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tv   Mad Money  CNBC  March 20, 2012 6:00pm-7:00pm EDT

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intel for 28.5. >> good clubbing. >> i'm melissa lee. thanks for watching. more fast money . i'm jim cramer, and welcome to my world. >> you need to get in the game. #. >> firms are going to go out of business, and he is nuts. they're nuts. they know nothing. >> there's a bull market somewhere. >> mad money, you can't afford to miss it. >> i'm cramer. welcome to mad money. welcome to cramerica. >> look at what i call the internals, it's noent intimidate
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you into hiring a professional to translate, my jaw drops. as stupid as the market was the last couple of years, it's now become smart, smart about individual stocks. it's as if gufus got a brain transplant. it's as if me like i'm ugly bizzarro and no longer wants to put the heads on a winged victory race. this market is now like bizzarro's opposite, superman. as long as it can stay away from the criptonite, it can go higher. in the fabulous world of d.c. comics, kryptonite not from the planet krypton. it's from china. all we ever heard from the in thisseders so anxious to make themselves sound so smart has been risk on, risk off. i want to throttle these guys. now i say welcome to my world. welcome to the new world. it's usa on, china off. frankly, i like this world a heck of a lot better. i hope you do too.
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how long can we rely on the lex luther, the communist party that rules the people's republic of china? what a pleasure it is to see the market actually discern between the stocks that count on china and the ones that count on america. ever since we became a sick economy back in 2007 our market has been relying on chinese growth, but now that the chinese slowing albeit at a decent pace, superman is avoiding companies that need china and embracing stocks that depend on the lead line, united states. i don't think i've ever seen the america on-china off trade as stark as it was today. china has that pneumonia. i don't know. coming down with not even a fever. maybe a sniffle. could be allergies. consider the china side of the equation. let's get the kryptonite off the table before we get to the lead line sectors. approximate cause of today's decline at the opening came out of bhp, australian mining china. that china was slowing faster --
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this huge iron ore flattening of demand and a decline in steel production. is china really slowing more noticeably? is there a more rapid decline? something that will take their economy from 12% growth to 0%. we'll know more later in the show, but sufficed to say that bhp lowers the boom, the china plays are about to get polaxed, and which companies are china first? we have to break out the china stock book, right? oh, look at this. under the self-reliance and adviser with us struggle segment is joy global. yeah. that's a coal mining equipment labor. they won't need all that coal digging machinery. their opening coal play is about one hour -- that's every nanosecond there. that is a real great leap forward for the oxygen. joy goes down $3.44. coal itself is a china hand, so peabody, the big daddy coal company got slaughtered. gave up $1.80, but, you know, that is 5.4%.
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sure enough, under the investigation study section of quotations from the chairman mao, we find peabody. all right. next love of kryptonite, oh, no, under the discipline section. cummins, the truck maker and manufacturer. the whole world uses the company's engines, but the stock only trades off of china. when it's china off, cummins plummets $4.58. the comrade caterpillar said some terrible things about america this morning. they're a quintessential china play. this slammed into a great chinese retaining wall crashing $2.97. how about steel? what do the chinese do when they make too much of something? stupid, they dump it here. if china is slowing, look at new corp. which shed $1, over 2% today -- >> that was easy. >> for the chinese. i could go on and on. you only need to look to the stock of our upcoming guest
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cliff's natural resources, be wild for $1.76, 2.4% decline to know what i mean. was it really that bad there that day, today? i don't know. we'll check in. enough negative dimsum already. this is what happens when china stays in china. today we saw the quintessential america on stocks blossom. the s&p futures were trying to let 1,000 flowers wilt. take the banks. you aren't going to see a sun trust or wells fargo, huntington bank corp. trying to crash the shanghai or beijing markets. east doesn't meet west in that group to drudge up the old troy atkin campaign. the banks faired terrifically all day. how about the restaurants? they don't serve panera's asian chicken salad, so panera was lead shielded. you can't find a chile's in china or the olive garden. the parent company both edged up nicely. and as much as the chinese want to shop at a home depot or
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lowe's or cost co, these are american plays. they have overseas exposure, but just as a stock like cummins trades in china, costco trades off usa. how about amazon? $6.81. americans apple pie. of course, anybody who makes apple pie would be destroyed by amazon. this is a market where the negatives are sequestered by the positives. trying to slow? then let's buy american. the china slowing story is going to be with us for some time because the chinese are desperately afraid of inflation. the secular build out of the western part of the country will continue. that's going to give the people some public hyper growth for many years, but until china can break the speculators backs, we won't see the rate cuts we need to turn the negative of the slowdown into the positive of the stimulus. here's the bottom line. in 2012 we no longer speak in terms of risk on, risk off. that is so 2008 to 2011.
