Mad Money w/ Jim Cramer 10/14/26

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future, together. If you're a small business, the right hire can be make or break. Indeed Sponsored Jobs gets you quality candidates when you need them most. Join the 3.3 million employers worldwide that use Indeed to connect with quality talent that fits their needs. Listeners of this show will get a$75 sponsored job credit to help get your job the premium status it deserves at indeed.com slash podcast.

0:38That's indeed.com slash podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed-sponsored jobs. My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bone working somewhere, and I promise to help you find it. Mad Money starts now.

1:03Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. Other people want to be friends? I'm just trying to save you some money. My job is not just to entertain, but I put this whole thing in some context. So call me 1-800-743-CMEC, tweet me at Jim Kramer. So last night, I tried to start writing my talk for tomorrow's CBC Investing Club meeting. Anyone who's a member of the club knows how seriously I am about these meetings. I try to get everything on the table, the good and the bad, including snippets of my current feelings about all the positions we own in the travel trust. In other words, it's a big deal for us and for all club members, especially the ones we answer the questions from.

1:39Right now, though, I want to explain how hard it is, how hard it is to run this club in this mean and nasty environment. So on the day when the Dow lost 49 points, the S &P tumbled 1.1 percent, and the Nasdaq plunged 1.88 percent. The House of Pain. Believe me, it was much worse in the early afternoon. Let me talk about what, why, and what got maybe stymied, and how I ultimately gave up writing after about four hours, and just said, you know what, I better wait until tonight to plan my thoughts. There's too much at stake. There are too many variables. And last night was way too far away from tomorrow for me to speak with any certainty.

2:19And I don't like that. Let me tell you what I was up against in trying to make sense of this market last night. First, at end this morning, frankly, I knew that I'd have to wait, have to deal with that consumer price index number that has been blown up by fuel costs and are now infiltrating the entire economy. Would people accept a hot CPI reading, knowing that it's manmade and could be rolled back instantly if this war with Iran comes to an end? Sure enough, at 830 this morning, the number comes in and it was a little hotter than expected. Interest rates immediately flew up. But then, oddly, they worked their way down over time, even as the rate of inflation rose 0.6 percent from August to September.

2:57That is incrementally worse. In a tightening atmosphere where the Fed's looking at the impact of its quarter point rate height so far, we can't tell whether it's really made a difference yet. Maybe you've got to do more. Normally, I think that there should have been no recovery in the bonds here. That number was bad. If I had given my talk today at noon, I would have said, you know what, I don't know where rates are going to go up, but they're going to go up plenty. But they didn't. They went down. Was it oil? No. No, this is still one more day where oil went higher. Was it that the inflation number wasn't as bad as we thought?

3:31Impossible. It was a bad number, especially when coupled with the strong possibility of a hot producer price index reading tomorrow, which will restart the debate about how many rate hikes we're going to hear about. Might as well tell you about it for this year or next. This CPI reading says that one hike, not enough. But of course, I haven't seen the PPI yet. Maybe it'll surprise me. There's just no way I can write a speech about the market and our stocks ahead of a PPI number when it might force the Fed to raise rates at its next meeting, which is October 28th. No. You know what I think happened?

3:59I think there was a flight to safety going on because we are now beginning to question if all these newer neoclows, these companies you see all the time on the tape, have enough money to keep building data centers. Maybe they're going to run out. Rates went down, I think, because some managers are frightened about how poorly the bonds of these new clouds trade. And I'm talking about the companies that might have started up as Bitcoin managers or just companies that put out a shingle saying we can build you a data center. Now, in some ways, it's even trickier. For example, think about the decision tree here for the Fed.

4:30If the Fed raises rates again off some too hot numbers like the CPI we got this morning, that will show how determined Kevin Warsh is, the Fed chief, to stop inflation. But it could also really slow business. That could lower the cost of living. but there's a strong chance it'll also throw a bunch of people out of work. Unfortunately, if the Fed does nothing, I think it's actually possible that the 30-year Treasury, currently at 5.5%, goes to 6%, increasing the cost of housing among other goods. Right now, housing is the worst part of the economy. The worst! And there are a whole host of other industries that would get crushed if that 30-year went above 6%.

5:07You'd like to think that someone in the food chain of price increases would eat the rising costs, But it looks like most of these increases are being borne by you, the consumer. The rate hike won't stop that process. I don't mean this is all about oil, so only ending the war can fix it. Which brings me to still another variable. The Fed has tightened once. What if it tightens again and then the war conundrums solved? Right now, I believe that every oil with oil is running full out. Every refinery is running at nearly 100 % of capacity. I think oil prices could plummet should peace break out. Plummet.

5:40I think oil could be cut in half. Even more. The Fed would have tightened for nothing. The stock market rally would be huge. Will the big sellers of goods roll back their price increases, though? Some will. Those who work at Walmart, Costco, Amazon, they know they've got to do that. But I'm not sure about others. They certainly don't want to cut the prices. The last time we had a big spike of inflation, only those three are really the keepers of our sanity. Either way, if we can give peace a chance, inflation will come down hard. But we have no idea if or when that might happen. So we're stuck in this limbo.

