Business

Monday – Friday, 6:00 – 7:00 PM ET

It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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Palantir: “If it can get to $10, then I would skedaddle. I hate to recommend it all the way down here because it’s near the bottom.”

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Black Knight Inc: “The government is so fickle, I hesitate to recommend any arbitrage situation.”

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Match Group Inc: “At $43? Really? I’m not going to recommend a sale of that thing.”

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Manchester United PLC: “It’s not making money. … I have no catalyst, and when I have no catalyst, I just don’t know how to recommend.”

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Monday – Friday, 6:00 – 7:00 PM ET

CNBC’s Jim Cramer on Monday said that the market could see a rally later this year that lasts through the end of 2022.
“The charts, as interpreted by Larry Williams, were able to call this incredible October rally. … And now he says that this market’s likely got even more upside even through the end of the year,” Cramer said.

CNBC’s Jim Cramer on Monday said that the market could see a rally later this year that lasts through the end of 2022.
“The charts, as interpreted by Larry Williams, were able to call this incredible October rally. … And now he says that this market’s likely got even more upside even through the end of the year,” Cramer said.

Stocks fell on Monday but saw a major comeback in October. The Dow Jones Industrial Average gained 13.95% in its best month since 1976. The S&P 500 and Nasdaq Composite increased about 8% and 3.9%, respectively, in October.
To explain Williams’ analysis, Cramer first examined the chart of the Dow Jones Industrial Average futures in black, and Williams’ true seasonal pattern in blue. 

Arrows pointing outwards

This chart is an updated version of what Williams used earlier this month when accurately predicting October’s rally, and suggests there could be a tremendous rally, according to Cramer.
“That true seasonal pattern is based on the historical pattern at any given point in the year, and it predicted a monster run through mid-November. And it suggests we’ve got another leg higher through the end of the year,” he said, adding that there will be a pause between the rallies.
He then examined a chart that shows the action in the Dow through last week, along with Williams’ long-term cycle forecast in red.

Arrows pointing outwards

The cycle forecast confirms the bullish previous seasonal forecast in the previous chart, according to Cramer.
“Bulls be prepared, bears beware,” he said.
For more analysis, watch Cramer’s full explanation below.

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Click here to download Jim Cramer’s Guide to Investing at no cost to help you build long-term wealth and invest smarter.

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Homebuilders say 2023 is going to bring an even sharper downturn in the market, as high interest rates scare away buyers.
Housing starts for single-family homes dropped nearly 19% year over year in September, according to the U.S. Census. Building permits, which are an indicator of future construction, fell 17%.
“It is definitely a hard landing for housing,” said one homebuilder in the Denver area.

A worker drills plywood on a single family home under construction in Lehi, Utah, on Friday, Jan. 7, 2022.
George Frey | Bloomberg | Getty Images

The once-hot housing market is cooling off at an alarming rate, and some homebuilders say it will only get worse come the new year as new orders dry up.
Fast-rising mortgage rates have caused once-frenzied homebuyers to turn on their heels and become worried about their potential investment and the health of the overall economy.

“There’s this cliff that’s happening in January,” said Gene Myers, CEO of Thrive Homebuilders in the Denver area, which was one of the hottest markets in the years leading up to and through the coronavirus pandemic.

U.S. homebuilders were a major beneficiary of the Covid economy. Record low interest rates, combined with surging demand from consumers looking for more living space, caused a run on housing unlike most had ever seen before. Home prices surged over 40% in just two years, and homebuilders couldn’t meet the orders fast enough. They even slowed sales just to keep pace. All of that is over.
Housing starts for single-family homes dropped nearly 19% year over year in September, according to the U.S. Census. Building permits, which are an indicator of future construction, fell 17%. PulteGroup, one of the nation’s largest homebuilders, reported its cancelation rate jumped from 15% in the second quarter of this year to 24% in the third.
The public homebuilders that have reported earnings so far showed surprisingly strong results, but that is because much of it is based on a backlog of homes that went under contract last spring. That was before mortgage rates crossed 6% and then 7%.
Now builders are preparing for what’s coming next. Myers said that his company’s balance sheet is incredibly strong right now, thanks to a backlog of homes sold at high prices, but he predicted that the market will be “ugly” by the start of next year.  

