Cramer: Harvey's Not an Issue for the Markets, the iPhone Is

 | Aug 28, 2017 | 3:16 PM EDT
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Nobody wants to profiteer off a Hurricane. Loss of life from a natural disaster is what matters. That's unequivocal. But events like Harvey, where there's tremendous property damage and a huge need to rebuild, do spur economic development, something that's not worth thinking about now, but will be the case in just a few weeks when the water recedes and the danger passes.

The market itself, however, tends not to respond to natural disasters of any magnitude, hence the placid nature of today's averages. And while there will be a massive rebuild of the damaged property that will require a great deal of federal money as well as insurance, it's not enough to impact our day to day. I offered some specific positives and negative investing concerns related directly to Houston earlier today, but when we talk about what are the themes of today's trading, Harvey's not one of them.

Instead we have some very specific data points that colored today's trading, the biggest being word that Apple (AAPL) may be launching its new phone as soon as September 12, far ahead of what had been the chatter on the street.

That news propelled the stock of the biggest company in the world as it rallied more than $1.60 and sent many tech followers to wondering what would be the impact on the entire Apple system.

First, let's get one thing straight. Do not overthink the winner in this new iPhone iteration. It's Apple. The stock has almost always run into a new phone and I don't expect this time to be any different. Apple's stock is just pennies away from a new high and stocks, in this market, tend to spurt higher if they do take out those levels.

You know me. I believe that you should not trade the stock of Apple you should just own it. That said, trader alert, CNBC's Becky Quick will be interviewing Warren Buffett, the Oracle of Omaha, and he's a gigantic holder of the stock. Buffett regards Apple as the creator of the greatest consumer product of all time and he struggles to understand why investors give it such a discount to other consumer product companies. I suspect he will forcefully reiterate that it would be worth a few points even without the new phone. Now I think it will stoke the enthusiasm even more than you would otherwise expect.

The odd thing about the news of the September 12 launch is how subdued the suppliers to Apple are. Micron (MU) , which makes simple memory chips, gained almost three percent and that makes sense because the kinds of components it makes are in short supply. Similarly, Lam Research (LRCX) , which makes the equipment needed for Micron to make its own chips, continues its halting advance after being clobbered following a very strong quarter.

However, Cirrus Logic (CRUS) , the maker of the chips behind the amazing sound of the phones barely budged. Skyworks Solutions (SWKS) and Broadcom (AVGO) saw their stocks actually fall. I think that's wrong and an opportunity.

Let me specifically spell out the possibilities for Broadcom, which has the most intellectual property in the iPhone of all suppliers.

Last Thursday Broadcom reported after the close and while it beat all projections, it failed to raise its forecast and was rather opaque in future prognostications for its own business. I think this was by design. Broadcom's management knows the rules for talking about Apple as a client. It's like the Fight Club, the first rule of Apple is that you do not talk about Apple. Given that we are at the eve of a new launch I believe that had Broadcom raised its forecast commensurate with what Apple expects as a possible sell-through it would be violating that first rule.

Therefore I think the whole sturm and drang about the quarter, which caused the stock to shed about a dozen points, was incorrect. As is often the case when selling is this heavy, the Friday dumpers were back today even though we have this new Apple news. To me that's just a mistake to sell. And it is a clarion call to buy if you don't own it already, something we told club members of today. Broadcom is an amazing company and its stock is just too cheap if it is about to ramp up for a new Apple cycle.

What's most odd about the Apple news is that, once again, it triggered a rally in FANG, my acronym for Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Google now Alphabet (GOOGL) .

There's no new news about Facebook, but the news flow Amazon is endless. The stock had been going down because of a perception that it is going to use Whole Foods as a loss leader now that it has completed that acquisition. In truth, Whole Foods had the most profitability of any retailer as measured by square footage so there's ample room for price concessions.

Nevertheless Amazon's stock rallied today and let me give you my theory why. After every different weather-related situation that makes people homebound, there's been a big spur in Amazon sales. I think that this time, with Houston it will be even bigger. What tends to happen is that while many peoples' lives in the area can return to normal, the infrastructure, especially the retail infrastructure isn't back to normal.

That's caused a gigantic rush to Amazon and a lot more online shopping. You can see that theory coming to life with the stock, which at last reversed after a huge downturn as well as a move up in Federal Express   (FDX) and UPS (UPS) , which will also benefit.

There's nothing new at Netflix to explain the advance, no more at least than the animal spirits powering Facebook's stock. But these are frequent fellow travelers with Apple of late. The lone disappointer? Alphabet, with a stock that has struggled mightily of late for no apparent reason.

The other driver of stocks? The stunning bid by Gilead (GILD) for Kite Pharmaceuticals (KITE) , one of several Car-T companies working to actually cure cancer by triggering your own cells to fight the disease. Gilead spent $11.9 billion to acquire Kite and I am sure some of you are wondering how it is possible that the stock of Gilead can advance on a deal where it is acquiring a company that is a gigantic money loser. The answer? For several years Gilead had sat on a considerable cash hoard generated by its Hepatitis C cure. As long as it did nothing with the money the stock was stagnant. Now it is finally advancing and I don't think that advance is done.

Last week I talked about the coming consolidation in drug stocks and it looks like the process has now begun. I don't have a list of what could be acquired. I do recognize that there are far too many companies that need to find ways both to come up with new drugs and cut costs: that's what happens when you merge with another pharmaceutical company hence the surge in all biotechs. I think the possibility of many of these getting a bid is fanciful. However there are plenty of reasons why one company could merge with another and I favor the group.

So, while Harvey dominates the world news, takeovers and an iPhone launch explain a lot more of today's gyrations than the storm of the decade. I am sure when we get another round of rain as is forecasted, the ideas I outlined elsewhere will gain adherents. But the most important financial events aren't triggered by the catastrophe. It's a new launch by Apple and a takeout, that really matter.

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