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My mission is simple— to help you make i, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. Other people are looking for friends. And only to entertain, but also to educate, to explain the context. Call me at 1-800-743-CBC or tweet at Jim Cramer. Cracks. We are seeing cracks in the armor of earnings forecasts from some very important companies.
And this is getting really embarrassing. We are now seeing the reverse of what the Fed did to combat inflation. And this is one of the main reasons why the Dow lost 199 points, the S&P fell by 0.7%, and the Nasdaq by 1.06%. We will have to learn to live not with a collapse in trade, but certainly with the slowdown, along with the decline in profitability, that always comes at this point in the business cycle.
Every day we see more and more such cracks. This morning we received extremely disappointing numbers from Southwest Airlines, ticker LUV. But there was no love there. Airline margins are under pressure due to higher fuel prices. It's not 2.50 or 2.60 per gallon as was budgeted. That's 2.70–2.80, which is a huge difference when you consider how much fuel these planes burn.
Meanwhile, Southwest's revenue per available passenger mile, or RASM, has fallen quite significantly. We see a decline of 5-7%, although the company previously predicted a decline of only 3-7%. This is shocking. It seems that businesses are finally being hurt by the sudden rise in oil prices, which used to be contained but now are not.
It is growing rapidly, and it is impossible to ignore the fact that Southwest's revenue per available passenger mile is falling, and falling sharply. This is a signal that the travel and leisure boom may finally be coming to an end. We don't want that. We are a service economy, for heaven's sake. It is not our industrial power that will keep everything afloat.
It was things like travel and recreation that fueled everything. What if we lose it? At the same time, we received news from General Mills that pet owners are becoming cautious. Their economic prospects are bleak, and they are switching to more budget-friendly products for their pets. This is not necessarily a strong point of the Blue Buffalo premium products from Mills that we use for our dogs, Rhea and Tony.
I've always considered pet food to be one of the most interchangeable goods, and it's easy to go down a slippery slope here . When things are going well, your freezer and refrigerator, filled with pet food, look like Green Giant and Hebrew National. Now pets get canned food. Hey, it's not like they'd see the difference.
They are always hungry anyway. I mean, what's the matter? New and improved. More cracks appeared last week when we received reports of the usually reliable Dollar General underperforming and having too much inventory. They significantly failed the quarter. Perhaps because their bargain sizes aren't as attractive as offerings from Costco, where the premium brand is Kirkland's own brand, and business remains very strong.
By the way, the fact that Costco stock is going up right now is actually a bad sign for the stock market because people know that at Costco you save significantly more, so your money goes further. We see cracks where we, you know, another one that's like Costco. We received two price target increases today on TJX stock.
It's a pair of TJ Maxx and Marshalls, a company that only succeeds when so many other retailers struggle to survive. Remember, TJX buys unwanted surplus merchandise from brick-and-mortar stores for next to nothing. Then resells them to you, the consumer. Good markup. This can be a vicious cycle for the rest of retail because once you get hooked on TJX, you won't go back to those full- price stores.
Just not me. I'll tell you this. I have one right next to me and I adore it. And we saw big cracks at Walgreens last week when the CEO suddenly left—not a good sign. You don't leave when things are going according to plan. Plus, it's a pilgrimage to pharmacies. It seems Walgreens has become terrible.
This is now considered a cost of doing business for all retailers . They need to keep everything under lock and key now, right? Have you ever seen it behind glass? But what, what is this now ? We don't have time to wait for the salesperson to come with the key. We always feel uncomfortable about it anyway.
And the only thing that seems locked down is branded goods, not private label. And this is what it looks like in the main rows of my Rite Aid. So why not just buy everything you need on Amazon, which has made same-day delivery an art form this year . You buy in the morning before you leave. I'm going to work, right?
It's already on your doorstep when you get home. It's like what Walgreens has, only faster. And, by the way, no one is stealing it. We see cracks in the banking system as well . No, it's not on the lending side, as usual, but on the borrowing side. They need more capital to fight the past war, which means bankruptcies of banks like Silicon Valley Bank and First Republic.
How stupid. It wasn't a capital problem. Regulators. This was a problem of investment decisions . But regulators don't want to be embarrassed again. They decided to limit the profitability of banks , which means less credit for you and your small business. Despite the fact that it's too late to drink Borjomi when your kidneys have failed.
We see cracks in the housing sector. The number of mortgage applications fell by 2.9% compared to last week. We learned today, without a doubt, that long-term rates are rising rapidly, and mortgage rates could reach around 9%. Two years ago I took out a mortgage at 3.35%. And now I'm not going anywhere.
Like everyone else with my mortgage terms. The housing market seems to be finally slowing down, and home prices have been a bone in everyone's throat, especially the Federal Reserve. But pulling this bone with higher rates rather than increasing housing supply is very painful. Unfortunately, Powell can't force developers to build new homes.