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i mean, it's as dated as word up magazine. this year it's all about usa on, china off, and given the pace of employment growth, the return of construction, the replace am of the inventories from everything from apartments to office buildings, usa on theme, let's just say, it could be with us for the duration and maybe we have to retire the little red stock book of good buy recommendations. let's go to john in nebraska. john. hey, cornhuskers, speak to me. >> caller: love the show. >> thank you. >> caller: i need to tap into your vast knowledge. >> hey, well, you came to the right place. my knowledge is being tapped. >> caller: i need to know about michael kors' secondary stock offering and what it's effective on stock price and i was wondering, are these new shares or shares from the original ipo? >> these are insider shares. now, let me just explain. when you get a stock that as red
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hot as kors, this is genuinely sizzling. it's got the highest growth of any of the majors that i follow. the growth hounds don't care who is selling. they just -- they don't care where the stock has been. they think, look, this stock is going higher because the company is growing fast, and they want to own it. i'm going to tell you, if that stock -- if they give you a chance to buy kors at a lower price than where it is right now, and they will take a little risk, do so. how about richard in new york, please. richard. >> caller: yes, boo-yah, jim. consecutive quarterly, double digit growth, profits 24 up, rev 24 up, and same-store sales. kafsh is good. inventory is good. they're opening 35 to 40 stores of which they cherry picked 17 borders, including 34th street. have they developed in your mind what i feel their own niche in the higher end market, and i don't think they have any competition. >> first, i want to apologize to the good people who run that
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store because i did mistakenly last time call it discount shoe warehouse. that was my daughter fooling me because i -- didn't know that -- i thought it was cheap. it's designer shoe warehouse, and it is extraordinary, and you are right. it's in a multi bull market move. it's like tjx. dsw rocks. it lives. i wish it were discount because then i wouldn't spend so much there. all right. usa on, china off. china is our pocket full of kryptonite, but the u.s., it's lead-lined. from now on china off, usa on. and stick with cramer. coming up, the vix fix? this market has been enduring whip saw volatility for years now. we've begun to accept it as the new norm, but could we finally be settling in for a sustained rally, or is there more instability ahead? jim is going off the charts to find out. and, later, material world? apple is in the spotlight as the
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best performing stock in the s&p over the past decade. up next is the one in second place. as worries about a chinese slowdown threaten to bring its growth to a grinding halt, cramer's mining for answers in his exclusive with the ceo of cliffs natural resources. plus, ride the lightning. take a nonstop thrill ride as cramer goes stock after stock. all your calls taken rapid fire on the lightning round. all coming up on "mad money". nice morning, scott?
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two of the most important are energy security and economic growth. north america actually has one of the largest oil reserves in the world. a large part of that is oil sands. this resource has the ability to create hundreds of thousands of jobs. at our kearl project in canada, we'll be able to produce these oil sands with the same emissions as many other oils and that's a huge breakthrough. that's good for our country's energy security and our economy.
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the price of fantastic profits is eternal vigilance, so on the first truly ugly day in quite a while we got to ask ourselves have we become too complacent, right?
