Jim Cramer: The pandemic led to 'one of the greatest wealth transfers in history'

my mission is simple to make you money i'm here to level the playing field for all investors there's always a homework at somewhere and i promise to help you find it mad money starts now hey i'm kramer welcome to mad money welcome to cray america other people want to make friends i'm just trying to make you some money my job is not to entertain but to educate and teach you put in context so call me 1-800-743 cbc or tweet me at jim kramer are we really returning to normalcy here despite the 21.5 million people collecting unemployment benefits is this the fabled v-shaped recovery that so many people were hoping for well that's what the market's saying even as the average didn't do much say dal inching up 12 points declining that's been climbing 0.34 nasdaq losing 0.69 see that's the problem uh i think we're looking at a v-shaped recovery but it's a v-shaped recovery in the stock market and that has almost nothing to do with the v-shape recovery in the economy liv when you look at the nasdaq 100 the tech heavy index that briefly hit an all-time high today it sure doesn't seem indicative of the broader jobs picture and most of the moves that responsible for whatever games we had were from airlines and hotels and casinos all of which i put in the so-called less bad category less bad than we thought a trend that can last a few more days before it does peter out and people do a lot of fast gaming of it but it does peter out it's kind of musical chairs how can the market rebound without the economy because the market doesn't represent the economy it represents the future of big business the bigger the business the more it moves the major averages and that matters because this is the first recession where big business along of course with bigger wealth but that's not really by show is coming through virtually unscathed if not going for the gold small business the ones that aren't publicly traded they're dropping like flies after a government mandated shutdown because they're non-essential the people who work there are non-essential it's hard enough to run a small business how about when the government says you you're closed and landlord says i don't care that's the thing about this pandemic it's been one of the greatest wealth transfers in history and it's a wealth transfer that was mandated by the state i think that we'll have a it'll have a horrible effect on our country but we've barely begun to see the impact still we just got some figures from the american bankruptcy institute that will chill both republican and democrat that's right the today's numbers so a 48 jump in chapter 11 bankruptcy filings that's that pesky real world asserting itself but the only big bankruptcy we've seen in the stock market is hertz now i'm not trying to blame the government for this the treasury department's practically shoveling money small and mid-sized businesses they can't find enough of there's still 186 billion left in paycheck protection program the companies that took the money just got a big break they only need to spend 60 on their employees to get the loans forgiven down from the original 75. that's important as most small businesses fail because they can't afford to pay the rent they can cut back on labor they can skimp on the product they can figure out ways to work more efficiently but they can't lower the darn rent and from what we can tell there hasn't been much forbearance from the major landlords but in the end the stimulus package probably won't be enough for one simple reason and it's an odd one that's not talked about enough it's not going to work because of social distancing social distancing has become the real bane of small business and a boon to the larger ones again while that's not really anybody's fault it's producing some terrible outcomes lately we've seen we've been seeing some real improvements in the coronavirus numbers however that's only happening due to the widespread adoption of mass and social distance guidelines the problem though is that it's very hard to make money at a restaurant or a retailer if you're not allowed to uh if you got to wear a mask at a bar it's just such a buzz kill and you can't have crowds anywhere in the restaurant industry which employs about 15 million people social distancing means losing a ton of tables and a lot of bar space the ladder's brutal because alcohol is where the real money is but for big business let me give you a concrete example i walked through this and i decided this is how i am going to explain it because it keeps alluding people it's driving me crazy costco last night costco reported some magnificent 5.4 safe source sales quote versus last year wall street was only looking for 1.6 they also saw an incredible 106 pickup in e-commerce you heard me 106. the stock moved up four points in appreciation while everything else got clobbered in sector costco has except for the lowest in retailers costco has a simple ethos they try to focus on a small number of producers where they can move huge volumes thus securing some terrific bargains for their customers they don't try to make money on markup you get better prices when you buy in bulk that's the power of what we call scale now consider what they sell all sorts of food stakes crab legs fish all at much cheaper prices than your local butcher or fish monger they sell auto parts for standalone standing listed less than what you pay at the local mechanic the apparel prices are as low as it gets no department store can beat them fruits and vegetables they're better looking and more organic than anything your corn or green grocer can supply often at half the price i am a bit of a wine aficionado not great but good enough and they were selling canvas below the price that my liquor store pays to the vineyard before even marking it up health and beauty aids don't you dare compare them to harmon owned by the hapless bed bath and beyond a place that had to be closed it didn't get to open may 30th costco sporting goods so inexpensive that you have to wonder how any mom and pop competitor can stay in business maybe best buy compete on electronics maybe not i know the local jewelries tried to bring in special inventory but not a costco special prices paper towels toilet paper they had to limit how many you can take because the prices were so great uh thank you evans that's going the only category that costco didn't compete in this month is hearing aids division was closed they're still the cheapest place to get this ultimate ultimate baby boom product but they won't bring them back until they can sell them safely don't worry though they're common as