6:12I wish I could tell you what will happen in the war. But unlike so many other confrontations, it's not clear what victory would even look like. Are we going to fight the Hooties with Saudi Arabia? Are we going to fight them for Saudi Arabia? Oil suddenly become the focus of Russia's war with Ukraine. Will we keep backing Ukrainians or is the White House about to back Russia instead? Does the president know something good about Putin? He's just not sharing. Or do we just need the oil? Can we speed up Starlink, please, in Ukraine? Tell me. Too many variables. Then there's the banks. That's the ones we've seen so far in the earnings season.

6:42What the heck? We're seeing some really nasty reactions to some very, very good quarters. Never a good sign. Bank of America reports a ho-hum quarter. Stock initially sheds$4. Neither Sidney or Wells Fargo can find their footing. Morgan Stanley reports a decent quarter and it drops$7. That's just lunacy. Suddenly all the charts now have head and shoulders patterns. The worst in the book. And they, well, let's just say they could go down much further. That's what you'd be expecting if the numbers were bad, though. But the numbers weren't bad. In some cases, they're pretty darn good. Right now, that doesn't seem to matter.

7:13The bank stocks are going down regardless. More on that later, but that's bad, too. How about tech? I'll talk about this later, too, but it is safe to say that the freefall in CoreWeave, yes, Neocloud, is freaking people out. It's a big company, a lot of debt. It's a data center operator with so much debt, some of which has now become distressed debt, that it's dragging down the whole group and maybe the entire market. It's so ugly, CoreWeave CEO Michael Entrader told his employees that he blames the stocks more than 15 % decline on the market acting irrationally. Hold it. Just a second. Good to know.

7:47But markets can stay irrational for longer than you can stay solvent. Not reassuring. Won't tech earnings save us? They have in the past. Nevertheless, ASML, the gigantic Dutch semiconductor capital equipment maker, reported a terrific quarter this morning, talked about rising demand. Much better than expected. When I got up this morning, the European stock was up a couple of points. I thought it might counter still one more bad day for the Korean, the COSPI, the Korean index that I've been talking about to you nightly. SK Hynix, the linchpin of AI Harbor, was down about five when it came out.

8:15I thought ASM might be able to counteract it. Wrong. Instead, SK Hynix fell another four. So ASM reversed and ended up getting clobbered. Those earnings were fabulous. Got clobbering fabulous earnings. The only stocks that rallied of any size are the ones that work in a serious recession where costs come down, but the consumer still has money to spend. Food, drug, think Procter & Gamble. Wow, market leader, Colgate. That's not the kind of leadership you want, though. You buy those stocks and you think the economy's in big trouble. Is it? Which brings me to the bottom line. If you have a market that can change its stripes usually every day, it becomes very hard to have what?

8:50Conviction. You just want to throw things away and go home. Sell, sell, sell, sell, sell, sell. That's happened time and again since the dot-com peak in 2000. Throw them away and go home. If you do, though, let me ask you something. Will you be able to buy them back in time for those 10 glorious days of the year when all the gains are made? I don't think so. I say stay in the game. Watch my club call tomorrow noon. It won't be soothing. It will tax everything I have learned in the last 45 years on Wall Street. It might even be fun, but only if you like macabre humor. How about we go to Kevin in Missouri?

9:23Kevin. Hey, Jim. Long time listener here. Good to have you on the show, Kevin. Thank you. I've got a question around Walmart. So I bought in at 111 and it took a dip for a while and it's kind of bounced around a little bit. At what point should I should I get rid of it? Walmart. Get rid of it. You better hope it goes down a couple of smackers so you can buy more. Are you kidding me? You're not getting rid of Walmart. Walmart is the winner in this environment. Get rid of almost any other stock other than Walmart. And, you know, keep Costco if you got Costco. But no, don't sell Walmart. Walmart is perfect for this environment, even though it has 40 times earnings.

10:02I think these guys are great. Let's get Ferner on the show, the CEO. Hey, John, I know you're a watcher. Come on the show. Let's go to Ryan in Pennsylvania. Ryan. Hey, Jim, this is just Ryan in Allentown, PA. How are you? I love it. I go to my Allentown Costco. You ever been to that Costco there? I just took my three-month-old the other day for his first time. Clean as a whistle. I told my wife I'd eat samples off the floor there. Jim, why would you want him off the floor? Why don't you just take him from the tray? She has a point. Let's go to work. Hey, Jim, so I just want to thank you for all the education you've given me through your new book and reading Get Rich Carefully as I'm home on fraternity leave.

10:42Two questions for you. The first one is, with all the help you've given me, how are you going to help your Eagles turn this season around? Well, I can only – look, I don't work Sunday, so I can do some coaching, and I'm not even worried about that. I know the plays. I can actually run an offense pretty darn well. I can just run the ball right every single time, or I can come up with something clever, and I would do the latter. But I don't know. I'm looking at fans from commanders. I'm looking at some chiefs. Whatever. Let's go to work. What's the other? That was easy. My question is on Tesla. Is it a buy, sell, or hold at this point?