“It is definitely a hard landing for housing,” he said. “Any hope of a soft landing really evaporated last spring, when it became so clear that our customers who are accustomed to such low mortgage rates just were going to go on strike.”
Myers was around during the last housing crash, which was brought on by a faulty mortgage market where just about anyone, qualified or not, could get a home loan. It caused a massive run on housing, based almost entirely on speculative buying and selling by investors. Single-family housing starts fell a stunning 80% from January 2006 to March 2009, but Myers notes that it was a slower turn compared with what is happening now.
“I think we’re seeing the most abrupt change in the market in my career, and I’ve been around a while,” he said. “I’ve never seen sales just turn off, which for us happened in May.”

Downward spiral

Barely six months ago, single-family housing starts were still up 10% year over year. That was just before mortgage rates really started to jump quickly. To go from a 10% annual gain in construction to a 19% drop in that time frame is an historically sharp turn.
While sales of newly built homes are falling, prices are still higher compared with a year ago. Much of that has to do with still-inflated prices for labor and materials. Part of the price strength may just be indicative of which homes are selling, namely the more expensive ones. But that may change soon, as well.
Sheryl Palmer, CEO of Arizona-based homebuilder Taylor Morrison, which just reported strong earnings for its third quarter, said entry-level buyers are clearly struggling. But she also admitted that higher-end buyers are not flooding in the door either anymore.
“When we look at our move-up and our resort lifestyle buyers they absolutely can still afford to buy, but emotionally, you need to have the confidence,” Palmer said Friday on CNBC’s “Mad Money.” “Even at today’s rates, both our FHA and conventional buyers have a great deal of room, but being able to afford it doesn’t mean they have the confidence, given everything that’s going on in the economy today.”

Palmer told analysts on the company’s earnings call that new orders were down “sharply” in September, and that the slowdown has been felt across a wide range of price points, geographies and consumer groups. As a result Taylor Morrison is pulling back on land investment, lowering its pace of new construction starts and offering buyers additional incentives.
Sales of newly built homes dropped below pre-pandemic levels in September, and cancelations are now double what they were a year ago, according to the National Association of Home Builders.
“This will be the first year since 2011 to see a decline for single-family starts,” NAHB Chief Economist Robert Dietz said in a release. “While some analysts have suggested that the housing market is now more ‘balanced,’ the truth is that the homeownership rate will decline in the quarters ahead as higher interest rates and ongoing elevated construction costs continue to price out a large number of prospective buyers.”
Supply of newly built homes remains elevated, unlike in the existing-home market, where listings are still scarce. NAHB reported that one-quarter of builders are now slashing prices.
And that is the big unknown. Prices are cooling down for both new and existing homes, but analysts are divided as to if they will actually show year-to-year declines, and how wide those declines might be. Myers said he has heard talk of a 20% drop in prices for new construction.
“And it sounds really harsh, but when we were looking back, because our construction costs have gone up so rapidly, we only have to dial back a little over a year to be 20% less than we are now,” Myers said. “So to think about, well, we’re just going to go back to 2020 doesn’t sound nearly as crazy as a 20% price correction. But I think it definitely has to happen if we’re going to get velocity back.”

