Index, measures the strength of manufacturing slips to the lowest level since 2009, everybodys going to freak out theyre worried about a recession. Which is why the dow lost 304 points, s p 5001. 23 and the nasdaq dropped 1. 13 that was last week now this market was due for this beatdown but i also told you that i dont believe were headed into recession. Im standing by that position. But the recession thesis became more compelling today and you need to get your head around it if you want to understand this market so let me lay it all out for you. One place. The single biggest problem behind the recession thesis is the president s trade policy but maybe not the way you think. Trumps towers and chinese exports have done realdamage t the chinese economy. Second largest in the world. As china falters, it is taking the rest of the trading partners with it, especially europe, throwing worries about brexit along with a lack of fiscal stimulus from germany and you have a worldwide slowdown going. Its one we might not be immune to logic does sound airtight, is it not it so then how come im not more worried about a recession than everybody else well, its the last step yes, there is a worldwide slowdown i dont see it doing as much damage here. If we were an expert oriented manufacturing economy in the United States, we would be in a lot of trouble we have a service driven economy, twothirds of our commerce is nonindustrial domestic were late stage capitalist country. Only our exports are really vulnerable our manufacturing has been devastated years ago what do we sell to the rest of the world . Airplanes and automobiles. Look, a big export, even the biggest, is the boeing 737 max thats grounded. Think about that general motors, its on strike think about that so you see the purchasing Managers Index number today, you need to take those two factors into account i dont think people did i think they explained a lot of the step down that were talking about. In other words, were not going back to the 2009 economy thats the worst since the Great Depression frankly, i gather exports can take douus down like that theyre too small, lucky or not, i he guess, to do all that much damage. Thats why i want to put todays action in different context from what you might have heard. We got hit today because we were due for a pullback think of that. The markets had an incredible year yes, we were up 17 from 2019. Were now in the Fourth Quarter the investors, like you, can do some tax planning. Its natural. I predicted this pull back two weeks ago. I had no idea about the pmi number i said there something off the twhal would hurt us. I hadnt known there was going to be this the struj that market had already gotten severely overbought hence, while weve been ringing the register for my travel trust. Im coming out here every day and telling you, weve been ringing the register you can find out by joining the club which im, ive been adamant that, well, ring the register today we actually dipped for the first time and did some buying only a little. I think the afrnls could have more down side and sold something to buy its the first buying i sanctioned because last, after today, so much profit taking were oversold. What else . Okay, the market has been exhausted by initial Public Offerings that buyers are no longer interested in or more accurately are repulsed by i told you this was going to happen there would come a day where there have been so many deals that it could wreck the whole darn market. Companies with rapid growth have gone out of style. There is little demand for a peloton which became public at 29 last week i told you to sell it. Thats latest from a long line of disappointing deals and theyre weighing on the averages thank you uber third, we have a rude awakening of what could happen during earnings season when the brokerage stocks collapsed on the news that Charles Schwab will no longer take commission on stocks, etfs and options. Td ameritrade, down 25 . On the other hand, were also some poz keep track of these. Did you want hear much about it. There is Spice Company theyre slightly better than expected quarter the stocks shot up, get this nearly 7 . Mostly because the strength in this this particular brand of franks. So i wouldnt be too worried about the earnings season. Pt there is going to be good and some bad fourth, there is washington. This matters two weeks ago i interviewed Speaker Nancy Pelosi she talked about the need to Work Together with the president to pass the new nafta, revised trade deal of mexico and canada. That is essential to so Many Companies and their employees. But just a few days later, the ukraine story broke. And suddenly she leading the charge on impeachment. Hard to work with the president on the trade agreement and impeach him at the same time beyond that, however, however you feel about impeachment, the spillover effects are undeniable and jarring people there is a belief that trump wont be able to get a trade deal with china if hes impeached because chinese will say no that will, for certain cut back on Business Investment more importantly, depending on how bad this gets for the president , theres a possibility it could lead to a democratic sweep in next years elections snag could put Elizabeth Warren in the white house she is the leader. Give her both chambers of commerce wall street is terrified of warren i think a lot of that is overblown. But my view doesnt matter as long as this is the narrative that terrified by warren and boy it is ever the narrative, we need to be prepared for endless bouts of selling every time there is new development with the impeachment proceedings or a poll that puts warren ahead of biden and that could last up until election day so how come im not losing more sleep over this scenario