11:16All right. This is a great question. I am a huge believer in SpaceX. That therefore makes me a believer in Tesla because it makes too much sense for Elon Musk not to buy Tesla. But I've got to say, I do like SpaceX more, and this decline in SpaceX may be a gift. You're going to have to buy it slowly in pyramid style, but it's what will work in this market when the smoke clears. Right now, we are in the smoke shop. All right. It can be tempting to just throw everything away in a market. You know, that's what you probably think. It's like, let's turn that guy off. You know, that screaming guy, the bald, fat guy.

11:49Beat the fat stuff. But anyway, please stay. It's worthwhile on Man Money Tonight. Like I mentioned earlier, the banks reported solid quarters. But the stocks are telling a different story. I'm going to dive into the numbers and why this stuff can happen. And as software stocks are rebounding, investors are getting a reminder of what companies have always been working well. I'm sitting down with one that I like so much that I can't believe I didn't buy it. But I bet you I'm going to get another chance. And it's work day. And while the software stocks rebound, its hardware's turn to get slammed by AI worries.

12:16I'm explaining how you can stay ahead of the imbalance. So stay in the market and stay with Kramer. Don't miss a second of Mad Money. Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.

13:10Must be 21. If you or someone you know has a gambling problem, crisis counseling and referral services can be accessed by calling 1-800-GAMBLER. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases.

13:53Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details.

14:20Yesterday, earnings season went into full swing when we started hearing from the major banks, Wells Fargo, J.P. Morgan, Goldman Sachs, and Citigroup. Then today we've got Bank of America and Morgan Stanley. So now that we've gotten results from all six of the major banks, I want to walk you through what they're saying, starting with the big money centers, because they are often a precursor to the entire earnings season. Before we get into specifics, though, you need to remember that the big banks have not been trading well. They limped into this earnings season. Very unusual. They've been coming in hot.

14:48As of Monday night's close, every single one of them was lagging the S &P 500 for the year. And that is a recent development, because the group sold off hard late last month. The banks have not been reacting well to the rising interest rates. We know that the last few weeks of some of their businesses have not been good. In theory, higher long rates let them make more money, right? They get to charge more interest, and they usually don't pay you much for your deposits. You ever see your deposit go up in this environment? But when rates soar, that slams the brakes on the economy, which translates into less demand for loans.

15:16At the same time, the investment banking business has been crimped by the slowdown in IPOs and the surprising dearth of M &A transactions. Still, with the bank stocks trading so poorly ahead of earnings, I hope the expectations were so low that we could get some positive surprises. To some extent, that's exactly what happened. But it wasn't enough to prevent most of these stocks from really rolling over. Rather incredible because, all in all, these were good numbers. Let's go through the big money center, starting with Wells Fargo, which we own for the Chapel Trust. When Wells reported yesterday morning, I have to tell you, they delivered a revenue miss, but it was paired with a two-cent earnings beat off$1.85 basis.

15:50That gave them 13 % earnings growth. That's nice growth for a bank. Their net interest income came in a tad late, as did their non-interest income. Could have been worse, though. Well, so it's net interest margin. What they make off the difference between the interest they pay you for deposits and the interest they charge you for loans actually stabilized and came in slightly higher than expected. That's a really good sign. I've been waiting for this to happen. These guys had missed the net interest margin estimates for nine of the past 10 quarters. They said this number would stabilize and that's what they delivered.

16:17I think that was very positive. What else? Well, so some good numbers from a small but growing investment banking division. They're taking share in equity capital markets, although their trading business took a hit and their wealth management unit came up a bit short. That's it. Well, it continues to perform well on the cost control front. It's efficiency ratio, which it's that's cost divided by revenues, came in at 63 percent, down from 65 percent a year ago. Keep in mind with the efficiency ratio. Lower is better. Charlie Sharp, the CEO, has really cut the headcount here. This bank is running very well.

16:47In the end, though, the stock still dropped 3 % yesterday because it sure did stabilize today. Tough for Wall Street to forgive that revenue miss, but I think we're getting a viable pullback here, which is why we just upgraded Wells Fargo for the charitable trust. We do rank each stock. If you remember, you know that. CEO Sharf emphasized that his bank is set up to do much better in a higher interest rate environment. And given his track record, I have no choice. I believe him. I've known this man for ages. Next up, let's talk J.P. Morgan, which had an ugly set of headline numbers. Clear top and bottom line miss.

17:16Even though their net interest income came in higher than expected, their non-interest income disappointed. There's so many line items in these banks, thanks to a big miss in fixed income trading. Also a miss in their asset management business. That surprised me. On top of that, their non-interest expenses rose faster than their revenue, hence the big earning shortfall. Now, initially, the stock reacted exactly to that, and it dropped in pre-market trading. But it began to firm up once the conference call. stock started going. There were two big takeaways from the call. First, J.P. Morgan offered a positive outlook for net interest income in both the current quarter and in 2027.