It can only lower prices by making loans more expensive. Not the best way to solve the problem. We see cracks in the automotive sector. Car companies other than Tesla are facing a possible major strike. The unions have a strike fund, which is much less than the gold reserves of automakers. But automakers were producing as much as possible in case of a strike, which means they would suffer anyway.
Think about it. If a strike starts, production will stop. They won't have enough cars to sell. If there is no strike, they will be left with too much stockpiled inventory. And you'll see a lot of car commercials on television during football season. You will probably be able to get good discounts. We are in a period of low incomes, but the dollar has risen during this time.
This deprives us of one of the biggest advantages of last quarter. Most of our companies operating abroad benefit from a weaker currency. This was relevant 3 months ago . Now everything is moving in the wrong direction. A new crack that we didn't expect. And what is the government doing? Nothing. The Federal Trade Commission is stepping up and taking on Amazon over some of their practices that allegedly harm sellers.
Let's assume that's even true. I know there are good reasons to protect sellers, but right now Amazon is one of the few institutions that actively lowers prices for you. Only Costco did more, and now the FTC is coming after them. Thank you very much, you're welcome . Even if the FTC has a good reason to go after Amazon for harming sellers, I'm not at all convinced that's the case.
Couldn't they wait until we curb inflation? The last thing we need is for the government to work to increase the prices of all kinds of goods. Thank you very much, FTC Chairman Lino Hahn, for attacking services that 65% of Americans rely on. Now let 's take a step back for a second. Remember, September is usually a terrible month, partly because many large funds have big returns.
September is already pretty close to the end of the year, so many of these managers are simply taking profits and going on vacation or semi-vacation. Thanks to the September environment, all news becomes exaggerated. This is especially true of bad news. We hear that the Chinese government may ban its employees from bringing iPhones to work.
What does this mean for Apple's amazing market ? Shoot first, ask questions later. Here's what it means. Governments are angry with megacorporations. Don't argue about it. Just, just sell them. Here's what's happening. In summary, the real crack we saw today and what we saw yesterday is why I hate September.
Too many things are going wrong. This is why markets typically fall 7% per month . The good news is that we've already fallen that far . So we may soon run out of downside potential unless the cracks in this market continue to widen. I want to move on to Kevin and George. And Kevin, Mr. Kramer, Kevin, how are you?
Thank you for taking my call. Good. And you? Oh. I'm delighted you called. What is happening? Thank you again for everything you do. Thank you. This stock is a major favorite when it comes to backup energy solutions and has been mentioned many times on the show, but even Michael Burry's fund made an investment in this company in its latest 13F report after bottoming out in late 2022.
The stock showed some signs of life but was then knocked down after the latest quarterly earnings reports. Given poor earnings but positive factors like hurricane season and an unreliable power grid, what are your latest thoughts on Generac Holdings? Look, I like Generac, but I have to say that I feel the same way, by the way, about SolarEdge, some of these solar players, and Enphase.
You need credit to be able to buy such big things, and that's what's causing the problems, because the cost of credit has gone up. People don't think about it, but that's what's dragging them down. Let's move on to Dennis, my home state of New Jersey. Dennis. Buia from Bedminster. Jim, how are you? Oh, come on, man.
You are right next to me. Glad to see you on the show. What's new? Oh, first I have to congratulate my beautiful wife Mary, with whom I have been together for 25 years. Great job. Thank you. And the stock I want to ask about has a PE ratio of about 15 and even yields a dividend of about 2%. It manufactures chips for many companies, including Nvidia.
And my average price is $98. Should I buy more, sell or hold Taiwan Semiconductor? That's a great question. This is a question we get asked all the time at the investment club : you are buying too close to your last purchase. When you try to average in this way, you don't want to do it only when it drops by six percent.
We believe that a 10% drop is the first level at which it is worth buying. So, you know, you still have to wait a little bit before I start... Not yet. Although I really like the company, we have already fallen about as much as we usually fall in the whole of September. So we may soon run out of downside potential, assuming the cracks in this market don't get deeper, although I have to say they probably will.
Today at “Mad Money,” our team will be holding their annual fantasy football draft later in the evening. And while I'm not quite ready to announce my top picks yet, I will share which stocks I think fit which positions and who I think you should choose for your stock portfolio. Next: CrowdStrike defends itself from bears after earnings report.
So what made the quarter so strong? Don't miss my exclusive interview with the CEO and FTC as she takes a look at some of the biggest deals on Wall Street. So how can this negatively impact your portfolio? I'm discussing this. . Do you have any questions? Tweet to . Is this something? Go to madmoney.cnbc.com.
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