over month, rising to a seasonally adjusted annual rate of 1.5 million units.

Wall Street was only looking for an increase of 3 percent, highest annualized housing starts in 10 months. For most of last year, anything related to homebuilders struggled as housing starts consistently came in below expectations. Once it became clear that the Fed wasn't going to cut interest rates as aggressively as Wall Street was hoping, the builders pulled in their horns. Then when rate cuts from the Fed finally did materialize in the final months of the year, it didn't help.

because the bond market went in the opposite direction. Very strange behavior and long rates soared. It's the long rates that really matter in this industry because that's what the mortgage rates are about. So it's encouraging to see the builders get a bit more confident into the very end of the year, signaling that there could be more building activity going forward.

Let me give you one more reason to like Builders First Source, the substantial rebuilding effort that's ahead of us in multiple parts of this country. Because of Hurricanes Helene and Milton in the southeast last fall and the wildfires that hit Southern California earlier this month, there are tens of thousands of homes across Florida, North Carolina and California that will need to be repaired or rebuilt entirely. That means more business for Builders First Source and its compadres.

You know what? While we're on the subject of housing, there's a reason we own Home Depot for the Chattel Trust. In fact, we've been steadily buying shares in this one since September, based on the idea that it should be a winner in a lower-interest rate environment. While we haven't exactly gotten that lower-rate environment, Home Depot's stock has held up pretty well these past few months. It's actually up modestly since September, something I'll talk about at the CNBC Investment Club meeting on June Thursday.

I will tell you, if long rates start to cooperate, then Home Depot stock could really shine. I think it'd be one of the best stocks in the Dow. Last year, Home Depot did a relatively large deal. It put this $18.25 billion acquisition of SRS Distribution, which let them move further into the part of the market where Builders First Source operates. That's the professional space. The deal is already benefiting Home Depot. When the company last reported earnings in November, its sales were up 6% year-over-year, despite the fact that it still cautions do-it-yourselfers, well, the shoppers,

They went into Home Depot less and spent less per transaction than in the year before. That didn't matter because they did so much professional business. Home Depot also called out hurricane-related demand in the quarter, but I think it's going to play out over multiple quarters or even multiple years, like the fires in the Southland.

Now, again, just in case I wasn't clear before, both Builders First Source and Home Depot are stocks that need lower interest rates to truly thrive. If you believe that long rates are still headed higher from here, and that's a perfectly sound thesis, these stocks will struggle. But if you believe the increase in long rates has mostly run its course at this point, then these two stocks should be very interesting.

Bottom line, once the macro backdrop is right, then builders first source and Home Depot stand to benefit inordinately from both the persistent housing shortage and now the additional business that will come from the vast rebuilding efforts underway in multiple states impacted by natural disasters recently. So if you're in the camp that expects lower rates, those are two terrific stocks to buy right now. Let's go to Brian in Pennsylvania. Brian. Hi, Jim. Thanks for taking my call. Hope you stayed warm today. Of course, Mike.

Oh, yeah, a little chilly out there, no doubt about it. How about you? Pretty good. We had negative nine this morning up here in the Poconos. Well, I'm putting that in the cold camp. What's going on?

Jim, I've been building a position in Caterpillar since November. I've been following your advice by buying a little at a time, which has worked out well. I've got a better average cost that way. But I'm still about 5% to 10% away from my target quantity, and they're scheduled to announce earnings next week. Should I complete my purchase before that, or should I wait until after earnings? What do you think?

We're not going to put a gun to your head like that. Jim Mumblebee is building this company for the long term in a completely different fashion from the old Caterpillar. This is not a quarter to quarter stock the way Cat used to be. This is a multi-year move, and I think you're part of it, and I would stay there. Let's go to Mike in Oregon. Mike.

Hi, Jim. This is Beaver Mike in Oregon. Long time here. Club member and second time caller. Yes. And I'll be sure to be on that call on Thursday, please. Thank you. Will do. I'd like to thank you for all you do for investors and in helping me retire three years earlier than I planned. Well, congratulations to you. Thank you.