17:50That was shocking. Shockingly positive. And I also regard that as the single most important metric. Second, CEO Jamie Dimon didn't hit us with his usual dose of doom and gloom. For once, the conference call wasn't a minefield. It was a beautiful thing. I felt great after it. So after the call, the stock was trading much better. J.P. Morgan actually opened up more than 5 percent, yes,$5 yesterday, before quickly pulling back and finishing the session down just 0.9%, a loss that was totally erased with today's bounce. Overall, the quarter wasn't much of a needle mover for the world's largest bank.

18:18The results are mixed, but investors seem to get over it quickly once they heard that more positive commentary on the conference call. Even if the if the president is not so hot for Jake Morgan, the intermediate term future is looking bright. That one's a winner. The third and final money center to report yesterday was Citigroup, which has been rallying like crazy for the last three years. thanks to the incredible turnaround orchestrated by CEO Jane Frazier, universally liked. Unlike Wells or J.P. Morgan, Citi posted a clean-top monologue beat, with earnings up 27 % year-over-year, even when you exclude a major one-time item from last year's numbers.

18:50Now, it first looked like another workmanlike quarter from the ever-improving Citi. That interest income exceeded expectations, but non-interest income missed, in part because of softness in investment banking. Overall, though, this was Citi's best third-quarter revenue result in a decade, And the company also raises full-year net interest income guidance from the 5 % to 6 % range up to the mid-to-high 6 % range. By the way, this was the only bank to beat expectations with their fixed-income trading business. It seemed good to me. But after opening flattish yesterday and then briefly trading higher, the stock took a turn for the worse, only finishing the session down 5.6%.

19:26The stock was cascading down a lot of times. It was worth performing the group. The stock got hit again, down 1.8%. Now, honestly, I cannot give you a good reason for that decline. While the quarter wasn't perfect, it was quite a bit better than J.P. Morgan Wells. My suspicion is this. Citi's stock was punished for its recent outperformance. Before yesterday's beatdown, it was running circles around the rest of the group. But if you believe in the turnaround, as I do, this is a buying opportunity. Finally this morning, really odd. We heard from Bank of America right after the Treasury Department hit them with a$1.2 billion fine last night for allegedly violating anti-money laundering laws.

20:00They did a settlement. And you know what? The quarter didn't know. Bank of America posted a clear top and bottom line miss, with earnings down 13 % year over year. Even if you exclude that regulatory panel, their numbers, they disappointed. Both that interest income and non-interest income missed expectations. Bank of America's investment banking business saw its fees fall 11%, sales and trading down 5%, fixed income currencies and commodities trading down 17%. Just not a good quarter. Influential Wells Fargo banks analyst Mike Mayo called Bank of America's capital markets results easily worst in class.

20:32That was mean. Bank of America management stressed that its core Main Street banking business is performing well. I agree with that. Pots up 2 percent, average loans and leases up 6 percent, growth across every business segment. Unfortunately, those arguments fell on deaf ears. Between the fine last night and that which really was ugly to do with the same day as earnings, lukewarm numbers from this morning, they were not happy. And the stock tumbled nearly 5 percent. Now, look, it's not all bad news. This stock traded as low as$49.25 before finishing at$51.30. That was down$2.57. The recovery was quite strong.

21:04The bottom line, so far this has been a rough earning season for the big money center banks. Even the ones that did well saw their stocks get hit. That's very odd, very rare, very bad. Stick around after the break. I'm going to get into the major investment bank. Coming up, Kramer's moving on to recap the major investment bank earnings and the reaction to them next. Next.

21:55Only at Whole Foods Market.

22:27With a good source of protein, Quaker protein products offer a variety of delicious flavors and options from breakfast time to snack time. Think about it. You shower, get dressed, head out to drop off the kids, log on to meetings, follow up after meetings, hit the gym, pick up the kids, and you realize it's already time for dinner. From oatmeal and granola to bars and rice snacks, Quaker protein products have options for the whole family. Get your protein with Quaker. Fuel to start whatever's next. Available at a store near you.

23:24markets activity, as well as asset and wealth management. We saw with the money centers that investment banking divisions have struggled. So how about Goldman? How about Morgan Stanley? Let's take them in chronological order. Yesterday morning, Goldman Sachs reported this is a stock we own for the Chapel House have for ages, and it pulled back dramatically after its last quarter of July, sinking from$1 ,154 at its high to just under$894 before it reported. Even with a slowdown in M &A and the IPO market and the whispers about weaker trading activity in the third quarter, which turned out to be true, basically, for all the Wall Street banks.

23:55I was so optimistic that Goldman could put up strong numbers. I told you that. And I thought it could reignite some enthusiasm for its stock. Well, it's half right. Goldman did put up some excellent numbers. They put in a monster top and bottom line beat. $18.68 billion in revenue. Wall Street was only looking for$16.71 billion. And nearly$4 per share beat off of a$13 basis. I mean, we're talking 23 percent revenue growth, 39 percent earnings growth. In terms of revenue, this was Goldman's second best quarter ever, behind only the previous quarter when they made a fortune leading the SpaceX deal.

