Mad Money 10/17/25 | Audio Only

Key Concepts

• Bull Market Skepticism: The prevailing sentiment of disbelief and contempt towards optimistic market outlooks, a consistent theme throughout the current bull run.
• Buying the Dips: A strategy of purchasing assets when their prices fall, which has historically proven profitable.
• Three Economies:
  • Data Center Economy: Driven by the demand for data processing and storage.
  • Speculative Economy: Characterized by insider selling and rapid price movements.
  • Real Economy: Heavily influenced by Federal Reserve interest rate policies.
• Cockroach Theory: The idea that financial problems, like bad loans at banks, rarely occur in isolation; if one is found, others are likely to follow.
• Agent Force: Salesforce's AI platform designed to utilize digital agents for business operations.
• Seat Model: Salesforce's pricing strategy, which is based on the number of users within an organization.
• Rule of 50: A financial metric for enterprise software companies where the sum of revenue growth rate and operating margin exceeds 50%.
• Turnaround Stories: Companies undergoing significant restructuring and strategic changes to improve performance.
• Direct-to-Consumer (DTC) Strategy: A business model focused on selling products directly to end consumers, bypassing intermediaries.
• Wildfire Liability Cap: Legislation designed to limit the financial exposure of utility companies in California related to wildfire damage.
• GHG Free Energy: Energy produced with zero greenhouse gas emissions.

Market Outlook and Investor Sentiment

The fourth year of the bull market is commencing with widespread skepticism and contempt for optimistic investors ("bulls"). This disbelief has been a consistent characteristic of the entire market run. The conventional wisdom often labels true believers as frauds, mountebanks, or fools, dismissing their strategy of "buying the dips" as self-embarrassing. However, the transcript argues that buying the dips has been a highly profitable strategy over the last 45 years, including the current period. The skeptics, by contrast, are identified as the real losers for missing significant market gains. This sentiment is exemplified by the day's market performance, where the Dow gained 238 points, the S&P 500 advanced 0.53%, and the NASDAQ climbed 0.52%, despite initial morning fears of a 1% decline due to concerns about bad bank loans. The market rallied as banks reported stable conditions and American Express delivered a spectacular quarterly report.

The "Why" Behind Bearish Betrayal

The transcript posits that bears are consistently "betrayed" by the market because pessimists and their media allies lose sight of the underlying companies. Instead of focusing on the index itself (e.g., S&P 500), they fail to recognize that the individual companies within these indices are performing exceptionally well, which contradicts the high levels of negativity often expressed. This is particularly true for investors who engage with individual stocks rather than solely relying on index funds.

Weekly Earnings Game Plan and Key Company Insights

The upcoming week is packed with earnings reports, which are expected to exceed expectations.

Monday

• Cleveland-Cliffs: This steelmaker's report is crucial for assessing the health of the "real economy." The transcript notes it might be a weak indicator. The "real economy" is contrasted with the "data center economy" and the "speculative economy" (where insider selling is observed). The real economy's performance is heavily tied to the Federal Reserve's interest rate decisions.
• Zions Bancorp: This regional bank's results are expected to confirm Jamie Dimon's "cockroach theory" regarding bad loans. The focus will be on how Zions was defrauded and whether they are experiencing widespread weakness, though the transcript expresses skepticism about Zions' overall quality.

Tuesday

• Coca-Cola: Expected to deliver its usual excellent numbers, being a highly consistent packaged goods stock.
• GE Aerospace: As a primary supplier to Airbus and Boeing, it's anticipated to report an upside surprise driven by aircraft maintenance demand.
• 3M: A "sleeper Dow stock" expected to have a strong but understated performance.
• Charitable Trust Club (Unnamed): May report its first good quarter after a prolonged dry spell for this once well-managed company.
• Capital One: A controversial but potentially strong performer, especially after American Express's positive quarter. As a credit card company, its results will reflect the acquisition of Discover.

Wednesday

• Vertiv: Expected to deliver excellent numbers, as it provides cooling solutions for data centers.
• Gennova (now GE Vernova): Manufactures gas turbines powering data centers. A recent sell rating is deemed "absurd," with the belief that the company is positioned for a multi-year move.
• Tesla: The focus will be on Elon Musk's commentary on self-driving and robots, with car sales being a secondary concern for Wall Street. Musk is expected to justify the stock's significant run.
• IBM: Expected to prove bears wrong regarding its growth rate. CEO Arvind Krishna's quantum computing initiative is highlighted as a superior strategy compared to speculative plays with high insider selling (e.g., NQ). IBM is noted for its lack of significant insider selling.