Thank you, Jim. Last month, I swapped out of my position in Stanley black and Decker to start a position in home Depot to reduce my tariff exposure. I've also been reducing my position in Honeywell since last fall and I'm now light in industrials. I've been considering adding to my position in Dover, but have been reluctant to violate my $175 cost basis. Jim is, is Dover still a buy here or should I? Wow. Yeah. I mean, I'm preparing my talk for, uh,

and I'm still including Dover as a buy. I understand the trim and honey. Well, we did the same thing today. I'm not going to give up on Stanley Black and Decker because I really believe the rebuild will help them. But I think you're doing sound things. I think Dover's about to break out. It's not that expensive when it's finished reshuffling his portfolio. I think I'd go with that one. And thank you for being such a close follower of the club and what we're up to. I want to go to Denise in Minnesota. Denise. Hey.

Hey there, and happy New Year to you, Jim. Same to you, Denise. How can I help? Well, this particular food company, unlike a lot of them, doesn't have the unhealthy foods. This is a seasonings company. They went through a couple of bad years. Things are looking better, but I don't know what the future holds. What do you think of McCormick?

Okay, I think you raise all the right issues, which it is not one of these companies that has adulterated food. However, the pull of a sector is so powerful in this particular market that no matter what McCormick does, it will be kept back by its compadres. So I'm not sure you want to pull the trigger in that stock.

All right, now, if anybody's expecting lower rates, I think Builders First Source and Home Depot are well suited for that environment, especially given the other housing factors we're seeing right now. I like that Home Depot so much. Now, much more man money, including my take on where the healthcare middlemen stand in the new Trump administration. Plus, today, Apple fell from its spot as the world's largest company. I'll tell you what it means for my audience.

own it, don't trade it thesis. And of course, all your calls rapid fire in tonight's edition of the lightning round. So stay with Rayburn.

If Elon Musk or anyone else in the Trump administration is serious about balancing the budget, they need to go after the one part of healthcare that's universally loathed, both inside and outside the industry. I'm talking about the pharmacy benefit manager, Middleman, that President Trump has already started to target. Let me say from the beginning, from the outset, it is very hard to balance the budget. The executive agencies are all staffed by people who know how to protect their turf, and a lot of what might need to be cut is pretty darn popular.

But there's some easy savings to come by if you go after the pharmacy benefit managers. The FTC has done this gigantic amount of work on these health care middlemen. So far, they came up empty handed. Maybe they just didn't get a chance to get it done. For instance, the FTC recently singled out Cygnus Express Scripps, CVS's Caremark Rx, and not only the United Health Optum Rx's FDM.

Expensive friction. These middlemen, whom Trump has pledged to knock out, collectively siphoned $7.3 billion for the six years the FTC measured through 2022 simply by marking up special and generic drugs. Hey, why don't we throw in Sincora, Microbial,

McKesson and Cardinal Health, although I think the latter is doing a lot more besides just middlemen. These are the drug distributors, and they're part of the FTC's version of the problem, too. Now that $7.3 billion alone is chicken feed. I know that compared to the federal budget deficit. But if the government wants savings in Medicare and Medicaid, it's certainly enough to make it very tough to own these stocks.

See, Medicare is where the money is. Three things define our deficit. Social Security, health care and just paying the interest on your existing debt. Social Security is called the third rail of American politics for a reason.

Interest payments on our bonds are mandatory. You can't scrap the full faith and credit of the U.S. government, which leaves health care. If I were looking for a way to shrink the deficit, I'd take a hard look at what happens with drug pricing and drug rebates. I'd question whether any company should own both a pharmacy and a pharmacy benefit manager. And I'd open up the pricing on everything, every little thing, and create a commission to ensure that there's some rationality for what the federal government will pay.