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maybe we got too accustomed to the fabulous bull market that's been raging since the beginning of the year. is it perhaps time to be more skeptical, or does today's action really represent a garden variety pullback? not unlike my vegetable garden that i'm readying this weekend. the market is simply taking a breather before making its way to ever higher levels. in order to answer that question, we need you to consider the cboe volatility index, also known as the vix, which i hardly err talk about on the show. it's an indicator also known as the fear index, the fear index, vix, because it measures the perceived level of near term volatility, and, therefore, uncertainty in the s&p 500. when the vix is high, it usually means that investors are terrified. when it's lower, there's generally more confidence in both the market's direction and stocks in general. at the moment the vix is at $15.58. it's the long-term average of about 20. we're hearing all kinds of
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chatter. this is a remarkably low level of volatility, but what does the vix really tell us here? it turns out it can tell us quite a bit, which is why tonight we're going off the charts to figure out what the fear index is saying to us right now with the help of scott, terrific technician, chief strategist -- chief strategic officer at t3 traegd. paid center site to the first of all, let's clear up some confusion. in order to understand this crucial measure of fear and complace ensy, you need to know how it works and how it's put together. see, the vix is calculated based on the prices people are paying for at the money options, both calls and puts on the s&p 500. what's that mean? okay. at the money call option, for example, gives you the right -- not the obligation, to buy the s&p 50000. the fact that people are willing to pay anything for the right to buy the s&p at a level where it's already trading indicates they believe it's going to move rarnd fluff to make the option worth paying. by looking at the prices of these opings, what people are willing to pay, you can calculate what's known as the implied volatility, the level of
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volatility. in pigeon english, the up and downedness that they're expecting in the underlying security. in this case the s&p 500. that's how the vix is put together. technically, it tells you how much people expect the s&p will move over the next 30 days on an annualized basis, and it's calculated as a percentage. that's why the vix index is really about. we just put it out there. too much shorthand. there you go. right now we're hearing all kinds of chatter about how the vix is super low because it's at $15. well below that historical averages have told you $20. it means we were being complacent, or, perhaps, brain dead. they think that that talk is nonsense. when you look at the fear intense with the lens of history, there have been times where 15 was really low, and other times where it was quite high, and it's incredibly important to understand the historical context of the vix if you want to know where we are right now and if you don't want to cast apurgeons on people that like the market. let's go to the way back machine with redler playing the role of
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mr. peabody and look at this chart of how the vix behaved from 1992 through 19 97. 1992, the iraq war is over, and u.s. rising out of recession. the market had an extended buying rally. in the five years from just after 1992 since that period to 1997 the vix only broke out above 20 on five occasions. it often stayed below 15, where we are right now, for incredibly extended periods of time. i mean, hey, look, did we just say, wow, i got to sell, sell, sell that period? is that what we were supposed to be doing? according to redler, a trader back in 1994 would have thought the very idea of the vix breaking out to 30 is -- you got to be crazy. were they too complacent back then? no. they had a terrific slow and steady bull market without a lot of volatility, and they were right not to be afraid. be not afraid. be very not afraid. that would have been a good mantra for the year. something changes.
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the vix finally starts to move higher, and we get our first true spike in the fear intexz, courtesy of the east asian financial crisis and then the implosion of long-term capital. a huge highly leveraged hedge fund that needed to be bailed out by the fed. the too big to fail of its day. after that everything changes. check out this chart of the vix from 1998 to 2003. this is a period of near constant volatility. first we had the tech bubble, an unusual situation where stocks went up despite high volatility. then the tech bauble popped, and just when things were starting to calm down, september 11th happened. not long after that we had the enron debacle. it was one thing after another, and the vix spiked over and over again. redler said mid 2002 after the dot-com bomb was going under, it would have been hard for traders to imagine that the fear and volatility would ever have ended, and, yet, you know what, that's exactly what happened. in 2003 things called down, and we entered a new period of low volatility and rising markets.