24:27Goldman's stalwart of global banking and markets division had a terrific quarter. Revenue up 32 percent year over year. Investment banking fees were up 21 percent. Equities revenue surged 72 percent year over year. The only disappointment was fixed income currencies and commodities trading, known as FIC, which was roughly flat year over year. came in a couple hundred million dollars short of expectations. Like I mentioned before the break, fixed income currencies and commodities were a problem for everyone this quarter. Now, I did think there'd be enough trading and hedging to pull off an upside surprise for Goldman.

24:55It didn't happen. Goldman's smaller asset and wealth management division, the one that I worked at, also posted strong results with a 14 percent revenue growth year over year, nicely ahead of expectations. While this is only 27 percent of the business, it's much steadier than the investment banking side, which is insanely volatile. Even though that business had tremendous 32 % growth year over year, it was still down 13 % from the previous quarter. Mostly again because of the SpaceX IPO. But asset and wealth management has nice and stable growth. It was up 10 % from the previous quarter. Expenses didn't seem to be a problem at all.

25:25Goldman's efficiency ratio was 59.4%. When analysts expected something closer to 65%, please remember, lower is better when it comes to that. That helped fuel the massive earnings beat. And on the conference call, management sounded incredibly positive. with CEO David Solomon dedicating much of his prepared remarks to the importance of AI, specifically all the financing opportunities Goldman's seeing from the AI infrastructure build out. CFO Dennis Coleman added that Goldman's, quote, investment banking backlog remains very robust, end quote, which is good to hear with all the worries about the slowdown in IPOs and mergers.

25:56So this was a great quarter. At first, that's how the stock reacted. It opened up more than 3 percent yesterday. But ultimately, like JP Morgan and Goldman couldn't hold into the gains. Stock ended yesterday down. That shocked me. 0.2%. Then it fell another 1.5 % today. For me, this is straightforward. I think the market is dead wrong. And that's why my charitable trust upgraded Goldman Sachs to a 1 yesterday, that is a 2, basically a buy. And we said we'd be happily to be buyers at this level. However, when a company reports to strong numbers and stock gets slammed anyway, that tells you there are a lot of skeptics out there.

26:27They think the boom times are over. I do not agree. But that's the market's verdict at least for the moment. Almost every time since Goldman came public, my charitable trust has bought stocks on dips exactly like this when nothing's changed. I'm going to do it again. Finally, there's Morgan Stanley, which dipped 1.8 % yesterday in sympathy with the other banks, and then tumbled another 2.8 % today if you're reported. Now, this was a case where the numbers were good, but not good enough to help the stock. Morgan Stanley's revenue grew 12 % year-over-year and beat expectations. The institutional security segment, which is what they call investment banking, combined with sales and trading, put up 18 % revenue growth.

26:59That's well above expectations. As with Goldman, equities trading was strong. All right, fixed income, I told you. missed expectations. Morgan Stanley is mainly a wealth and asset manager these days and a real good one. Their wealth management revenue grew 10 percent, coming in ahead of expectations. And while investment management fell 12 percent, it still was slightly ahead of what Wall Street was looking for. Across wealth and investment management, total client assets grew to $10.5 trillion. In a terrific interview with CNBC's Leslie Picker today, Morgan Stanley CEO Ted Pick also told us that he's, quote, cautiously optimistic about the fourth quarter, end quote.

27:31And I certainly hope So they're the lead underwriter for the Anthropic IPO. That's supposed to come in November. It could be the largest deal in history. But again, apparently none of that was good enough to get buyers excited. So the stock rolled over today. Now, in the end, I think investors are on the edge in this earnings season. It's just much harder for these banks to make a good impression. After these past two days, five of the big banks are lower. JP Morgan only up fractionally. Every other bank stock fell somewhere between 2 % and 7%. Three of them are now negative for the year, including Goldman, which just reported an all-time, an amazing quarter.

28:02Frankly, it's strange to see such university negative reactions to a set of quarters that contain plenty of positives. But this is what happens when investors are worried about the future. And it's hard not to worry with persistent inflation, rising interest rates, and newly wobbly capital markets. We might have to expect some equity issuance for some of these neocloud types. Maybe that will help the quarter. I don't know. If we can get some kind of resolution to the award in Iran, even a bad resolution, that should allow inflation to cool, give the Fed some breathing room to back off on its rate hikes.

28:30I think the capital markets would bounce right back. That's why I'm feeling more bullish on Wells and Goldman Sachs for the Travel Trust. Tomorrow's club meeting, you'll hear more. But the bottom line is, man, it's not easy to own these bank stocks right now, even the ones that reported strong quarters. The group is confounding, maybe perhaps because it isn't a group anymore, as each has now such different characteristics that I think it's fair to say no two are alike. Let's take some calls. Let's go after Jim in Wyoming. me, Jim. Oh, thank you, Jim. Thank you for taking my call. Oh, thanks, Jim.

