Price Rout?: Cramer’s ‘Mad Cash’ Recap (Thursday 3/18/21)

Wall Street freaked out last year when the Federal Reserve aggressively cut interest rates to fight COVID, and some have now freaked out again as Federal Reserve Chairman Jerome Powell plans to keep rates low. That was Jim Cramer’s take on Thursday’s head-scratching sale. Low interest rates are historically good for stocks, but not for all stocks.

Cramer told Mad Money viewers that as inflation rises, the future profits of high-growth tech companies will become less attractive. This means that money managers move out of growth into cyclical and financial areas.

Normally that wouldn’t be a huge problem, but with so many tech stocks flooding the market, there’s still a lot to sell.

The bigger problem, however, remains: are investors right to worry about inflation? Cramer doesn’t think so. He said many of the rising commodity prices are temporary. Oil prices have already fallen as OPEC eases restrictions. Plastic prices will fall once many Texas plants are back online after crippling storms. And the shortage of wood could be remedied by calling our neighbors in northern Canada. After all, interest rates cannot grow trees.

Even the shortage of semiconductors is partly a short-term problem as many chips get stuck on ships due to work problems in our ports. Chips are usually shipped in the holds of commercial flights as well, and we still have a shortage of these.

According to Cramer, Powell is right to prioritize unemployment over inflation. Jobs are a long-term problem, inflation is not. In the meantime, investors will need to be patient until this sell-off subsides.

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Executive decision: Magna International

In his first “Executive Decision” segment, Cramer spoke to Swamy Kotagiri, CEO of Magna International ((MGA) – Get the report The auto parts and assembly giant with stocks rose 250% over the past year. Magna shares currently only trade for 12 times earnings.

Kotagiri stated that Magna is no longer just an auto parts maker. Instead, they call themselves a $ 40 billion tech startup with a 60-year history. All of Magna’s end markets add up to over $ 3 trillion.

Despite popular belief, Kotagiri said Magna is actually agnostic when it comes to propulsion systems. He said 70% to 80% of the parts and systems they make are found in both internal combustion engines and electric vehicles.

When asked about electric vehicles, Kotagiri said they were very excited about their partnerships with Fisker ((FSR) – Get the report. He said they had partnered with the electric vehicle maker from the very beginning, and Fisker benefited from their extensive knowledge of systems and integrations. Magna currently works with dozens of OEM partners and nothing prevents them from working with additional partners in the future.

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At the time of publication, Cramer’s Action Alerts PLUS had no position in the stocks mentioned.