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take a look at the chart of the vix from 2003 to 2008. as you can see, the fear index stayed at very low levels for a very long time. almost never going above its long-term average of 20, and this was a very good time to own stocks. it wasn't until the wheels started falling off in the housing market in 2007 that the vix began to rise, and it really spiked in 2008 once it became clear the entire financial system was in fear of falling apart. now look at the final chart that shows the vix from 2008 to where we are now. again, we have a period of heightened volatility with lots of spikes as the markets are battered with crisis after crisis not long after our own domestic domestic cries is sorted out, the europeans have their own sovereign debt debacle that only got resolved at the end of last year. some feel it's not resolved at all. according to redler this is another period where traders think it's impossible for the vix to go below 20. it feels like the problems will never stop. investors are terrified, but as we've seen from the vix's action
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over the last 20 years, these periods don't last forever. no more than the crackin or space mountain or the great american dream machine or the wizard willing world of harry potter which i chose not to go on because i threw up all over my shoes last time i traveled upside down. roller coasters do end. they don't let you ride forebecause then they would have to keep charging you. the fear index has cooled down to 15 and change. redler thinks we could be for another period of volatility where the market works higher. looking back redler points out that each of these volatility cycles lasts four to five years, and now, well, it's been about four and a half years since the latest round of high volatility began. u.s. economy is back on its feet. our banks, which is a major source of bad volatility, are roaring after mostly passing the stress test, and even europe seems to have its house in order. call it the old norm. here's the bottom line. the action in the vix as intrepd by scott redler suggests we are entering into a new period of
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low volatility. the fear index seems to move in patterns of four or five years, and we've had four sdpaf years of fear. we just showed you that. perhaps it's now time for four and a half years of peace and prosperity. i say that from now on when you think of the vix during this era, you think of vick's vaporub. instead adopt the teachings of mr. spock. get long and go prosper. let's go to rhonda in kansas please. >> caller: hi, jim. rainy day boo-yah. >> i'm sorry to hear that, boo-yah. >> caller: i've got a question. i recognize that china appears to be slowing and evolving, and i recognize your skepticism regarding chinese companies. >> yeah. >> caller: how do i as an individual investor evaluate the skill set of u.s.
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multi-nationals doing business in china? >> this is really hard. i mean, you got to go through the conference calls. you got to go through the quarterly report. let me tell you how to start with this. go to the annuals. every company, even if they have like a ceo who touched base in shanghai for 30 seconds, they write about it. that's where you get it. look at the percentages. remember, don't overthink it. most of our companies do not make enough money in china that it matters to them. most of them are just telling a tall tale. the fear index, the vix, i'm here to hold your hand. the markets are strong again. get long and prosper, and when you need vick's, think of vaporub. after the break i'll try to make you even more money. >> coming up, material world? apple is in the spotlight as the best performing stock in the s&p over the past decade. but up next is the one in second place. as worries about a chinese slowdown threaten to bring its growth to a grinding halt,
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this morning we got some seemingly devastating news out of china. the main reason the market got
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hammered today with bhp billiton saying they see signs of flattening iron ore demand for the people's republic, which indicates a slowing in chinese steel production. slow in the fact that china plans to raise the price of diesel and the lower growth target announced at the beginning of the month, and we have ourselves a great wall of china worries that could be difficult to climb. on the other hand, we've heard lots of positive commentary from individual companies that do business in china, and that's creating one of this market's biggest conundrums. will the chinese economy have a smooth, soft landing, or are we looking at a nasty crash-landing that can be bad news for all sorts of natural resource companies. take close natural resources, clf, it should account for 83% of the company's sales as well as coal, the two key ingredients needed make steel. if china is in trouble and the demand for iron is slackening, and cliffs natural resores has a real problem because price issing all really determined by what the chinese want to play, even if you're not selling to
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them. just a week ago cliffs came out with a spectacular 123% dividend, brif its yield to 3.5% at these levels and that's not the action of the company in trouble. this kind of dividend raises a statement by management that they're extremely confident in the company's future. mrut plus, cliff's natural resources left their outlook unchanged saying they believe new iron ore can be climbed higher, and the market seems to fear. let's say long-term i would not bet against this company. cliffs natural resources is the second best performer in the last decade. second only to apple. while everyone was focused on the new dividend, they should have been focused on dividend boosts that turn cliff's natural into one of the top 10%. of course, it costs them. the stock pulled back over $2 today. is this the buying opportunity? let's check in with joe, chairman and ceo of cliffs natural resources, find out more about this fabulous company's
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recent capital indication announcements, including the big dividend boost, and let's hear about the future of the industry. welcome to "mad money". >> hi, jim. thanks for having me on. >> well, first of all, i want to congratulate you. we tried to tell companies what our investors want is a big dividend. almost no one listens to us. they give you buybacks or we're going grow, grow, grow, and no -- and without that much regard for the shareholders. what made you decide, you know what, it's the dividend that people want? >> well, you know, jim, in our strategy we've always said, look, we have to earn the right to grow. we have to earn the respect of our shareholders. our shareholders have really hung in there with us in the last half of a decade, if you will. with the growth we put forward with the m&a that we've put forward, taking the risk, you know, paying the premiums for the deals that we've put together, and now it's time to work or organically the growth pipeline that our shareholders have paid for and to give some of that back, as we have this strong cash performance in the future. >> well, i know companies do buybacks somewhat oddly. they can drop away. if they're doing a big dividend