29:02Thanks for calling. How can I help? Well, I also want to thank you for your hard work and for your excellent advice. Earlier this year, Enrique Lawrence resigned as the chief executive of Hewlett Packard to become the chief executive of PayPal. I wonder what your thoughts are on PayPal. OK, well, I've not been a big fan of PayPal. I like what Enrique might be doing there, but my problem is it sells at 10 times earnings, and I'd rather buy a Goldman Sachs that it's just a little bit more of a premium than that. I just think that PayPal is too limited. You're really hoping for a takeout, and I don't like to buy stocks just with the idea that maybe they get a takeover.

29:40Thank you for your kind words. They energize me on a very tough day. It's strange to see such negative reactions. Pretty good bank earnings, but that's what happens when investors worry about the future. Watch for me at Bunnyhead, including my exclusive work day after Strong Analyst Day. Then software is back in fashion and warfing while AI takes off the toll on hardware. I think we're seeing a big reset in this market. I'm going to explain. And, of course, later calls rapid fire. It's a nice little while. Anyway, this is David Kram.

30:13The software as a service apocalypse has come and gone. And now the best of these enterprise software stocks have spent months rebounding from their lows. Take Workday, the cloud software company that helps businesses with human capital management and financial planning. After a beatdown in 2025 or earlier this year, the stock's now rebounded 71 % from its April lows, including a major move this August. After we heard there might be a takeover interest from the private equity guys at Silver Lake, because the business got better. Quite the comeback. At the end of August, Workday reported a terrific quarter, and the stock rallied almost 6 % the next day.

30:44This pulled back a bit in recent weeks. Could be an opportunity. Yesterday, the company held an analyst day where they laid out their AI strategy and reaffirmed their financial targets. That includes Workday's partnership with Anthropic, which actually already uses Workday's software for their own HR finance operations. How did anyone ever believe Claude would make this company obsolete? Now, Workday will be able to integrate its AI agents into Claude. They're also acquiring C1AI, which manages what employees and AI agents can access across business systems. I think that's important. So can Workday pull this off?

31:14Let's check in with Anil Bushmead, the co-founder, chair and CEO of Muerte, and I should say an old friend of Mad Money. Mr. Bushmead, welcome back to Mad Money. Thank you, Jim. It's been a few years. It's great to be back with you. Well, it's terrific to see you. And I have to tell you, as I read through your excellent presentation, that I did feel like it is a refounding to have you back. And if you could kind of explain what a refounding means, I think our viewers would know why I think both of us are very excited about your coven. Well, you know, the cloud was in its 20th year of development and AI shows up.

31:52And when a new technology shows up, you need to think like a startup. You need to act like a startup. You need to organize like a startup. And it effectively became a refounding moment. And along the way, I thought, well, I haven't been CEO for three years. Is there a playbook on what to do when I go back? And I watched, I don't know how many countless Steve Jobs videos on Instagram. And he was a product genius. He was also a management genius. And he talked about making Apple the biggest startup in the world. And that's the playbook we're using. Well, when I look at what you're doing, it comes at a good time.

32:27Because, frankly, we heard that enterprise software might be obsolete. But when I look at all the things that you've put together, actually, enterprise software is kind of uniquely ready to be AI. as opposed to other companies that are a little bit more on the pretender side. Talk about how easily it actually fit into what you're doing. Well, so the way that the software industry has worked, there's been a replacement cycle. We went from mainframe to client server to cloud. AI is not the next. AI is built on top of cloud. I think that's a subtlety that many people miss. And what does cloud have?

33:05Cloud has a very simple data model. We have every customer on one version of the software. We have aggregated data across 80 million employees. That data and that one version of the software lets us train the models to produce amazing AI agents that make business better, automate, make better decisions, all the like. And you can't really build those great AI agents unless you have a really solid enterprise software foundation, especially in HR and finance. Well, I think it's a good time to mention one because you're always filled with specifics that make people understand that it's not smoke and mirrors.

33:45You have 7-Eleven talking about cutting hiring time by 70 percent using your AI. I mean, to me, that's false right to the bottom line. Exactly. And that's what AI can do. And there's the talk about whether it's AI versus traditional software. It's AI plus traditional software. It's deterministic and probabilistic. Applications like ours, we have a start of a payroll process. We have an end of a payroll process. You have to get it right 100 % of the time, and the process doesn't change. But can you help the process along by using AI to speed it up and make decisions along the way? Absolutely. So our vision is that the world of the future is a marriage of deterministic and probabilistic AI and the cloud applications that we built.

34:36The 7-Eleven example is one really great example of how that is coming to pass. Three months ago, we asked our sales team to say, let's get one million users up and running on our self-service agent, which is basically our front door to all of our applications based on this incredible technology called SANA that we acquired about a year ago. And so we have our own UI built in AI that many companies don't have. And in three months, we have a million users using it out of 80 million. So we're still in the early days. And Accenture and BMO are two of those users, and they're live and happy. So I think it's a really good sign that customers are adopting AI in front of Workday and being successful.