It's crazy. That's the only place where I think our government can find real savings that won't make too many people angry. President Biden stunned the not-ready pharma industry with the IRA-Medicare negotiation passage. Now, I remember when I was the Kramer from Kudlow & Kramer in the early part of the century, and we discussed this issue endlessly. My colleague Larry Kudlow said it would never happen. It was too dangerous to market innovation if Medicare used its bargaining power to negotiate lower prices. I heard that too many joint companies would leave the country. It would stifle all innovation.

I came in a different way. I said that the VA negotiates prices. Why shouldn't Medicare? Besides, virtually every other government on Earth does the same thing. So where the heck are these companies going to go? Dozen years later, Larry became President Trump's chief economic advisor, and the drug companies were still untouchable. They were perceived to be off limits, too powerful to take on.

But I think the drug companies were caught off guard by Biden's initiative against them, something that was buried in what was basically an infrastructure bill. They were stunned further when a second list of drugs subject to price negotiations came out last week. Or at least they seem to be stunned by the turn of events when I talk with them behind the scenes at the JPMorgan Health Care Conference. But one thing's for certain, these drug companies aren't moving anywhere. It was an idle threat. Not only that, but I think Big Pharma is now on a mission to tell their side of the story about how the middlemen are. They're the ones who really rip us off.

Go back to the $7.3 billion figure. I think Elon Musk and his buddies at Doge can dig in and find out other costs to the system that will make the $7.3 billion small change. And I think they can call for a different way to distribute drugs. Drugs, I got an idea. Maybe they should call for a commission rate.

Like the 6% commission when you buy a house in this country, instead of this opaque system of rebates that often gets a lot of profiteering. Any middleman, like a McKesson, like a Karmark RX, should get the same commission for helping drug companies dispense their drugs. Not one penny more. Real bad for their stocks, I know, but the government could generate a lot of savings. Isn't that the point?

Sadly, Biden's FTC seemed to have spent more time trying to stop two handbag companies from merging than it did trying to get health care costs down through creating more competition. Hey, maybe that can change under the new regime. It can't. I just can't emphasize enough how despised these middlemen are by the rest of the industry. With technology as it is, with the ability to know where and how everything needs to go and how to charge for it, I have no idea how this current process survives.

I can argue we don't even need these companies anymore. But nothing rational is going to come of this unless some agency really champions it and the president gets behind it. Or to put it another way, while everyone was concerned about the conference about Robert F. Kennedy Jr., hoping he wouldn't be confirmed as Health and Human Services Secretary, the real battle is convincing the public that it's not the drug companies screwing over everybody, it's the middlemen. And how about RFK Jr.? All right?

I think there's a lot of fear that what he really means, what he says about vaccines, that he really intends to crack down on them. Although the people around him are much more perturbed on the vaccine issue than he is. I'm almost sure of that. Where's he really?

I want you to go to the January 6th edition of The New Yorker. I want you to read the piece by Dhruv Kular. It's called, quote, Why is the American diet so deadly? End quote. If you didn't know about what are about RFK Jr., you'd say, geez, why can't someone in our government do something about this?

It's all about the processed food and what it does to us. It's disgraceful. I think RFK knows that he shouldn't waste too much of his time and political capital on vaccines when he could be devoting himself to changing our food regime, which is a disaster. There are a handful of food companies left, and they all trade as if the world of hurt is about to come down on them. Maybe it will.

The issue with RFK, though, is that you can't expect the American people to give up on the cause of their bad diets. So don't give up on owning the GOP-1 weight loss drug stocks, because I think the government's going to have to pay for them. I think Medicare and the health insurance companies will pay, and they'll pay a lot. We can't kick these foods because they're like drugs. We need drugs to

combat these drugs. Lots of people were fretting about how Novo Nordisk GOP-1 is now going to be regulated by Medicare price controls. As someone who owns Eli Lilly from my travel trust, I

I got to say, I was glad to see Novo on the list because I wasn't even sure Medicare wouldn't even pay for them all. The bottom line, yes, we got tons of talk about drugs at the JPMorgan Health Care Conference last week. But when it comes to emotions, they're riding high about middlemen and about RFK Jr. But the only ones who should be trembling are the pharmacy benefit manager middlemen and those who adulterate our food. I am no fan of the middlemen.

