Thursday’s updated guidance from the CDC was great news for the stock market, but Jim Cramer told his Mad Money viewers there’s a lot more going on under the hood. In fact, the day’s rally had less to do with COVID-19 and more to do with keeping inflation at bay.
Simply put, we need to keep our economy growing without overheating. The news from the CDC ensures the former, but the latter comes from the four most inflationary areas of the market, namely oil, lumber, bitcoin and the high-flying growth stocks, which Cramer dubbed the “Wood stocks” after Cathie Wood of ARK Invest.
Oil prices plunged Thursday after it was reported that Colonial Pipeline paid hackers nearly $5 million via cryptocurrency after a ransomware attack Friday. This news sent short sellers betting on supply disruptions scrambling.
Bitcoin also fell after Elon Musk announced that Tesla (TSLA) – Get Report would no longer accept the cryptocurrency as payment, citing the environmental impact of bitcoin mining.
Add to these the growing declines in lumber and the tech stocks, which have been selling off for days, and suddenly, Federal Reserve chair Jay Powell looks like the smartest guy in the room for keeping interest rates low.
Cramer said as long as inflation stays under control, we’ll see more days like today where the entire market can celebrate a return to normal life in a post-COVID world.
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Off the Charts: Inflation
In the “Off The Charts” segment, Cramer checked in with colleague Carley Garner over the direction of inflation. According to Garner, commodities are already starting to show signs of peaking, which would be excellent news for stocks.
Garner first looked at the price of lumber, one of the out of control commodities. She noted that lumber is thinly traded, making it a poor gauge of actual inflation. That said, lumber has traded limit-down for three days in a row.
It turns out that many other commodities trade in lock-step with lumber, thanks to the ubiquity of ETFs. Garner expects to see copper, sugar, and corn soon follow in lumber’s footsteps.
Looking at a monthly chart of copper, Garner noted that the rally has stalled, which is the first sign towards normalization.
Cramer said that Garner makes a compelling case. Often, there’s a circular logic to commodities. People buy them due to fears of inflation, and when too many people buy it causes inflation. But eventually, that logic fails and prices tumble. That tumble may occur sooner than you think.
Executive Decision: Coinbase
For one of his “Executive Decision” segments, Cramer checked in Alesia Haas, CFO of cryptocurrency exchange Coinbase Global (COIN) – Get Report, which dipped 6.5% Thursday.
Haas said that cryptocurrencies are attracting investors of all ages, demographics…