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When evan spiegel, boss of Snap, wrote in a leaked memo that the social-media company had been “punched in the face hard by 2022’s new economic reality”, he might as well have been describing America’s digital darlings as a whole. After a multi-year bull run, the sector is suffering a sharp correction. The NASDAQ index, home to many consumer-internet firms, has fallen by nearly 30% in the past 12 months; the Dow Jones Industrial Average, made up of less techie firms, is down by less than 10%. Crunchbase, a data provider, estimates that American tech firms have already shed more than 45,000 jobs this year.Macroeconomics is partly to blame. Soaring inflation and rising mortgage repayments are leading consumers to cut back on discretionary spending—and most digital offerings are discretionary. Even the industry’s trillion-dollar giants have not been spared, despite continuing to rake in handsome profits. Alphabet, Amazon, Apple and Microsoft have collectively lost $2trn in market value over the past 12 months. If you think big tech has it bad, spare a thought for the not-so-big tech. In particular, three business models embraced by firms born after the dotcom crash of 2001—and subsequently by investors—are losing steam: the movers (which shuttle people or things around cities), the streamers (which offer music and tv online) and the creepers (which make money by watching their users and selling eerily well-targeted ads). Over the past year, the firms that epitomise these business models—Uber and DoorDash; Netflix and Spotify; and Snap and Meta (which has tumbled spectacularly out of the trillion-dollar club)—have shed two-thirds of their market capitalisation on average (see chart). And things could get worse. Despite being the global leader in ride-hailing, Uber is expected to report yet another quarter of negative free cashflow (the money companies generate after subtracting capital investments). In its 13-year life it has torched a cumulative $25bn of cash, equivalent to roughly half its current market value. DoorDash, the leader in food delivery, also remains lossmaking. So do Spotify (despite decent revenue growth) and Snap (in addition to sharply slowing sales). Netflix—a child of the 1990s but a streamer only since 2007—turns a profit but its revenue growth was down to 6% year on year in the third quarter, compared with a historical average of more than 20%. Meta’s revenues have now shrunk for two consecutive quarters. On the surface, the movers, streamers and creepers—and thus their problems—look distinct. On closer inspection, though, their businesses all turn out to face the same main pitfalls: a misplaced faith in network effects, low barriers to entry and a dependence on someone else’s platform. Start with network effects, or “flywheels” in Silicon Valley speak—the idea that a product’s value to a user rises with the number of users. Once the user base passes a certain threshold, the argument goes, the flywheel powers a self-perpetuating cycle of growth. It also explains why so many startups seek growth at all cost, spending millions acquiring ever more customers to get the flywheel spinning. Network effects are real. But they also have their limits. Uber believed that its headstart in ride-hailing gave it a ticket to riches, as more riders and drivers would mean less idle time for both, drawing ever more users into an unstoppable vortex. Instead, it encountered diminishing returns to scale: reducing average wait times from two minutes to one would require twice as many drivers, even though most riders would barely notice the difference. DoorDash’s hungry consumers likewise only require so many alternative Indian restaurants to choose from. And what network effects the movers enjoy are local; a user in New York cares little about the popularity of the app in Los Angeles.Spotify and Netflix also tried to capitalise on network effects, as oodles of data on the listening and viewing habits of similar users promised to deliver an unbeatable product. Belief that Netflix’s trove of user information would give it a winning edge in creating content has been shattered by flops like “True Memoirs of an International Assassin”, which scored a rare 0% audience rating on Rotten Tomatoes, a review website. For the creepers—whose social networks are a network-effects business par excellence—the worry is what happens if the flywheels start spinning in reverse. Meta had a scare in the fourth quarter of 2021, when it lost 1m users. That loss did not turn into a stampede; the company has added users since. Next time it may not be so lucky.The second problem—low barriers to entry—also looks like a supposed boon that turned into a bane. Advances in technology, from smartphones to cloud computing, allowed all manner of startups, including the movers, streamers and creepers, to build consumer software cheaply and quickly. But that also meant that copycats soon emerged, and easy money allowed them to offer generous discounts to quickly build the minimum necessary scale. Although Uber faces only one real ride-hailing rival, Lyft, in its home market, its global expansion almost immediately ran up against local rivals such as Didi in China or Grab and Gojek in South-East Asia. The combination of relatively simple products and free-of-charge user experience means a new twist on social media can be enough for a new challenger to gain momentum: just try to pry a teenager from TikTok. The barriers to entry for the streamers are higher—Netflix and Spotify spend a lot of money making or licensing content. But they are not insurmountable, especially for deep-pocketed rivals. To fend off the challenge from Disney, which is spending a total of $30bn a year on content, Netflix has to keep splurging, too, to the tune of around $17bn a year. Like customer-acquisition costs for the movers, content costs eat into streamers’ profits. Disney’s streaming services lost $1.1bn in the second quarter of this year and the company has said that its Disney+ platform expects to lose money until 2024. Heavy investment explains why Netflix’s free cashflow is equal to only 6% of revenue.The third flaw common to the three wobbly business models is their reliance on distribution platforms that are not their own. Uber and DoorDash pay a handsome fee to advertise on the iPhone and Alphabet’s Android app stores. Spotify forks over a 15% commission on subscriptions purchased on iPhones—a tax so annoying that it has filed a complaint against Apple over it. Netflix avoids the commission by forcing users to subscribe through their web browser, shifting the irritation to the customer—and quite possibly missing out on subscriptions.Worst affected by the lack of their own rails are the creepers. Their dependence on the iPhone-Android duopoly is an existential threat. Apple’s newish requirement that users give iPhone apps permission to track their activity across other apps and websites, a move since replicated by Alphabet, may this year cost Meta an estimated $10bn in forgone revenue. Parler, a creeper favoured by the far right for its liberal attitude to speech norms, was temporarily suspended by both Apple and Android. If American national-security hawks worried about TikTok’s Chinese ownership get their way and force Apple and Alphabet to expel it from their app stores, the rising star of social media could find itself similarly thwacked.The different business models do not face an equal balance of challenges. The movers would be in better nick if the industry had meaningful barriers to entry. The streamers may have been able to bat away new entrants if network effects had been stronger. And the creepers were in reasonable shape until Apple and Alphabet spoiled their party. One shaky pillar is problematic enough. Three of them is a disaster waiting to happen. ■ More