And I'm all in on RFK when he's talking about food. I hope he sticks to that rather than the vaccine stuff. He could really make a difference and strike a real blow against obesity, diabetes and the food makers and adulterers themselves. I would not own the stocks of the middlemen or the food processor. It's a long four years. And for them, the pain hasn't even started. They have 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. It is time. It's time for the lightning round. We're right before our course. My staff prepares the graphics. We plan to sound. Ah!

And then the lightning round is over. Are you ready? It's time for the lightning round, everybody. Let's go with Paul in New York. Paul. Hey, Jim. Long time viewer, first time caller. I'd like to know what you think of RGTA. Okay, it's a quantum stock. These are short squeezes. If you want to participate in a short squeeze, this is better than most. How about that? Let's go to Reese in Pennsylvania. Reese.

Hey, Kramer, I want to get your opinion before I open a position on ASML. I think ASML is a remarkably great company, and I think you should buy it. Let me tell you, I also like Lamber Search. Let's go to Andrew in Utah. Andrew. Hey, Kramer, what's going on? Not much. How about you?

Not much, not much. So, yeah, my question today is with advanced micro devices. I'm just wondering if, you know, with the stock being down, you know, year over year, if it's a stock on sale or if it's a buck? Look, I think that it's a great company. I do think that there's a lot of people who believe that they will not be able to deliver on this quarter. I, therefore, am reluctant to get in ahead of the quarter. And we did sell the stock a little bit higher for the travel trust. Let's go to Ken in Texas. Ken.

Yes, Jim, I'd like your opinion on my situation.

About 10 years ago, I bought Dow and DuPont, and they merged, they split. I've held the Dow, DuPont, and Cortina since that time. I'm playing with the house's money, basically, and I'm drawing $900 in dividends per month on Dow. But its price keeps sliding, and I'm nervous whether I should continue to hold or sell and move on. I don't want to sell it here. We might be at some sort of trough.

at this very moment in Dow pricing. So I think you should hold on to the stock. Let's go to Jim in Connecticut. Jim. Jim, I do not own a pet stock. Since I sold my Zotus, I had over 600% profit thanks to you.

Not my favorite. I do think that the pet, I look, I like Chewy. I know that's a pedestrian way to look at things, but I think that Chewy is the better bet for this group. Let's go to Ryan in Arizona. Ryan.

Pretty chill. I want your opinion on a healthcare technology company that focuses on Medicare Advantage plans and uses an AI-based platform to help physicians improve chronic disease management and patient outcomes. Do you think this type of innovation has the potential to disrupt the industry and compete with the larger players?

or you see it as an eventual acquisition target. The company I'm referring to is Glover Health Investment, ticker CLOV. Okay, that is just a total speck. I mean, the kind of stocks that we talk about in healthcare, I think are much better than this. This company loses a lot of money. I'm not recommending stocks on mad money of companies that lose a lot of money. Let's go to Connor in Pennsylvania, please. Connor. Hey, Jim. Kyle, what's up?

Hey, Jim, I'm a young investor and I've been watching your show for about a year now. And I want to thank you for your 2025 dividend stock. They're off to a great start. Thank you.

My question is that I spent most of my last year buying Cleveland Cliffs with anticipation that it would go up after Trump won the election. It did go up a bit in November, but it's been very flat since. Do you think I should sell? No, I don't want to. A lot of the commodities I think can bottom here. This stock has come down, down, down, down, down. I cannot count on selling Cleveland Cliffs at this level. And that, ladies and gentlemen, is the conclusion of the Lightning Round.

The Lightning Round is sponsored by Charles Schwab. When is a miss not a miss? When it's totally expected, that's when. Which brings me to Apple. Today, Apple fell from its purges the largest company on Earth. It's now worth less than Nvidia after sinking 3.2%. What the heck happened here? Well, on the surface, I tell you that Apple caught not one but two downgrades, which were brutal. Because while one of them was a buy to hold, the other was the dreaded hold to sell.