are costco's terrific free samples in a newer safer form now i bring up costco because a month ago they instituted a policy saying that all customers need to wear masks covering their mouth and nose at all times unless you're two no masks no shoes no service we initially heard a bunch of stories about a potential backlash from shoppers who boycott the chain rather than mascot you probably saw those a lot of people said oh that's the end of costco mass mass mass wrong turns out most customers understand if anything the mass policy has helped them immensely because people feel safe to shop in there that plus costco 16 feet wide aisles give costco the one-two punch against kovid 19 and the supermarkets or any other store for that matter for all the chatter about frustrated americans who don't want to wear a master shop the reality is that most consumers desperately want a safe place to buy their essentials with masked men and women manning all parts of the store let's see okay highest quality lowest prices incredibly wide 16 feet aisles save the shopping experience all massed other than amazon which you have to put the box out there for 24 hours but who the heck can compete with that combination that's right and there's the problem i want you to go to your costco go aisle by aisle and what you see is the destruction of nearly every small to medium-sized retailer right there in front of you now the local guys are starting to reopen but they're in debt they're struggling to pay the rent they've already lost customers the big box chains we've now tasted them and loved them and they just can't compete with costco on pricing or more importantly safety they can't rival target order ahead and pick up contactless of course they can't beat walmart with this ability to deliver anywhere anytime at low prices at best these mom and pop outfits can set up an omni channel facebook shop powered by shopify which is better than nothing but probably not enough and that's just retail smaller restaurants even worse you can rip out half the seats from most of the big chain locations and they're just going to make up the difference with takeout and delivery but ordinary restaurants they get crushed by delivery because the real money's at the bar and delivery takes a chunk of their profits remember i call on two places and we could lose two-thirds of our tables if we are lucky we aren't even allowed to be open right now in order to meet the rules that we don't even have yet we're costing a fortune just to find out what those are our italian food the longshoremen may be better than the olive garden but how the heck do we make money with only four tables instead of 12 and by the way you can't we don't have a bottomless salad bar and if you try to steal our rolls good luck now what's happening to small business all over the country and the stock market will never capture that kind of pain that i just described instead they'll capture all the gain as the larger outfits take share from tiny companies and those are the ones or the stocks that we're trading the bottom line you might say that's just capitalism but the logical conclusion here is a world where we have a handful of big retailers and a handful of big restaurants but all publicly traded and that's it without a second stimulus package that's what the future will look like i guarantee it and you won't enjoy it even if you profit off the rising stocks of the big box stores that are taking over the world and mourn the corner story and whatever the heck it once pervaded zach in pennsylvania zach hey jim big booyah from eagles nation how are you eagles nation's getting ready for a season even if you're not allowed to go see it i'm good how about you good man so i have a two-part question in my early 30s i want to know is sherwood williams a long-term buy and can it stock get to a thousand you know what it's so funny i happen to like the stock of sherwin-williams very much ever since they bought valspar but i like even more i know i know look let's just leave it down i think sure williams is a great company that's going to say i like lowe's at home depot but you know what i'm just giving it to you i'm giving it to zach sherwin williams is a winner just by the way not a lot of competition in the paint business you noticed that they shouldn't let all those companies combine hey why don't we go to mark in iowa mark hi jim i'm a new investor that bought delphi technologies when it was low right they're being they're being bought out by borg warner late quarter three or quarter three or quarter two or quarter three sometime now i need to better better understand how that affects the company's value when it buys out another company like that or is there more value inside let me just say borgwarner's down 20 for the next one's to run and i know that's what i say run there are people actually running stocks these days they ran the hotel now they're renting they're running the uh airlines the next thing they're gonna do is they're gonna run the autos that's just my prediction and board warner's one of the runs that they're gonna run magna is the best in that segment and when i say run you know exactly what i mean go read my passatine twitter file that i can't barely get through disgust me frankly i'm disgusted by it i don't need twitter any more than the president oh no the president needs it i forgot all right i think we're looking at a b-shaped recovery in the stock market but not the economy this is the one for the stock market this is the one for the economy because that's live long and prosper and quite frankly you may not enjoy what's about to happen in the real economy oh man money tonight i'm sitting down with house speaker nancy pelosi to talk employment reopening plans and the role that business can play amid recent civil unrest it'll be good because tomorrow i'll be speaking to vice president pence then my sit down with ceo j.m smucker find out the latest quarter could offer some food for thought and shopify is up over 100 over the past two months alone is there still time to buy this red hot stock i've got the exclusive so stay with kramer [Music] don't miss a second of mad money follow at jim kramer on twitter have a question tweet cramer hashtag mad tweets send jim an email to madmoney at cnbc.com or give us a call at 1-800-743-cnbc miss something head to madmoney.cnbc.com

Channel: CNBC Television

Views: 60,030

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Keywords: CNBC, Mad Money, invest, investing, stock market, jim cramer, cramer, kramer, wall street, lightning round, investment strategy, retirement

Id: fIJizaahJVU

Length: 12min 6sec (726 seconds)

Published: Fri Oct 01 2021