Huawei arrest just made companies like Apple less valuable, Jim Cramer says

Huawei arrest made companies, including Apple, less valuable: Cramer

Huawei arrest made companies, including Apple, less valuable: Cramer   4 Hours Ago | 01:13

U.S.-based technology companies with business in China automatically lost value on news of the arrest of Huawei CFO Meng Wanzhou, who has reportedly been accused of violating U.S. sanctions, CNBC’s Jim Cramer said Thursday.

The arrest, which occurred in Canada on Saturday and was announced Wednesday, “means any tech company that does a huge amount of business in China, including Apple or Micron or Intel or Skyworks or Qualcomm or Broadcom, is worth a little less today than it was yesterday,” Cramer, host of “Mad Money,” told investors.

Tech colossus Huawei, the world’s second largest phone seller and one of China’s most important companies, has been a cornerstone both of Chinese technological pride and of spying concerns from U.S. government officials. A rival of Samsung and Apple in the smartphone arena, Huawei counts Qualcomm and Intel among its suppliers.

The arrest of its global CFO could mark a setback in U.S.-China trade relations, a notion that Wall Street took to heart. To Cramer, calling the event an “escalation” in tensions was “one of the biggest understatements of the year.”

“To say that it could wreck any further negotiations seems reasonable,” he said. “Until we know more, we have to figure there could be more downgrades ahead [and] more pain to come in these tech stocks, unless the CFO is allowed to return to China, or at least released on her own recognizance.”

“Even then, we’re in seriously uncharted waters here,” he said. “Caution is warranted, at least on the Chinese-related tech stocks, until we know more.”

Moreover, it gives the White House “hardliners” on China — namely Trade and Industrial Policy Director Peter Navarro, Vice President Mike Pence and U.S. Trade Representative Robert Lighthizer — more “ammunition” in their push to slow China’s rise to power, Cramer said.

“These guys want to maintain America’s place as the world’s sole superpower. They believe some pain needs to be taken, even if it hurts corporate profits, to prevent China from challenging the U.S. hegemony,” the “Mad Money” host explained. “This kind of thing gives the hardliners a lot of ammunition because it illustrates that trade with China is about a lot more than making money.”

Stocks fell dramatically in the first half of Thursday’s trading session, at one point bringing the Dow Jones Industrial Average’s two-day losses to over 1,500 points. The major averages mounted a recovery into the close, though the Dow and the S&P 500 index still ended the day lower.


This sell-off was caused by a computer-driven ‘footrace,’ Jim Cramer says

Sell-off caused by computer-driven 'footrace,' says Jim Cramer

Sell-off caused by computer-driven ‘footrace,’ says Jim Cramer   13 Hours Ago | 01:10

As CNBC’s Jim Cramer watched stocks nosedive in Tuesday’s trading session, one thing became abundantly clear to the longtime market-watcher: it “was all about the rise of the machines.”

The major averages all fell more than 2 percent as a possible slowdown signal in the bond market and lingering trade fears rattled investors. The Dow Jones Industrial Average fell more than 800 points intraday.

Some attributed the dramatic declines to a lack of buyers, but Cramer already knew the culprits: complex algorithmic programs set up by professional money managers to sell when the odds of future market losses increase.

In other words, when an event that often precedes a recession occurs — in Tuesday’s case, short-term interest rates trading above long-term rates in a so-called yield curve inversion — some trading algorithms will automatically begin selling securities because the chances of an economic slowdown just got higher.

Cramer, host of “Mad Money,” drew a comparison with football. Some plays can seem very risky, but when you consider the percentage chances of them going right, there’s no choice but to implement them in the field. These programs make the same kind of calculation.

So, when the two-year and the five-year yield curves inverted on Tuesday, some hedge funds’ programs automatically sold the S&P 500, which tends to fall in times of economic weakness, and others automatically sold shares of the big banks, which suffer when long-term rates are lower, Cramer said.

“Why? Because historically, this situation has produced negative results for the bank stocks and these hedge funds are trying to get out ahead of others who fear those negative results but just don’t know they’re going to fear them. It’s a footrace,” he explained. “This curve, as they call it, overrides whatever you hear about good employment or consumer balance sheets or robust lending. It’s predictive.”

Worse, the charts are signaling more pain ahead: based on Cramer’s analysis, many hedge funds likely sold the S&P 500 when it dipped below its 200-day moving average because, in the past, that move tended to bring more downside.

“Here’s the problem: there are now so many hedge funds using the same algorithm, same programs [that] there simply aren’t enough investors willing to take the other side of the trade. If we all know that stocks go down on certain triggers, then who the heck would want to buy stocks?” Cramer said.

“That’s how you get a day like today, where the market goes into free-fall,” the “Mad Money” host continued. “When the percentages are against you and the algorithms are in charge, … nobody wants to try to be a hero and bet against them.”