for starters, it is very early in the race. We have no idea what will happen trying to bet on the Election Results more than a year in advance, i think thats a fools game on top of that, there is always a possibility that trump will get a trade deal with china. I think the chances are slim but the president thinks hes slipping he might be a lot more willing to compromise with the chinese but the main reason im not worried about a warren white house or at least as much as the other guy, i dont think it will be nearly as big a deal as people think wall street is acting as this is her playbook that she is chairman now frankly, that is lunacy. I expect war tone raise taxes on the very rich. Well, shocker. Shes been saying that i think she will go after companies she believes are too powerful like Teddy Roosevelt did as Mark Zuckerberg pointed out, it suck for facebook if they go after him. But he can take his case to a court of law maybe hell win. Warren break up big tech i have to tell you, as i see the price ratios of the stocks collapse, it might not be that bad if say, you say alphabet should be broken up. They may not want it okay but it might be positive for shareholders you get youtube and you get wamo and the health care thing and the search frankly, that will add up to more than the stock is right now. Yea, parts are now worth more than the whole the worst thing for the stock market, i see warren pushing the Capital Gains and that nos noe nothing new. People benefit from keeping the rates lower. Because they own more stock. It certainly possible investors sell stock ahead of time in an effort to anticipate that change the but again, im telling you, that really feels like gun jumping. Heres the bottom line im not saying its time to head for the exits here im saying the opposite. If youve been selling stock for weeks to raise cash as ive been advising you to this is a time to start look forg stocks to buy in weakness. We have some were going to mention later in the show. If youre living in fear of recession or of the prospect of an Elizabeth Warren presidency, i think youre going to miss out on some terrific opportunities and i think youre too scared to act reasonably to protector grow your wealth. Joel in florida, joel . Caller hi, jim i want to thank you for your advice in make ming me a lot of money. South florida, ill give you lessons on how to play the beautiful game of the question, not just watching but playing. I used to go to big bend high lined when it opens in tallahassee. Man, i have toil, that is fun. The frod the frod its a beautiful sport. My question is, some time ago you recommended Sky Works Solutions which i bought at 6 a share. Yeah. I pyramided it up over several years. And i guess sky works went sky high to over 100. I sold some for a nice fat profit and left some on the table. I think they call playing with the house of money thats right. Thats my goal caller now sky works descended from the 100 to about 77. My question is do i sell, buy, or stay the course remember, youre playing with houses money. You dont have to do anything. That was stock was at 6 6 it went from 6 to 100. Thank you for remembering. Liam griffin in came n is in the cross hairs of the trade dispute. I would not buy more, i would not sell more. Hold on it to. The liam griffin come back on the show and not just because the patriots look like theyre going to go all the way again which sun fortunate. Trevor in North Carolina trevor caller hey, jim. Im 23 years old and although im a court cutter, i listen to the podcast every single morning. Take i where you with get it. Caller jim, i have 23 of my mad money portfolio tined up in cannabis growth. With it hitting 592week low, should i double down or move over to Something LikeGw Pharma Gw Pharma is terrific there was a short rate on it gw pharma is real. Consolation brands reports in the third. See what they have to say about canopy before we rul tpull the trigger. I dont believe well have a recession, all right i understand you may disagree. Its important to take a deep breath and dont let panic take over you know what . I got to tell you, i have seen enough times in my life that people have been trying to, lets just say, take quotes from chairman mail. I dont see that right now with one of the president ial candidates that people think is doing that on mad money today, china is back in the news rumors swirls the government is considering limiting Chinese Companies access to Capital Market companies what does it mean for recent ipos im offering you my take this isnt the secs handbook. All right. Then even in a trade war people have to eat. So how about the advertising place. Im going off the charts and find out and give you conclusions. And in a market dominated by trade worries, im playing defense by going domestic. Tonight the company that keeps the lights on in the city that never sleeps is here. Going to electrify your portfolio. Dont miss my xleef with coneds ceo and stay with cramer devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. On friday bloom reported that the white house might be onboard with making it harder for Chinese Companies to access american Capital Markets yesterday Peter Navarro came on squawk box and walked it back. Calling the story fake news. I got to tell you that, is too bad. We should make it harder for Chinese Companies to raise money here in the United States. And im not even talking about this new context of the trade war. This is purely about protecting investors from it garbage merchandise. What we need is a moratorium on chinese ipos boo as ive been telling you for ages, companies from china keep coming public here in the United States and for the most part, this day of deals has been a nightmare for anyone who is participating in