Delta Air Lines pilots voted overwhelmingly to authorize a strike if contract talks between the carrier and the union don’t lead to an agreement.
A strike wouldn’t be immediate and it would require permissions from the federal National Mediation board.
Pilots for U.S. carriers have have recently picketed at major airports to demand better contracts as the industry returns to profitability.

Delta pilots picket for a better contract outside of John F. Kennedy International Airport.
Leslie Josephs | CNBC

Delta Air Lines pilots voted overwhelmingly to authorize a strike if contract talks between the carrier and the union don’t lead to an agreement, the labor group said Monday.
A strike wouldn’t be immediate and it would require permissions from the federal National Mediation board. The Air Line Pilots Association union said it wants a contract, not a strike.

Covid derailed contract talks throughout the airline industry starting in 2020. Talks have since resumed, and the Delta pilot strike vote underscores the difficulty in getting agreements through.
Pilots for U.S. carriers like Delta and competitors American Airlines, United Airlines and Southwest Airlines have have recently picketed at major airports to demand better contracts as the industry returns to profitability.
“Meanwhile, our negotiations have dragged on for too long. Our goal is to reach an agreement, not to strike,” said Capt. Jason Ambrosi, chair of the Delta master executive council of the Air Line Pilots Association. “The ball is in management’s court. It’s time for the Company to get serious at the bargaining table and invest in the Delta pilots.”
Delta said the vote won’t affect its operation, since the pilots are not on strike, and that the carrier and union have made “significant progress” in their talks.
“ALPA’s stated purpose for the vote is simply to gain leverage in our pilot contract negotiations, which continue to progress under the normal process set by the Railway Labor Act and in partnership with the National Mediation Board,” the airline said in a statement. “We are confident that the parties will reach an agreement that is fair and equitable, as we always have in past negotiations.”
Earlier this year, Alaska Airlines pilots voted to authorize a potential strike. Pilots for that airline recently reached a new contract agreement with the company.

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Shares of spacecraft manufacturer Terran Orbital rose Monday after the company added $100 million via an investment from existing shareholder Lockheed Martin.
Terran noted the investment comes with a new cooperation agreement “to pursue a wider variety of opportunities” alongside the defense giant.
CNBC previously reported that Terran was among the space SPAC stocks seeking capital, with several companies facing a cash crunch.

The company’s banner above the New York Stock Exchange on March 28, 2022.
Terran Orbital

Shares of spacecraft manufacturer Terran Orbital rose Monday after the company added $100 million via an investment from existing shareholder Lockheed Martin.
Lockheed purchased both debt and stock, and Terran noted the investment comes with a new cooperation agreement “to pursue a wider variety of opportunities” alongside the defense giant.

Terran stock rose 2.3% in trading to close at $2.62 a share, after soaring as much as 33% earlier in the day. The stock is down more than 70% year to date.

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The company went public via a SPAC earlier this year and, like many space stocks, has been hit hard by the shifting risk environment in the market. CNBC previously reported that Terran was among the space SPAC stocks seeking capital, with several companies facing a cash crunch.
The company noted in Monday’s announcement that it will “no longer pursue” building its own constellation of satellites, and instead will plan to use its existing PredaSAR technology to offer a specialist Earth-imagery product.
Terran is set to report third-quarter results on Nov. 9.

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More than 17% of women had long Covid at some point during the pandemic, compared with 11% of men, according to Census Bureau data.
Some 2.4% of women had symptoms that significantly limited their normal activities, compared with 1.3% of men, according to the data.
Overall, more than 14% of U.S. adults had long Covid at some point, according to the survey.