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boost, they must see a clear future. bhp, they were talking about what sounds to me like a real song from china. clearly, if things were rel bad in china, where i know the iron ore price said if you don't sell all that iron ore into them, you would not have taken this aggressive action and boosted the dividend, right? >> that's right, jim. i just so happened i was in china last week, and talking with customers and taking my own view. i mean, i think you have to remember just the enormity of the base. last year the estimates on chinese steel production was 680 million tons. if you get high single digit flattening growth in that -- you know, you're talking 40 million or 50 million tons of additional growth per year of iron ore just to cover that. that's a healthy industry, and that's what really gives us confidence for our growth perspectives in the future. >> now, one of the things that was amazing to me is i knew you as cleveland cliffs. i actually bought your debt. as a hedge fund manager i bought your receivables. i knew this was a great american company. you have made this into a great
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global company. you have made a series of acquisitions. how is that position versus just being reliant on the american steel industry? >> well, you know, diversification has always been important to derisk the portfolio, and it's not so much where the minds are. we always tell people you have to think about where the markets are and just where we're not china-centric as well as u.s.-centric as we used to be. we have different plays to go with our products and build a great customer base to carry the load through these commodity cycles. >> it's very clear that the era where you have those -- the m&a work is being paused right here because of that -- of your capital allocations. >> we feel like we have cash to serve our pipeline and growth in the eastern canadian assets that we've purchased last year as well as the assets on the discovery that we had several years ago as we bring that project forward, so we feel that we've got a great organic pipeline that we can finance
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easily as well as secure this nice dividend for the shareholders. >> i'm not a political guy, but as among you, you have therma-coal mining and latin american operations and canadian, united states. which is the best place to operate? i put it that way because of this 30% tax on iron ore that the australians are putting on. >> well, we really like canada. as you know, we did our large $5 billion investment up there when we purchased consolidated thompson. we like the pro activeness of the government. we work very hard and very closely in the relationship. they like mining where they work. they're very responsible in their environmental care and community care just as we are. it's a good partnership, but canada certainly is the right place for us right now. >> all right. i want to circle back to china because it's so in the news. in your terrific conference call from -- not the one -- you -- people should go read the conference call for the dividend boost because people usually don't do conference calls for dividend boostz. this one did. you say that you believe the world's emerging economies will continue to urbanize,
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specifically in china. household formation and labor growth remains strong. can you just talk about the indemmic nature of growth because people seem to think that one day we're going to come in and china is going to be shrinking or no growth, but you're talking about a secular trend towards growth here. >> well, that's right. you know, if you go over to china, and i think more or less you really got to get out into the communities and talk to the people, even the folks in our office, you know that, are very open about the growth, the prospects they have for the future. they all want better homes. they want larger homes. they like the goods and services that we in the west enjoy so much. i mean, you know, jim, the jeannie is out of the bottle. people have experienced a better lifestyle, and it's going to continue as the urbanization comes on. there's also an upgrading taking place as well as people move into -- from one apartment to the next and into having nicer consumer goods, which are all based off of steel products. >> would you compare it to, say, the industrial revolution in
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this country where there's a rural to urban and if you got in on that, it was obviously one of the greatest investments in the world. >> no question. when you talk to the people, they're very excited. if those that got in early in the big cities like beijing where we were that talk about, you know, the base price that they talk about their homes and what they're worth today, it's no different than in the u.s. or any other, you know, stable economy. people are excited about the wealth that they're creating individually and they're going to keep that going. >> one last question, joe. when i look through the assets that you have been able to accumulate -- again, i'm so slild you're doing the dividend because i think you have a lot of the assets -- i see things like chromite. do you have years of assets that you accumulate that literally i don't have to worry about you running out of things to be able to dig in for many, many years? >> no. our pipeline is very strong, jim. i think, you know, the -- one of the best problems that we really grapple with is the prioritization of our pipeline as things come on, our expiration group has been very, very successful in what they
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develop, and the chromite is a niche into the stainless market, which follows the carbon steel era, if you will. as china, you know, flatens out as bhp says if their carbon era and their infrastructure, the stainless steel industry follows and we're going to follow right in with a strong iron ore component as well as a chrome deposit component. >> i wish more executives would listen to you because the buybacks just tend to be able to make it so that they can offer many options as they want to their executives. they don't really shrink the float. you want to reward shareholders and you want investors. you give them dividend boosts like the one, two, three that you did. thank you so much, joe. president and ceo of cliffs natural resources. >> thanks, jim. appreciate it. >> guys who want yield, you want growth, you want china, you want to be levered to the comeback of our country, clf is a pretty darn good way to do it. joe, chairman and president and ceo. stay with cramer. >> coming up, the clock is ticking. call cramer at 1-800-743-cnbc.
