For investors struggling to make sense of a volatile market, CNBC’s Jim Cramer said clarity comes from focusing on scarcity as a key determinant in stock performance.
“When in doubt, ask if there’s a shortage or glut of what the company in question sells,” Cramer said Wednesday night on “Mad Money.” “If it’s the former, then you can buy; and if it’s the latter, you better get out of dodge.”
Cramer called the framework “the best cheat sheet I can offer you at this point in earnings season,” adding that “shortages are true north, gluts are the kiss of death.”
However, that may not be obvious by simply looking at the performance of the major U.S. stock averages, Cramer said. On Wednesday, the Dow Jones Industrial Average inched up merely 12 points, or 0.02%. The S&P 500 also was basically flat, while the Nasdaq advanced 0.17%.
Cramer said the market’s message is becoming clearer when investors look at which stocks are actually working. “When I look at the scoreboard for this period, who has the wins and who has the losses, it’s all about shortages versus gluts,” he said.
One of the most evident examples is gold. “We just don’t have enough of it,” Cramer said of the precious metal, noting that miners only grow gold supply by 1% per year. He reiterated his long-standing stance “I would keep the gold – I am a gold bug from way back.”
Cramer said shortages are also defining tech, particularly in data storage. “We’ve got a big shortage in tech, one that’s truly unlike anything I have ever seen,” he said, pointing to data centers and cloud infrastructure. That’s because despite the commitment to the buildout of AI infrastructure, supply can’t continue to come on quickly. For that reason, Cramer said he believes the shortage will last “for some time.”