Thursday

• Freeport-McMoRan: Its report will indicate if the gold rally has momentum. The company operates the world's largest gold mine but faces challenges like flooding in Indonesia. A positive outlook could fuel further precious metal rallies.
• T-Mobile: The street is showing renewed support, suggesting their Apple initiative (offering iPhones at low prices) is exceeding estimates. Both T-Mobile and Apple are expected to perform well.
• Honeywell: Despite a strong outlook, the stock is described as "snake bit." The company is breaking into three distinct businesses, including an undervalued aerospace division. Investors are advised to look beyond the immediate numbers and focus on the breakup's potential.
• Blackstone: The transcript defends private equity firms against criticism, highlighting their strong performance. Blackstone's sizable data center business is expected to contribute to a strong quarter.
• Ford: The impact of a significant fire at its aluminum plant on Ford's numbers will be a key focus. A negative impact could lead to the stock falling below $11.

Friday

• CPI Report (Bureau of Labor Statistics): This report is crucial due to the lack of recent big-picture data from the government shutdown. A CPI below 3% would be highly positive for the market and justify the decline in Treasury yields.
• Procter & Gamble (P&G): After a period of underperformance, P&G has shown recent strength. The transcript highlights P&G's excellent conference calls and expects a positive report, making it a stock to own.

Bottom Line on Earnings

The transcript concludes that bears will likely remain disengaged as the week progresses, anticipating another strong earnings period. Earnings, not other factors, are identified as the primary drivers of stock prices.