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to find out how to fire away at cramer on the lightning round. can he with stand your thunderous talk? plus, piping hot? domestic drilling has been heating up, but is u.s. energy independence within reach, or is it just a pipe dream? cramer is going one-on-one with the ceo of western gas partners to see if it's time to open the bell. all coming up on "mad money". s ♪ when your chain of supply goes from here to shanghai, that's logistics. ♪ ♪ chips from here, boards from there track it all through the air, that's logistics. ♪ ♪ clearing customs like that hurry up no time flat
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it is time -- it is time for the lightning round. cramer's "mad money" -- ♪ >> buy, buy, buy. >> sell, sell, sell. >> by this sound, and then the lightning round is over. are you ready, skee-daddy? it's time for the lightning round. we start with chris in texas. chris. >> caller: big boo-yah to you from texas, mr. cosmo. hey, let me get your thoughts on corning, symbol glw? >> guys that can't shoot straight and can't get a handle on their own business. i got to tell you, don't buy. i want to go to jesse in kansas.
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one of my higher picks. jesse. >> caller: rock chop boo-yah, go k.u., jim. i have my sleeves rolled up in your honor right now. >> thank you very much. it's a very handsome and becoming look. go ahead. >> caller: what's your take on lynn energy. >> i like it. i like it. i think the stock has had 7% yield. it's safe and a really well run company. i want to go to jackie, oh, boy, show me state, kansas people. jackie from missouri. jackie. >> caller: hi, jim. can i get your take on intuitive surgical, isrg? thank you. >> absolutely. i think isrg is going -- i lost a lot. my brackets were destroyed by missouri, i just want to say. it's a very solid story. multi-year growth. i continue to believe in it. >> buy, buy, buy. >> i thisty goes higher. let's go to lasard in missouri. it broke my heart, as it did to you. let's go to jay in texas. >> caller: b, b, b, b-boo-yah,
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jim. >> boo-yah back. >> caller: hey, i want to ask about lusk, lusk industries. it was one of your halloween picks way back in 2011. >> right. >> caller: also wells fargo. where do you see these? >> i like wells. we have made a lot of money in lufkin, and i don't mind if people do ka-ching. those are the donkey that is go up and down that we saw when the bobbingin was rockin. let's go to carlos in tennessee. carlos. >> caller: boo-yah, jim. how are you? >> i'm volunteering. how about you, partner? >> caller: i'm doing good. a company that i'm calling about is american company, mrk. it's the symbol. >> let's take the yield and wait for them to develop some blockbusters. i think it's terrific. i want to go to chris in the illini. chris. >> caller: hi, jim. how are you? >> real good, chris. how about you? >> caller: great. a boo-yah to you.
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>> booa right back at you. >> caller: i have a position in little shoes, lfus. >> undervalued, overlooked company. absolutely terrific nuts and bolts. when i get -- literally the guts, it's the guts of business. it's the guts of machinery, and i like little fuse. and that, ladies and gentlemen, is the conclusion of the lightning round. >> the lightning round is sponsored by td ameritrade. like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.
