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The Fed: A Paragon of Predictability

The Fed: A Paragon of Predictability
June 16
12:01 2017

After the Federal Reserve raised interest rates a quarter point on Wednesday, Jim Cramer had to applaud it and its chief, Janet Yellen, for keeping an even keel in an increasingly partisan and politicized environment.

“Into that dark void comes the Fed, which I think has become a paragon of predictability and legitimacy,” the “Mad Money” host said. “There was a time when even the whisper of a rate hike would destroy the stock market. But the Fed has prepped us in so many ways for its actions that they truly amount to non-events, non-news events, and that’s precisely what’s needed to keep the stock market orderly.”

Cramer recalled the barrage of media backlash when the Fed announced its forecast at the start of 2017.

Yellen made a point of not factoring in President Donald Trump’s pro-growth agenda, causing the press to criticize her for ignoring the inevitable economic boom that his policies would spur.

“I didn’t hear a soul come out today and mention how right Yellen’s been and how wrong everyone else has been about factoring [in] the Trump effect,” Cramer said. “She’s been right as rain about what was going to happen and she gets zero credit whatsoever for engineering this soft path out of the economic emergency room.”

Janet Yellen, chair of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., U.S., on Wednesday, June 14, 2017.

Moving to a more secular industry, Cramer spoke with Aaron Levie, the co-founder, chairman and CEO of cloud infrastructure play Box Inc., for his take on the future of the cloud.

On Wednesday, the company announced its release of the Box Drive, a new product that allows customers to store all of their files in the cloud and access them directly from their desktops.

“The reason this is significant is so many large enterprises are still investing billions of dollars collectively every year in traditional storage infrastructure that allows them to deliver desktop access to files in their local networks,” Levie told Cramer on Wednesday. “So this really is going to be, I think, the final nail in the on-premises storage and content management coffin, and we’re very excited to be bringing this to the market.”

Levie also said that Box, which has 74,000 business clients which include 64 percent of the Fortune 500 companies, has been seeing growth in some unexpected areas as its cloud systems become more sophisticated.

“We’re seeing more and more growth from even the most regulated industries. These are industries where previously they actually avoided the cloud because the compliance, the security, the different controls that you needed weren’t ready in the cloud. And so in the past couple of years, we’ve been seeing an accelerated growth rate in some of the most regulated customers, even including the federal government,” the CEO said.

Then, after tax preparation giant H&R Block reported a stronger-than-expected quarter, its outgoing president and CEO, Bill Cobb, said the company prides itself on its forward-thinking, client-friendly orientation.

“We made it easy to import from competitors right into our software, we did W-2 capture from your phone right into our software, and we feel that we’re really leading on this in terms of making ease of use a part of our brand,” Cobb told Cramer in an interview on Wednesday.

H&R Block made it through several tough quarters in 2016, after which Cobb came on “Mad Money” and assured Cramer that the company would deliver.

Sure enough, after a series of successful promotions and a deal with IBM’s artificial intelligence system Watson, H&R Block beat Wall Street’s estimates, expanded its margins, boosted its net income by 10 percent, saw 40 percent returns coming from digital, and, in Cobb’s words, “over-delivered” on expense reductions.

With the stock of Coca-Cola on the rise after a downturn in 2016, Cramer decided to track the soft drink giant’s transformation to see if changes at the company will brighten its future.

But to understand the company’s future, investors need to understand its past, the “Mad Money” host said, turning to 2008, when the company appointed Muhtar Kent as CEO.

In the past five years under Kent’s leadership, the stock of Coca-Cola lagged, climbing only 40 percent compared to shares of its top competitor, PepsiCo, which rose 95 percent.

However, in December, Kent announced that he would step down and hand over the CEO role to James Quincey, the company’s former president and COO.

Since the announcement, Coca-Cola shares have gained momentum, even speeding past PepsiCo stock’s pace in the last three months, causing Cramer to wonder whether Coca-Cola is making a serious comeback.
With Oil at $44, Is Crude Done For Good?

Finally, Cramer shared his take on the fate of oil, which broke down to just $44, a seven-month low for the much talked-about commodity.

Cramer said he spent an hour on the phone with his go-to energy expert, RBNEnergy’s Rusty Braziel, who has made some bold but correct calls on crude in the past.

“With oil breaking down to $44, it’s a legitimate question to ask if crude’s kaput and going down for the count. Neither Rusty nor I believe that. In fact, we’ve been waiting for the speculators to be washed out and that’s what I think is finally happening,” the “Mad Money” host said.

Cramer gave three reasons for his analysis: first, algorithmic trading has made the oil stocks move more dramatically on oil inventory news, causing heavier blows than usual.

“Second, while it’s true that the OPEC production cuts haven’t done enough to stem the glut — in fact U.S. production, barrel for barrel, is making up for whatever’s been taken out — the demand for oil is not declining as the bears would have you believe,” he said.

Finally, oil wells around the world are depleting and big oil companies may choose not to replace their production, which will reduce the supply glut, Cramer said.

“I think that picking at the oil stocks as crude gets to $43 will make you money, even though the long-term doubt is quietly surfacing as a real issue to watch, but not for this decade, but certainly beyond,” he concluded.
Lightning Round: Some Alternative Options

Target: “I think that Target is OK. I do prefer TJX, which has come down a lot and to me is a buy, buy, buy!”

Coupa Software: “You know, I think Coupa’s a good software company. I’m not crazy about it. I’d rather own down here.”

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