×

Cramer Remix: The damage German 10-year bonds could do to your portfolio

As Germany issued 10-year bonds with negative yield for the first time in history on Wednesday, Jim Cramer had a word of caution for Wall Street.

"The German 10-year right now with its eyesore of a negative yield is therefore the WORST that money can buy. Whoever is pushing this lunatic piece of paper to people and whoever is buying them are making a huge mistake," the "Mad Money" host said.

Approximately 33 percent of all government bonds worldwide now have negative yields, according to The Wall Street Journal. In other words, investors that hold these bonds until maturity will lose money.

Cramer heard many investors use politics as an explanation, stating that negative rates reflect a failed tyranny of the European Union, or that Germany should be borrowing interest-free money to finance projects that could put people to work.

"Forget the politics. A bad investment is a bad investment," Cramer said.

Brokers at the German Stock Exchange in Frankfurt, Germany.
Daniel Roland | AFP | GettyImages
Brokers at the German Stock Exchange in Frankfurt, Germany.

Cramer has a message for investors that believe current stock prices are unjustified: stop wasting his time. Earnings season kicked off with a bang this week, and Cramer liked what he heard from Alcoa, United Continental and Delta.

"At a certain point the anecdotal evidence piles up until it's empirical, and I think these earnings reports potentially justify these prices," Cramer said.

Central banks around the world attempted to debase their currencies in order to boost exports. As government bond yields around the world are hitting historic lows, the scarcity of U.S. bonds and prices being bid up create lower rates for the U.S.

This influx of assets coming to the U.S. are what is keeping rates low and makes dividend yields in stocks much more attractive. Thus, many investors believe there is an unnatural floor supporting the market. While Cramer noted that it does support the argument that stocks don't deserve to trade at current levels, he dismissed the theory.

Health care stocks didn't do much for the first half of 2016, but Cramer is ready for them to go into bull mode for the rest of the year.

Many investors fled the faster growth pharmaceutical and biotech names, and the best performing health care stocks of the first half were medical device plays.

"I think these patterns will continue through the second half, with winners staying winners all the way," Cramer said.

The health care cohort was down 0.4 percent in the first half. This was partly due to companies taking the heat for higher drug prices as highlighted by Hillary Clinton last fall. Valeant and the dissolved merger between Pfizer and Allergan also contributed.

HMOs, hospitals, laboratory service plays and medical device makers were all pockets of strength, which offset the weakness.

Man sitting in pile of money
John Lund | Getty Images

One group that has struggled this year is the retail stocks, thanks to the so-called death of the shopping mall.

Yet, at a time when mall-based retailers are in pain, Cramer was puzzled by the strength of Federal Realty. The real estate investment trust owns more than 100 shopping center properties in the most crowded areas in the U.S.

Cramer speculated that it could be because REITs have been gaining strength due to their large yields. To learn more, he spoke with the company's CEO Don Wood, who explained the evolution of technology changing the way consumers live and shop.

"It's not just shopping … people want to live in a convenient place, work in a convenient place, be able to not be involved in lots of traffic. They want to be able to experience life … the bottom line is, that level of convenience and that level of service means we all have to bring up our game," Wood said.


In the Lightning Round, Cramer gave his take on a few caller favorite stocks:

Johnson Controls: "No! That merger with Tyco is a buy, buy, buy, buy. I love it."

Rite Aid: "I am worried that Walgreens is not going to be able to close that deal with Rite Aid because of the FTC. That's why that spread is so big. I would be very careful."