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when it comes to the pipeline plays, one of my favorite groups out there, we got ourselves a real rye quality problem. you know i like these stocks because they offer high yields with the security of a toll road-like business model. getting paid fixed fees to gather process and transport both oil and natural gas. i'm sure you've heard by now. i don't care. i fwot to drive it home that these are the right places to be. man, the pipelines, the stocks, they have run, and they have run big. take western gas partners. west, wes, a natural gas gathering and processing mass aluminum partnership that shares most of its business with its parent, anadarko. you had jim hackett retiring on
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the other day. it provides both growth and yield. 14% long-term growth. 4% yield. it operates in liquid rich shale plays and gets 95% from fee based contracts, no fluctuation. very little risk, lots of reward. pretty much unheard of when it comes to common stocks. thanks to the growth, they've been able to raise their distribution by 16% over the last 12 months, and they plan on double digit payout boosts for years to come. there's just one problem, and it's the best problem you can possibly have with a stock. western gas is more than doubled since i first recommended it two years ago. 124% return with reinvested dividends. at the time it had a 6% yield, and even with repeated distribution, the payout hasn't been able to keep pace with the rising share price. now we have to wonder. has western gas run too much, or is there more upside ahead? that's why i'm thrilled to have don st. claire, ceo of western gas, here with us tonight to talk to us about where it this company is headed and what's going to happen next. mr. sinclair, welcome back.
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welcome back to "mad money". great to see you. >> great to see you. >> have a seat. you came to us on the show and said, look, i got -- this is something that doesn't have a lot of risk. it has good reward. basically laid it out. how was it that most of the companies that are in your industry say they're hole roads, but have a lot of the fluctuation, and you have been able to make it so that it literally is pretty much as risk-free as you can get. >> if you think about the way our portfolio sets up, about 70% of gross margin is fee-based business that we get paid straight fee, no commodity component to it. the residual part, anadarko provides us commodity swaps for that direct moderatety risk. that allows us to headset risk and show our unit holders that direct cash flow source from those assets. >> now, you have two shorsz of growth. you have expansion and you have drop down. i'm sure many of our viewers understand the notion of expansion. i still find the dropdown eludes them. we had mr. hackett on last week.
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if you could just quickly, the 30-second description of dropdown. >> if you think about where we are. the midstream owns assets outside -- that inventory is available for western to purchase over time. >> now, there's plenty of properties. on page five, there's an unbeliefably vivid and exciting even though you're -- i -- relatively risk -- less risk portfolio that you have. there is a chart on page five. it's liquid rich versus dry grass basis. i always prided myself in thinking i know about some of these fields, but i see this greater green river basin. you went to -- i mean, it sounds like even though you have some great properties, there could be many big ones ahead that could drop down. >> this f you think about those particular fields, you go back to us acquiring the assets from anadarko, our latest acquisition has been mountain gas resources, which is the green river basin. it's been a great basin for us
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for a long time. these assets came from original western gas. we've got a lot of third party producers back there. in fact, what's interesting about mountain gas it's only 5% through anadarko, so the rest of it is third party. you mentioned we're in the middle of our trading three expansion. it will go into service -- >> train three people. it's locomotive. >> exactly. >> we're building cryogenic facility. we built the first cryogenic plant, and we're now building the third cryogenic plant. it will go into service in september. the plant will be full the day we put it into service. >> so just added the moment it opens. >> yes. >> now, el paso, there have been these divest tours because of kinder morgan. i know people think about you with anadarko. are you able to get in there and bid? is it something you can do, or is it not worth it? >> we absolutely do. we've looked at a ton of third party transactions. if you remember, last year in
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february we did and fort lumpkin right across from the fort lumpkin plant. we will look at all third party transactions. we think we have a very competitive currency out there. it's just got to meet our metrics. it's got to be fee-based and low risk. we'll use our current if it makes sense. we can't put our model at risk. >> i look at where most of your properties are. we're looking at a particular area around. you have clusters in, say, chicago and wyoming. do you need to be like williams, which made a huge acquisition today in the marcellus, or happy with this area that does it for you? >> if think about one of the growth areas we announced in 2012 it's going to be our plant in south texas. we're starting to expand our footprint beyond the rockies. we'll be in part of south texas supporting anadarko building a cryogenic facility there as well. >> where is the ultimate destination of what you're putting through your pipes,
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because we are hearing a lot of -- all the candidates are talking about it. on this show i talk about it all the time. natural gas. where is your natural gas going? is there enough demand for it? we know the prices come down. not that that affects you. i understand. only 5% on hedge. just trying to think globally about where the united states is in terms of using its resources. what do you see happening? >> today anadarko has a phenomenal marketing partner. they take all the off take whether it's ngo's or dry residue, and they've been very successful in making sure they have found premium markets for those reserves. >> now, do you think that we will be in a world where three, four years from now a lot of the big trucks will use natural gas and maybe even cars, or is that just a pipe dream put out by oilmen? >> clean energy on here a week or so ago. >> 52-week high. >> i mean, you would think so. >> commonsense. >> the economics, the math works. you would think so. >> i got to tell you, don, i have totally delivered and delivered in a quiet way. not a show boat. the show boats tend to crash and burn in the end. i like what you have done.