them. The house of pain there are few winners for the most part, chinese ipos are toxic to your wealth sell, sell, sell, sell weve been 31 of the deals last year 14 more in 2019. Do you know that almost all of them underwater . On average, the stocks have fallen 32 from where the ipos priced if you go by where they close in the first day of trading, theyre down 37 and market that is already overwhelmed with low quality ipos the last thing we sneed more questionable securities from china which has much weaker regulations surrounding all of this stuff than we do. Chinese companies should comply with our disclosure rules. It makes a ton of ten e. Sensse. You should have to follow u. S. Securities law in fact, total lunacy this isnt already the status quo what happens when you let Chinese Companies take advantage of our stock market had without subjecting them to the sim day closure requirements as u. S. Companies . Ill tell what you happens investors get burned thats what. So tonight i want to lay out the quantitative case for imposing some kind of limitations on new u. S. Listings for Companies Based in in the peoples republic of china. When you look at all 45 chinese names that came public near 2018 and the first nine months of 2019, the underperformance is staggering like i told before you, the chinese ipos are down an average of 32 32 . And thats not just a few bad apples spoiling a bunch. The median chinese ipo is down more than 37 . Of all 45 stocks, only six are up from their Closing Price on the first day of trading six in fact theres a whole pattern here the median chinese ipo peaked 22 calendar days after they came public roughly twothirds have been cut in half from the post ipo highs. In other words, typically chinese ipos may start strong and roar higher in the first two weeks. But then they quickly get peaked and then they tend to get eviscerated when you look at the class of 2018, there were 31 deals, only 3 are above the ipo price. Only three now those three winners are up anywhere from 20 to 95 and theyre often the ones that are thrown at me on twitter by a bunch of chatter head sunshine clowns that have reason to be excited about the chinese deals. But that doesnt come close to offsetting the 28 losers some are down 80 to 90 as for the 14 chinese deals of 2019, only four are above the ipo price. Who knows how long those four will will continue to hold up. I would sell them all. Theyre only down 18 on average. The average is up 17 . The median is much worse down 32 more than half of these stocks peak within a week of coming public theyre doing worse because the newer names havent had as much chance to disappoint you what more can i say . The larger Chinese Companies tend to perform better even with the winners, most of the gains came on the first day. I would sell any of these and invest in the companies that have the disclowe sure stronger. As they famously pointed out, sunlight is the best dits infectant. How about a more indepth example. Consider the case of when you asked about many times lets go to nio. They came public over a year ago. Normally i wouldnt talk about a 1. 32 stock. Thats right but nio has a 1. 38 billion market capitalization and more than 26 million change hands every day. Plus two weeks ago nio is trading at 3. It is below the usual requirements thats why its the perfect example. Nio makes luxury electric cars sounds compelling. So going into the deal hailed widely chinese tested. We seen the same story so many times. Chinese this and that. Nios ipo price is the 6 and change and then 13 two days later because of the hype. Today this is the stocks all time high. They gave up the gains, trading back to the Single Digits n february, 60 minutes ran a segment on chinas drive to dominate the electric car industry they call nio the chinese tes l. A. Once again, the gains didnt last. A few weeks later back to five its been all down hill since that stock getting annihilated china announced they were scaling back the electric vehicle subsidies. Then in june the recall nearly 5,000 vehicles after a number of them caught fire subopt mall. Finally, the Company Reported much larger expected loss. The now you have analysts expecting that they could run out of cash in a the maer of years, months . How about weeks . Meanwhile, the actual tesla is a vaktry in shanghai getting ready to that i china by storm. This is a textbook example of how people get burned by chinese ipos it could be a boiled down to a sij sentence chinese tesla is a great elevator pitch but there is no underlying rigor then the stock gets crushed by a series of unforeseen events. A big product recall shocking negative earnings numbers. I bring this up because nio is typical. The bottom line. But last thing we need right now are more low quality chinese ipos i would love for our government to block these deals regardless of what happened with the trade talks because they are hazardous to your wealth but even if these chinese ipos keep coming, you can avoid getting burned with this one simple trick just say no. Stick with cramer. I keep telling you this market is turning vicious. That means you need to get a little more selective about the stocks you own you Want Companies that can thrive even in a time of uncertainty, even if the trade war drags on, even if the political fallout from impeachment makes american businesses gunshy about spending money so what might be worth picking at here . Consider some of the better run fast food chains with stocks that have been holding up pretty well of late remember, the consumer economy is still very good shape the weakness here is mostly the enterprise side of things. Weve seen solid retail sales. Some of best in years. Job market is incredibly strong. Wages are rise something what. Not so much as th