This kind of downgrade is usually the problems of companies showing dismal failure. Several down quarters in a row, followed by the big give up, perhaps even a changing of the car.

Apple's superficial problem, demand, not enough of it, especially the phone. Everything seems to be going the wrong way here. U.S. demand seems tepid. More important, China demand seems to have fallen off a cliff. There's apparently a problem with artificial intelligence for the iPhone in China. Apple doesn't have a partner. Again, apparently that's going to cause them to miss the quarter. Worse, they're going to miss the next quarter, too, which means they'll cut their forecast for the next quarter when they report.

They say it's going to be a shortfall and an estimate cut of epic proportions, calling into question whether Apple's growth has come to a halt. There'll be endless downgrades, and someone may even evoke what Metis Mark Zuckerberg said in his seminal Joe Rogan interview, that Apple hasn't invented anything since Steve Jobs passed away 14 years ago. They're claiming it'll be a brutal shocker, that no one will see it coming.

There's just one problem. How can something this widely telegraphed, this well-known, this speculated on still be a surprise? Today's the birthday of our executive producer, Regina Gilligan. We'll have surprise cupcakes after the show. There, the proverbial cat's out of the bag. Is it still a surprise? I don't think so. Same goes for Apple. I expect more downgrades by people who want to get ahead of the big surprise.

Analysts want to downgrade it now ahead of its report on Thursday of next week, perhaps so they can upgrade it after the bombshell so it's not too late to sell, right? Isn't that the thrust of all my comments? Wrong.

I've been recommending Apple for 20 years now because it makes the best products universally loved. When something goes wrong, which is apparently the case now, Apple will pivot it, will fix it, will do what's necessary to please the customer. At the same time, it has the fabulous revenue stream, that service stream. Anytime you see an Apple charge that you pay and you most likely pay it automatically, the money goes into the service revenue bucket, which keeps growing and growing and growing as more people tap into something Apple offers. Mike Chappell trusts his own Apple forever.

We had to sell some late last year as an answer to a really high quality problem, owning too much Apple versus the rest of the portfolio. We'll talk about that at our noon Thursday club meeting. Now, consider this. If you owned Apple for the past 20 years, you'd be up 17,588 percent. 17,588 percent.

If you include dividends paid, $100 invested in Apple stock back then would now be worth nearly $21,000. So why isn't everyone who owns Apple a millionaire? Simple, because of days like today, because of analysts who have no faith, because of all the people who think that the company's best days are behind them. If you believe them, you miss the big moves, the kind of moves you only catch when you're invested, not flitting in and out like a cat jumping multiple times onto a stove. You had to hold on even if it were for dear life.

What will turn things around this time? Maybe Apple finds a partner in China for AI. Maybe the next version of the iPhone is radically better. Maybe the Vision Pro is better than the competition from Meta, if you're keeping score. Maybe there are new additions to the revenue stream. Maybe everyone knows it'll be terrible. It turns out to be less terrible. Hey, everyone knew Netflix was going to be great tonight. It turned out to be really great. The stock went up more than 100 points. I don't know what it will take to turn Apple stock around. I just have faith that Apple will pull it off. That's why I don't mind days like today at all.

These days are the price you pay for greatness, sometimes because you never know when you can get back in. This is the price you have to pay. That's why I say own Apple, don't trade it, and don't sell it, unless the position gets so big that you have no choice. That real high-quality problem that happens to Apple shareholders all the time. Like I said, as always, it's a bull market summary. I promise I'll be right back just for you right here on MadMoney. I'm Jim Graber. See you tomorrow.

All opinions expressed by Jim Cramer on this podcast are solely Cramer's opinions and do not reflect the opinions of CNBC, NBCUniversal, or their parent company or affiliates, and may have been previously disseminated by Cramer on television, radio, internet, or another medium.

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