A woman receives a dose of a vaccine against the coronavirus disease (COVID-19) at a sport stadium during the coronavirus disease pandemic, in Vina del Mar, Chile, April 22, 2021.
Rodrigo Garrido | Reuters

Long Covid is more common among women than men, according to federal data.
More than 17% of women have had long Covid at some point during the pandemic, compared with 11% of men, according to data from U.S. Census Bureau and National Center for Health Statistics published this month.

Long Covid was defined as experiencing symptoms for three months or more after infection. The most recent data was collected through an online survey of more than 41,000 adults during the two weeks ending Oct. 17.
Women were also more likely to suffer from more severe long Covid, the survey found. Some 2.4% of all women had symptoms that significantly limited their normal activities, compared with 1.3% of men, according to the data.
Overall, more than 14% of U.S. adults had long Covid at some point during the pandemic, the survey found. Seven percent of U.S. adults currently have long Covid, according to the data.
If those figures held true for the general population, 36 million adults could have had long Covid at some point during the pandemic, while 18 million could currently be dealing with it.
About 2% of adults in the U.S. have suffered from more severe long Covid symptoms that significantly limited their daily activities, according to the data. That would be equivalent to more than 5 million people in the general U.S. adult population.

The Brookings Institution, in a separate analysis, found that as many as 4 million people in the U.S. are unable to work due to long Covid.

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Long Covid presents a wide array symptoms that vary from mild to debilitating and affect multiple organ systems. Some of the most commonly reported symptoms include poor memory or brain fog, fatigue, shortness of breath and loss of smell, according to a recent study published in Journal of the American Medical Association.
The JAMA study also found that long Covid was more common among women. Nearly 18% of Covid survivors who had symptoms for more than two months were women, while 10% were men.
The dominant Covid variant and vaccination status may also play roles in how likely people are to get long Covid.
Nearly 60% people who developed long Covid were infected with the original virus strain that emerged in China, while more than 17% caught the delta variant and more than 10% had omicron, according to the JAMA study.
The study found that 87% of those who had long Covid were unvaccinated.
“There may be differences in these strains and how likely they are to cause long Covid that could teach us something about why this happens,” said Dr. Roy Perlis, the lead author on the study and co-director of the Center for Quantitative Health at Massachusetts General Hospital.
The JAMA study, which published last week, looked at more than 16,000 adults who tested positive for Covid. The data was collected from February 2021 through July 2022 from a national online survey conducted every six weeks called the Covid States Project.
Scientists do not understand the underlying cause of long Covid yet, though there’s a growing consensus that it is likely several distinct conditions and not a single disease. The National Institutes of Health is enrolling a massive study, called Recover, to precisely define the different types of long Covid, identify risk factors and develop tests and treatments.

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When shorter-term government bonds have higher yields than long-term, which is known as yield curve inversions, it’s one signal of a future recession.
“The yield curve is not perfect, but it does better in general than standard forecasts,” said Robert Barbera, director of Johns Hopkins Center for Financial Economics. 

Catherine Yeulet | Getty Images

What the inverted yield curve means

Generally, longer-term bonds pay more than bonds with shorter maturities. Since longer-maturity bonds are more vulnerable to price changes, investors expect a “premium,” explained Preston Caldwell, head of U.S. economics for Morningstar Research Services.
“In normal times, the yield curve slopes upwards,” he said. But there’s currently a downward sloping curve, also known as an “inverted yield,” with the 2-year Treasury paying more than the 10-year Treasury. 

While many experts believe the inverted yield curve is one signal of a future recession, Caldwell said it’s more “correlative,” showing how the markets expect the Federal Reserve to respond in the near term.  
What’s more, he said there’s “too much focus” on the “will there or won’t there be recession” question, and not enough attention on the severity of a possible recession, which the yield curve doesn’t show, he said.

‘Real economic indicators are going to suffer’ 

While a yield curve inversion is only one signal of a possible recession, it shouldn’t be ignored, particularly at the lower end of the curve, experts say.
“Economists have a very, very consistent record of not forecasting recessions,” said Robert Barbera, director of the Center for Financial Economics at Johns Hopkins University. “The yield curve is not perfect, but it does better in general than standard forecasts.” 

Factors like a once-in-a-100-year global pandemic and the war in Ukraine make it difficult to compare trends based on past data, Barbera said.
However, it “certainly looks like short rates are going up until that inflation rate breaks in a big way,” he said. “And unfortunately, if we look at the history of that dynamic, it’s likely that real economic indicators are going to suffer alongside or ahead of that break for inflation.”  

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