Mad Money 9/25/25 | Audio Only

Key Concepts

• Two Economies: AI-driven economy vs. consumer-driven economy.
• AI Economy: Rapid growth, significant investment, and transformative deals.
• Consumer Economy: Weakening, sensitive to interest rates, and facing challenges in housing, auto, and retail sectors.
• Rate Cuts: Potential solution to stimulate the consumer economy.
• S&P 500 Sector Weightings: Comparison of tech sector dominance to the dot-com era.
• Forward Price-to-Earnings Multiple (P/E): Valuation metric used to assess market overvaluation.
• Technical Analysis: Use of charts, moving averages, and indicators (RSI, Bollinger Bands) to analyze market trends.
• Speculative Stocks: High-risk investments with potential for significant gains or losses.
• Anaphylaxis Treatment: Novel oral film medication as a potential replacement for EpiPens.

Two Diverging Economies

Jim Cramer highlights the stark contrast between two economies: a thriving AI-driven economy and a struggling consumer-driven economy. The averages mask this divergence, with the AI sector's weight skewing the overall market performance.

• AI Economy: Characterized by monumental activity, large investments, and transformative deals. Examples include:
  • Intel potentially seeking funding from Apple.
  • Coreweave expanding its agreement with OpenAI for $6.5 billion, bringing the total to $22.4 billion.
  • Meta building a $10 billion data center in Louisiana, requiring significant power from Entergy.
• Consumer Economy: Facing significant headwinds, as evidenced by:
  • CarMax's awful results, with sales 6% below expectations and a 20% stock plunge.
  • KB Home choosing to build fewer homes due to high interest rates.
  • Starbucks laying off 900 corporate workers and shrinking its North American store count by 1%.

The Role of Interest Rates

Interest rates are a critical factor impacting the consumer economy.

• CarMax: Customers need lower rates as auto loans are priced off the shorter end of the yield curve.
• KB Home: Rates are too high, hindering home sales. Short-term teaser rates could provide some relief.
• Overall Impact: Without rate cuts, the consumer-oriented part of the economy will continue to weaken.

AI's Dominance and Investment

The AI sector's influence on the market is substantial.

• S&P 500 Returns: AI-related stocks have accounted for 75% of the S&P's returns, 80% of earnings growth, and 90% of capital spending since Chat GBT's launch.
• Apple's Investment: Apple's commitment to investment is larger than the US government's commitment to building the interstate highway system.

Housing Market Analysis

Cramer analyzes the housing market based on reports from Lenar (LAR) and KB Home.

• Lenar (LAR):
  • Acknowledged expectations of an improved housing environment due to easier Fed policy.
  • Reported continued softening of market conditions and affordability.
  • Weaker than expected revenue, lower deliveries, and a 30-basis point lower housing gross margin (17.5%).
  • Earnings for the current quarter are likely to come in below expectations.
  • Required additional incentives to lure buyers, crushing gross margins.
  • Saw early signs of greater customer interest and stronger traffic entering the market.
  • Optimistic that stronger sales activity will come soon if interest rates continue to fall.
  • Forced to cut construction costs to make housing more affordable.
  • Confident that demand will kick in as mortgage rates approach 6% or lower.
• KB Home:
  • Posted better than expected sales and deliveries, although both were still down year-over-year.
  • Gross margin came in ahead of expectations.
  • Cut their full-year sales forecast by a sizable amount.
  • Management is adamant that the long-term outlook for housing remains favorable.
  • Saw positive signs starting in June with price stability and demand.
  • Mortgage rates have fallen roughly 60 basis points from earlier this year, adding $30,000 of purchasing power.
  • Taking a different approach than LAR, not chasing incremental volume.
  • Buyers are in a "wait and see mode," waiting for rates to come down further.
  • Would rather buy back stock than put up homes for the sake of putting up homes.
• Bottom Line: The bulls got ahead of themselves, as there hasn't been any meaningful increase in sales volume driven by lower mortgage rates. Both companies need lower mortgage rates to win.

Technical Analysis of the Market

Jessica Insk provides a technical analysis of the market, arguing that it's not topping and has legs.

• S&P 500 Sector Weightings: The tech sector's weighting in the S&P 500 is not as extreme as during the dot-com era.
• Forward Price-to-Earnings Multiple: The S&P 500 tends to sputter when the tech sector's forward P/E gets above 34, but it's currently in the low 30s.
• Weekly Chart of the S&P 500:
  • Bullish trading cycle with key moving averages (13-week, 26-week, and 40-week) sloping upwards.
  • Floor of support at 6430 and 6147.
  • Bollinger Bands have narrowed.
  • RSI is not showing signs of overvaluation.
• Weekly Chart of the S&P 500 (Equal Weight):
  • Finally gave a higher high, signaling that the market is broadening again.
  • Broke through its ceiling of resistance at 7612, which is now a new floor of support.
  • RSI has been leveling out, predicting sideways action.
• Weekly Chart of the XLK (Technology Select Sector Spider Fund) Relative to the Dollar Index:
  • Strong relationship between a weakening dollar and strengthening tech stocks.

Aquestive Therapeutics Interview

Dan Barber, the president and CEO of Aquestive Therapeutics, discusses their novel oral film medication for anaphylaxis.

• Company History: Aquestive has been around for two decades, with six FDA approvals and 2.5 billion doses put in the hands of patients.
• Anaphylaxis Treatment (Anaphylm):
  • First and only oral rescue medication for the treatment of anaphylaxis.
  • Uses oral thin film technology (PharmFilm) that dissolves under the tongue in seconds.
  • Potential blockbuster product with a billion-dollar worldwide market at peak.
  • FDA action date is January 31st.
  • The FDA does not need an advisory committee meeting.
  • The market could expand because people are willing to risk it.
• Alipcia Ariata: A different release profile and they'll have more products after that.

Lightning Round Highlights

• Dutch Bros (BROS): Buy some here and then buy some in the 40s.
• American Bitcoin (ABTC): A total spec.
• Recursion Pharmaceuticals: Needs to see a proof of concept.
• Republic Service (RSG): Need to see a bounce.

Speculative Stock Shakeout

Cramer discusses the shakeout in speculative stocks.

• Causes:
  • Big insider sales at Ollo.
  • Higher interest rates.
  • Real-life example of IBM's quantum computing product beating its younger competitors.
• IBM: IBM is the best way to invest in crypto in quantum and it's a mighty inexpensive stock.
• Lesson: The market needs to get back to planet Earth.
• Strategy: If you got a diversified portfolio of five stocks, one of them can be speculative, but you got to speculate wisely.
• Take Profits: If you've made fortunes off speculation, take something off the table so that you're playing with the house's money.

Conclusion

Cramer emphasizes the importance of understanding the two diverging economies and the impact of interest rates. He advises caution in the housing market and speculative stocks, while highlighting the potential of AI and quality growth stocks. He also introduces Aquestive Therapeutics as a promising speculative investment. The key takeaway is to be selective, take profits, and focus on quality investments.