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this is don st. claire, president and ceo of western gas partners wrush want some yield, you want some growth, you're afraid about big fluctuations? look into wes. that has what you want. stay with cramer. thank you, don. ♪ ( whirring and crackling sounds )
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the sdagser that was john carter, did you see that? disney has spent so much time and energy explaining to us for
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many quarters that movies could no longer hurt their bottom line that hard. the idea is disney explained it was because the movie business because so episodic that they were going to make fewer and more reliable pictures and keeping with what has already worked. was there anything about john carter which fit that bill? was this epic flop supposed to be the beginning of the next "pirates of the caribbean" franchise? did anybody recall that pirates is a theme park ride? this huge fail or of "john carter" did send a chill up any spine about the hunger games given that i have been recommending lion's gate since i heard they were going to turn the trilogy into movies. the chill hasn't come from what i have seen so far. i hated the john carter trailer. i love the hunger games. i devoured all three susan collins' books. i think this series has real staying power. for you guys out there, a runningman meets robinhood if you were a teenage girl, that is. no. the worries come from the ram paint second guessing and i told you so's that i'm hearing right now about the failed "john
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carter." it seems that everybody is a critic and everyone on earth with the sole exception of disney ceo seems to have known what a bomb this "john carter" was going to be. it's almost as though everyone on twitter university recognized that it was going to be a national flop the moment this international flop the moment the story originally came out off the presses 95 years ago. even though they haven't even -- that's why last night i went on twitter at jim cramer and asked if anyone thought the hunger games would be a bomb. lion's gate lives oofr dies based on the success of its films, and i'm including mad men too. thinks big. i think that a lot of people who want "hunger games" to fail now, they're sick of the -- there are a lot of others who will sell lions gate if somehow it doesn't do north of $100 million this weekend. given the number of seats available and the times and the price of tickets, i don't know what the max is. i don't know if they can do $100 million. i initially told you to buy lion's gate back on february 14th and the stock was then at $11.35. the stock has not looked back
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since. jp morgan recommended it today. got a 34% gain. that's a terrific rally. even up here i would still own lion's gate into the weekend because i think the hunger games will live up to the hype. now, if the buyers gap it up on monday, we might have to turn this investment into a trade. i would definitely ring the register on half the position. 100 shares goes to 50 on monday. however, the trilogy is as big as i believe it's going to be, you might have a sustained run on our hands, and i bet this victory will have 1,000 fathers, even as "john carter" was clearly forfeited by the wonderful world that is disney. stay with cramer. [ leanne ] appliance park has been here since the early 50s.
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my dad and grandfather spent their whole careers here. [ charlie ] we're the heartbeat of this place, the people on the line. we take pride in what we do. when that refrigerator ships out the door, it's us that work out here. [ michael ] we're on the forefront of revitalizing manufacturing. we're proving that it can be done here, and it can be done well. [ ilona ] i came to ge after the plant i was working at closed after 33 years. ge's giving me the chance to start back over.
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[ cindy ] there's construction workers everywhere. so what does that mean? it means work. it means work for more people. [ brian ] there's a bright future here, and there's a chance to get on the ground floor of something big, something that will bring us back. not only this company, but this country. ♪
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>> seconds away on the kudlow report, illinois primary polls close in just over an hour. looks like a big night for mitt romney. plus, is vlad peer putin going to drive up oil prices, or will the saudis drive them back down? i take on a leading senior democrat to defend paul ryan's budget. the kudlow report begins in just a few moments. >> remember, it's no longer that jiberrish, that nonsense, risk on, risk off. some hedge fund creation that seeped into the media lexicon. right now it's china off,


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