Specific Stock Discussions and Recommendations

• Airbnb: Recommended as a "buy" despite being "chronically denigrated." The argument is that earnings are paramount, not the index itself.
• ELF Beauty: The CEO, Tarang Amin, discusses the company's success despite tariff headwinds.
  • Growth Drivers: Launch of "Rhode" skincare line, expansion into Dollar General stores (serving underserved communities), and strong performance in Sephora.
  • Financial Performance: 26 consecutive quarters of net sales and market share gains.
  • Value Proposition: Offers high-quality products inspired by prestige brands at significantly lower prices (e.g., a $17 serum comparable to a $185 product).
  • Innovation and Supply Chain: Emphasizes a strong innovation engine and efficient supply chain for cost, quality, and speed.
  • Marketing Strategy: Utilizes rapid, community-driven marketing campaigns, exemplified by the successful TikTok sale of a mega-sized primer.
  • Demographic Reach: Dominant among teens (8 consecutive surveys), Gen Alpha, and millennials, demonstrating multi-generational appeal.
  • Global Expansion: Entering new markets like Poland (Rossmann's) and GCC (Sephora).
  • Tariff Management: Despite 55% tariffs, price increases were minimal ($1), with the company absorbing some costs and utilizing pricing actions, supply diversification, and business diversification.
  • Retailer Performance: Leading brand at Target and Walmart, selling more per linear foot than any other brand.
  • Board Diversity: Highlights a board with two-thirds women and 44% diversity, linking it to profitability.
• Salesforce:
  • Context: Stock has been a "dog" year-to-date, down 29%, unusual for an enterprise software play.
  • Challenges: Pressure from generative AI's ability to write code, potential for AI-driven layoffs impacting the "seat model," and Wall Street's skepticism about Agent Force's effectiveness.
  • Historical Growth: Impressive growth from $300 million in revenue in 2005 to over $41 billion projected for this year.
  • Stagnant Growth: Revenue growth has been stuck in the high single digits (8-9%) for five quarters, leading to investor frustration.
  • Investor Day Revelation: Management shifted focus from how Agent Force helps customers to how it drives more business for Salesforce, citing examples of increased spending by consumer goods and electronics companies after adopting Agent Force.
  • New Guidance: A significant development is the new revenue target of over $60 billion for fiscal year 2030, exceeding analyst expectations ($58.4 billion). This implies a compound annual growth rate (CAGR) of 10% over the next four years, suggesting a re-acceleration from the high single digits.
  • Stock Buyback: Commitment to buying back $7 billion worth of stock over six months.
  • Rule of 50 Target: Aiming to be a "Rule of 50" company by fiscal 2030.
  • Skepticism: Analysts like Gil Luria of DA Davidson call the target "aspirational."
  • Kramer's Take: Views the announcement as a turning point and feels more sanguine about the stock, recommending it for the Charitable Trust. Patience is advised, as the enterprise software group is currently "hated." The bet is on a winner over 12-18 months.
• Meta:
  • Valuation: A 24x multiple on next year's earnings is considered an "insult" and below market multiples.
  • Recommendation: Expected to have a "very big run" and urged to be held. A stock split is not addressed due to lack of insight into management's intentions.
• PG&E:
  • Context: Stock is down over 18% for the year, partly due to misplaced perceptions about wildfires.
  • Liability Cap: Legislation has capped PG&E's liabilities in the event of wildfires caused by its equipment, significantly reducing investor risk.
  • Wildfire Mitigation: The company has invested in making its system safer, including burying power lines and deploying AI-enabled cameras.
  • Diablo Canyon Nuclear Plant: Extended for five years, providing crucial power.
  • Data Center Growth: California has significant data center growth, with 10 gigawatts of new applications for the grid. PG&E's underutilized grid (45% utilization) can accommodate this growth, potentially lowering customer rates by 10%.
  • Capacity: California has added nearly 20 gigawatts of new capacity in the last four years, staying ahead of demand.
  • EV Impact: The growth of EVs further reduces rates.
  • Rate Reductions: PG&E's rates have decreased multiple times in 2024 and are scheduled to go down again next year.
  • Net Zero Goal: Aiming for net-zero energy by 2040, with 98% of energy delivered being GHG free last year.
  • Kramer's Take: Believes the stock is a bargain due to the liability cap and the company's ability to power data center growth while lowering rates.
• Carnival Corporation: Recommended as a "buyer."
• Iron (Bitcoin Miner/Data Center): Advised to "sell," with an expectation of insider selling.
• C3.ai: A 40% drop is seen as an "opportunity."
• Starbucks:
  • Turnaround Context: New CEO Brian Niccol, who successfully turned around Chipotle, is leading the effort. The stock jumped significantly upon his appointment but has since fallen.
  • Challenges: The organization was found to be "broken," with an over-reliance on technology and understaffing.
  • Niccol's Strategy: Focus on staffing, not just technology, and recognizing that not all stores can be transformed into "third places."
  • Analyst Sentiment: Analysts are turning against Niccol, partly due to getting ahead of themselves and the realization that turnarounds take time.
  • Kramer's Take: Views the current analyst sentiment as a buying opportunity, recommending to "buy" Starbucks.
• Nike:
  • Previous Strategy: The former CEO's focus on direct-to-consumer (DTC) and technology was problematic due to the need to try on shoes and issues with delivery theft.
  • New Strategy (Elliot Hill): Reinventing the business by returning to brick-and-mortar distribution (including Foot Locker), developing new science and innovation, fixing the China business, and managing inventory.
  • Management Alignment: Emphasizes the importance of management and employees rowing in the same direction, which is facilitated by Hill's prior positive relationship with the company.
  • Analyst Sentiment: Similar to Starbucks, analysts are realizing a fast turnaround is impossible, leading to a pullback.
  • Kramer's Take: Recommends to "buy" Nike, seeing the current moment as an opportunity due to the realization that turnarounds require time.
• Starbucks and Nike (General Turnaround Argument): Kramer emphasizes that good turnarounds take time (6-18 months) and that people often give up too soon. This is precisely why he wants to "double down" on these stocks for his charitable trust.

Other Mentions

• Mad Money: The show's consistent viewership and informative content are highlighted.
• CNBC Investing Club: Promoted as a valuable resource with exclusive access and perks.
• Frank Slugman: Quoted on the importance of guidance in financial analysis.
• Hawk Tan (Broadcom): Mentioned in the context of potential power infrastructure needs.
• Larry Fink (BlackRock): Discussed regarding capital availability for infrastructure.
• Diablo Canyon: Its extension is seen as positive for California's energy needs.
• Rancho Seco: Mentioned as a closed nuclear plant.
• EVs: Their growth is seen as beneficial for reducing electricity rates.
• Kaiso (California ISO): Praised for its effectiveness in directing infrastructure development.
• Brian Niccol (Starbucks CEO): Praised for his turnaround work at Chipotle and his approach at Starbucks.
• Mark Benioff (Salesforce CEO): Discussed in relation to Agent Force and Salesforce's future guidance.
• Patty Poppa (PG&E CEO): Interviewed about PG&E's turnaround and future prospects.
• Jim Cramer's Book: "How to Make Money in Any Market" is mentioned.

Disclaimer

All opinions expressed by Jim Kramer are his own and do not reflect the views of CNBC or its affiliates. They should not be treated as specific investment advice.