35:26Okay, let me dive into those. SANA concierge, SANA coach, who uses them? What do they do? Well, SANA concierge is basically your employee help desk. You've got a question. You want to get some piece of work done. You might want to promote somebody. You might want to give them a bonus. You might want to sign up for travel. You might want to look at your business plan. You can almost ask it any business question you want. And instead of going through multiple layers of the system, it goes directly to where you get the work done. And so it's an AI-driven front end that is built by this incredible guy, Joel Hellmark, who is the founder of Sauna.

36:09Now he's our chief AI officer. He's honestly a generational talent. And every customer gets it. I want that user experience. I want it. I want it now, and that's why it's being embraced on such a broad pace and so quickly, faster than I honestly would have expected. Okay, I want to talk about irony for a second, which is that Anthropic and the customer experience in Sinai, I mean, one of the things that was supposed to happen was they were supposed to wipe you out. I don't know where that came from, honestly, because I said, you know, like, wipe them out. I mean, I think this thing together, melded together with the work they was doing is unstoppable.

36:44But talk to me about Anthropic, because, you know, if Anthropic was supposed to be the enemy, it sure doesn't look like they're acting like that. No, they're they're a wonderful partner, as is OpenAI, as is Google. We work with all the model companies. And at the end of the day, what they do is some ways it's magic. Right. The reasoning engines, the abilities they have are amazing, but they're probabilistic. They're trying to predict the future. Our applications have to execute the future, right? You've got to execute a payroll. You've got to close the books. You've got to finish a financial audit.

37:21So the power of the two together is amazing. And that's what we're proving out with Anthropic, with OpenAI, with Google, maybe down the road with Muse. Who knows? But they're all amazing companies, and we feel lucky to work with them. Very excited about the Anthropic announcements and the OpenAI announcement we did around recruiting. Well, let me be probabilistic and deterministic, too. I don't see any reason why you would necessarily have to succumb to a silver-like takeover bid or even stake. You guys have plenty of cash. You're doing incredibly strong. Can we just put a spike in that and just say that this is Workday being refounded?

37:55Let's see how it runs. Yeah, well, you know I can't comment on that, especially on your show. All I would say is that I came back for the long run. And when the stock was at 110, so, yeah, I was really annoyed when it was at 110. And do we explore all alternatives? Yes. I would just leave it there. It wouldn't be succumb. It would be, was there a different way for Workday to be when it was 110? I was looking at all options on the table. Okay, that's fair. That's fair. You don't have to do my job. You have to do your job. All right, then here's some of your job. C1.ai. Why would I want that to be involved with Workday?

38:40So if you look at how identity gets provisioned, it all starts with the HR system. A company might have multiple identity systems. They have one HR system. The source of identity is HR. Who works for who? Who's an employee? Who's not an employee? Where they fit in the organization? All of those are credentialized by the HR system. It's always been a natural extension for us. And we have an agent system of record that manages agents the way we manage employees. So we thought a natural next move is to help our customers do the same with the agents, give them governance around those agents, give them permissions coming out of the HR system and basically helping to secure agents and humans with provisions and permissions that they get.

39:31It's a natural extension out of HR. It sure is. I hope that everybody hears you, because instead of just mindlessly talking about guardrails, it says they've got a real service going. Well, look, Neil, I'm really glad to see you again. You've made a lot of money for people, and you're just a good guy. And I'm really glad you're back running Workday, OK? Well, right back at you, Jim. It's good to see you. Thank you. That's Neil Bushby, co-founder and chair and CEO of Workday, WDAY. And like I said, old friend of the show, I play with an open hand. Mad Money's back after the break. Coming up, he's the fastest mind on Wall Street, so we're putting him to the test with your help.

40:06Bring on the lightning round next.

40:16It is time. It's time for the lightning round. It's time for the lightning round. My staff prepares to grab a silver fly. You play in the sound. And then the lightning round is over. Are you ready? Skiing day. Let's start with Michael, New Jersey. Michael. Booyah, Jim. The world's short power. The world's short power. Demand's growing nearly 10 % a year, and not just from AI. Nuclear runs over 90 % of the time, 24-7 power AI needs. X Energy has plenty of cash, 900 employees, more than Oklo, New Scale, and Nano combined. A DOE-backed project with Dow, and Amazon owns 16%. So is that the buy? No, it's losing too much money.

41:02And since the rates started rising and the Fed started rising, I do not recommend companies that lose money because I will end up losing money for you. And then I wake up each morning and say, why did I take this job? Let's go to Stephen in Florida. Stephen. Hi, Jim. I'm a longtime listener, a member of the Investing Club, and my stock today is McKesson Corporation. McKesson's a winner. I wish it is a middleman, but it is a winner. The stock is going to go much higher. It is exactly what you buy in this environment. Let's go to Bill in Massachusetts. Bill. Hi, Jimmy. I have a small cap here in physical AI that I've been looking at.

