When the facts change, I have to change my mind, lest be caught in some sort of homegrown dogma that will hurt us all. That’s how I feel about a phrase that has withstood all sorts of markets but I fear may have finally lost its usefulness: “own it, don’t trade it.” Those of you who read my Sunday column know that to ignore the actions of President Donald Trump , who has become determined to stop globalism and put an embargo around China, is to cost us money. That’s why I said that I could no longer endorse an “own, don’t trade” stance on either Nvidia or Apple, and I told you that you needed to sell some even as I couldn’t for the Club because our trade restrictions, which are detailed at the bottom of all of our stories. On Tuesday night, after having developed a rapport with the White House, Nvidia revealed in a securities filing a $5.5 billion inventory charge as it bowed to a new licensing requirements that will block sale of its dumbed-down China-specific H20 chip. That was the one that was thought to be safe enough to export to Chinese customers both militarily and technologically. Now, if you didn’t know better, you would say that’s impossible given the cadence of events: the embrace of Nvidia’s chips and their exemption from other kinds of tariffs as well as commitments of support after Nvidia announced a commitment to produce up to $500 billion of AI infrastructure in the U.S. through partnerships within the next four years. You would presume goodwill, correct? That assumption would have been wrong. You would have assumed that all of the news would come out at once so you could make an informed judgment. That presumption would also be wrong. There is no such thing as “buying goodwill” from the Trump administration when it comes to China. I have to presume that Apple will be next to be whacked and that stay of execution late Friday — when guidance went out on “reciprocal” tariff exemption for certain electronics, including smartphones and semiconductors — was little more than a short stay and Apple could be walking the “Green Mile” any day now. So, you ask yourself in this environment, is it wise to continue to embrace a shibboleth that puts you at odds with what you see and know, which is to say that our government does not want companies to do business in China? There are a lot of other countries than China, and this government is saying go do business with them. For its part, China is fighting back. Apple and Nvidia are not the only ones being hurt by China exposure. We owned Estee Lauder, a once-tremendous cosmetics and skin care company, that got shredded when China clamped down on expensive goods. Brutal beatdown. We owned GE Healthcare and managed to eke out a nice profit on all but our last sale. But then, China sanctioned its machines. We own DuPont, a terrific breakup candidate until the Chinese government criticized it and destroyed a huge chunk of value. Then there’s Danaher, the worst of all, which has been brutalized by a lack of Chinese biotech offerings. Did it matter that these were great companies, too, albeit not as good as Apple and Nvidia? No. Not at all. We should have obeyed a corollary, “Got China: Sell it, don’t trade it.” And, that’s where we find ourselves now. What’s really going on here? And how can we deal with it better? Believe me, I have thought a lot about it. I have come to believe that the most important point, top of the agenda of the Trump administration, is to wean us off of globalism and stop free trade in favor of fair trade. This is an incredible turn from the 2016 Trump when my old pal and partner Larry Kudlow was the chief economic advisor to the president. In our “Kudlow & Cramer” days on CNBC, even as I was meant to be “the liberal” and Larry “the conservative,” I embraced “fair trade” while Larry was a stalwart “free trade.” To me, one meant highway robbery and the other meant equal pain, equal pleasure. Larry is not in this White House. He is not there to counterbalance current Commerce Secretary Howard Lutnick or trade advisor Peter Navarro. One of the most important books I have ever read is called “Death by China: Confronting the Dragon,” which Navarro wrote a dozen years ago. It’s about how this country that we compete with is actually no better than the old Soviet Union, maybe worse, because it has co-opted us. He has convinced Trump that companies like Apple are aiding and abetting the enemy. Navarro does not care for talk about the stock market. He has his view, and the president is dependent on it, and on that of Lutnick, although the latter is more cognizant of the world of stocks. In that world, where Navarro has pledged everything to Trump, witness his willingness to go to prison for him, the president is going to go with Navarro. I am furious at myself that I both know it and refused to change my mind, even as John Maynard Keynes, the great economist, reminds us that when the facts change, you must change, too. If I ignore that, I am not a portfolio manager, I am a cheerleader. It’s brutal and Jeff Marks, my righthand as director of portfolio analysis for the Club, and I have no intention of taking all of Apple and Nvidia off the sheets, a Wall Street way of saying kick out of the portfolio. For all I know, the president tomorrow will say that he’s reconsidered his stance. But go back to Monday’s Morning Meeting when I said that these two stocks are “renting too much of my brain.” Am I missing McKesson because I am focusing on Nvidia? Did I overlook United Healthcare because of Apple? I don’t know the answers. But I have lost more sleep on Apple and Nvidia than any two stocks in my life. And, the only solution is to make them smaller before they become smaller themselves. Worse, these two have become crutches. They have kept me from finding good domestic companies that fit this market better. Given that Trump’s term is in its infancy, waiting for something to happen to change things seems foolish. I made the call during our April Monthly Meeting on Wednesday. Watch the full replay below. (See here a full list of the stocks in Jim Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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CEO of Nvidia, Jensen Huang and CEO of Apple Inc., Tim Cook.
Ritzau Scanpix | Mads Claus Rasmussen | Reuters | David Paul Morris | Bloomberg | Getty Images
When the facts change, I have to change my mind, lest be caught in some sort of homegrown dogma that will hurt us all. That’s how I feel about a phrase that has withstood all sorts of markets but I fear may have finally lost its usefulness: “own it, don’t trade it.”
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