41:36They have an excellent balance sheet, low debt. It's Visha Group, BPG. Oh, Vachet Precision used to be Vachet Technology, a Philadelphia company. I have to tell you that it's valued too high right now. I wait till it came in, maybe 10%, and then you can buy it. Let's go to Sanjeev in Texas. Sanjeev. Booyah, James. Booyah. I'm looking to put new money into medical devices between Medtronic, MDG, and the newly independent FiniMed, MMED. Which one would you buy today? Oh, that's easy. It's Medtronic. I would buy that one. The other one, I think it's a little bit more commodity. 15 times earnings for Medtronic.

42:16I think the stock is right here. It's weathered a time in the 80s, and now it's going to start going up. Let's go to John in New York. John. Jimmy, booyah. Good evening. How are you? I'm doing well. How about you? I'm very well. Thank you. I have a position that I've had for a while and it's been doing great. And with everything that's going on with AI, I want to know what you think of where it's going. Cypher. Which one? Cypher. No, you can't own Cypher. It's losing a ton of money. I mean, the reason why it's going down is because it should be going down. That's kind of But the conundrum of this market, the only thing I'm really more worried about are the bonds of these companies.

42:56That's what I'm really concerned about. There's been way too many issues. And I am determined to try to get to the bottom of what's going on in the bond market with these new issues. And that, ladies and gentlemen, conclusion of the Lightning Round. The Lightning Round is sponsored by Charles Schwab. Coming up with the markets in motion, Kramer's returning to his guiding principle to try to explain why stocks are rising or falling. Next.

43:32Sometimes it's as simple as thinking about what people will pay for a given stock and what they won't pay for because it's too expensive or the prospects aren't even as bright as most investors think. You can see this most dramatically in the stocks in the technology sector, which is the largest segment in the S &P 500. Specifically, I'm talking about the contrast between hardware and software and the price earnings multiples. We will pay for them. The thesis for more than a year was simple. AI represents a new industrial revolution. So we're going to pay more for the stocks that helped that revolution along and pay less for the stocks that are standing around doing nothing.

44:05That's why we went wild with memory plays, Seagate. They're essential for the data center. We decided to raise the price earnings multiple for stocks like Micron, which is a chronically low valuation stock. Remember, in How to Make Money in Any Market, I explained the importance of the PE multiple, which isn't talked about enough, and why people will pay more for one stock than another. Oh, we were paying more for Dell because you needed Dell's servers to integrate NVIDIA hardware into your organization. And we recognized that a stock like AMD deserved a premium multiple because it had both GPUs and CPUs, which would be the beating hearts of AI and agentic AI, respectively.

44:40And that's how Dell could go from 110 in January to 595 at its highest last month. That's how AMD could go from$188 in March to$658 by last week. Now we're finding that maybe these moves were too big too fast. While hardware was roaring, Wall Street decided that enterprise software would be turned to roadkill under the wheels of Claude and ChatGPT. Who needed Viva Systems, which had the leading software platform for clinical trials, when it was doomed to be displaced by Claude, right? So a$300 stock, it's cut in half. Same thing happened to Surface Now. Everyone assumed it would be rendered obsolete by ChatGPT.

45:12The stock goes from 193 to 81. Nothing was rougher to watch than Salesforce with a per-seat business model that seemed to ignore AI. So that stock finishes last year at$264. Then it goes all the way down to$160s six months later. And we just covered workday. Stock went from$247 to$110 to six months. But that whole dynamic disappeared and has switched ever since the summer. We decided suddenly that we were paying too much for that hardware and too little for that software. So we've begun to savage the semis like SK Highness. The largest memory chip company which dominates the Korean exchange and has now come to dominate our own since it was here.

45:53The earnings aren't being crushed. In fact, semiconductor capital equipment maker ASML reported Fantastica last night, yet its stock was down. Slam! The memory chip companies are all raising estimates, but we're paying less for those estimates. The P.E. multiples are being crushed. PE compression explains this move, not earnings. And the enterprise software companies, from work data, salesforce, service now, they've become more involved in AI with a heavy endorsement from the likes of OpenAI and Anthropik itself. Now we're willing to pay much more for their earnings. No analysts have raised numbers for these enterprise software companies, at least not yet.

46:26So the question is, do you need to sell hardware? Can you still buy the enterprise software stocks? Have the semis with their ever-rising prices peak? Is Dell really done? I think we're seeing a reset and one that simply can't be gamed. I'm going over my travel shows holdings tonight and looking where there could be more rounds of multiple contraction and multiple expansion. My take, too early to call bottom in hardware. Moves are too violent. But in the end, you will need the hardware to build data centers. All this stuff remains in short supply. The enterprise software companies, they can keep going higher because their stocks never should have been so low in the first place.

46:56They want to enjoy the multiple expansion after a year where we expected these companies to be destroyed by AI. It never came to pass. And with the changes they're making, it never will. I like to say there's always a bull market somewhere. I promise I'll find it just for you. Radio Money, I'm Jim Cramer. See you tomorrow.

47:35CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Mad Money disclaimer, please visit CNBC.com forward slash Mad Money disclaimer.

47:49Oh, look, you just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode.