tv Mad Money CNBC August 12, 2009 6:00pm-7:00pm EDT
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i'm jim cramer. "mad money." you can't afford to miss it. hey, i'm cramer. more than ever. welcome to "mad money." welcome to cramerica. call me, 1-800-743-cnbc. why is it so hard? why is the market so topsy-turvy? why does it confound so many people right here? sample thought. why did the dow go down 97 points yesterday, and up 120
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points today? even though we got a yawner of a fifth -- i'm going to make everybody yawn -- a yawner of a fed meeting and nothing happened of any import? i am sorry to be a truth-telling blunt person, but can i just tell you, that meeting had all the excitement of a new york mets/arizona diamondbacks game. that's saying something. i could pontificate endlessly about the confusion but i like to tell the story of a stock. that's what i do best. the best way to relate narrative today is the tale of two brand-new ipos. first, star wawood. he's going to issue and invest
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in commercial real estate. ipo price at $20. gigantic yield, biggest of the year. it was a total flop from the get-go. if you came in from new haven, they closed the curtain at the end of the day. this is worse than the play that was involved with the "producers." i won't mention a name. it gave an immediate loss at the opening, rallied back at $20 at the end of the day. i call it nasty. why not? why should it be a dog? who wants to get in on what may be the 50th war of the commercial real estate bust? certainly not at the ground floor. did they see some sort of bust coming? not that i know of. why should we trust him now? was the deal price too high thereby abusing you, the home gamer? of course. does anyone really want to own a company that can only thrive on a market that's universally known to be going lower?
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no. if you're looking at stwd, you can always include one thing about this market. when a big deal goes bust especially when sentiment is running high as a kite in this market, we should be ringing the register. i just saw this morning an investor's intelligence poll, it showed there were 49% bulls versus the fewest number of bears. here, storms a picture is worth a thousand words. talking about a red flag, who's left to buy? maybe that's why the deal didn't deliver. maybe we should consider ourselves on -- ♪ highway to the danger zone ♪ right into the danger zone >> who knows this music beside
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m me. dy tell you not to get in on this one, emdeon? if you saw at the oemg you made $2.50, that's $2.50 per share, not bad for one minute's work which is how long it might have taken for you to enter an order on the deal after you watched the show, play this profitable, good company. how fabulous. i regard it as a perfect counter to start with properties. maybe instead of being on the danger zone, maybe we're on the highway to the safety zone or the found highway to twist cramer fave -- i put bon jovi in so i wouldn't cough. this show is about smooth and sweet. wait a second though.
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after today, doesn't it look like the market has -- should we be doing the watoosi? i know, cramer's a jerk. shouldn't wing taking profits aggressively? that would be my first inclination. then i read a story about a great mupd manager. he took in $20 billion in the month of july. why? positive investment returns. $20 billion. come on, that money's not going to sit on the sidelines. it is sent to them to be redeployed in the stock market immediately. they certainly would use any dip. how about yesterday's 97 points to put it to sghoshg why is bernstein winning money, then it is putting it in its winning stocks, then they get bit up? as i said many times, winning managers simply keep buying the
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best performing stocks as typically they believe them to be cheaper and the best. no matter how high they go. was it upgraded because they're writing more insurance? because they're hit with fewer claims? because cramer's hit for deer lately? no. because their gigantic investment portfolio is doing much better. why? because the stock market is much better. so a better stock market takes up not just allstate, but the others. the continued positive move in the capital markets to quote the report allows them to upgrade allstate. buy, buy, buy. we see these cross currents everywhere.
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macy's reports lean inventorien. what should the take-away be? we measure retailers for how lean their inventories are. inventories control their sales and their discounts. that means macy's is in great shape with tight inventory while sales compared to last year didn't matter given they were pumped up by government stimulus checks. when are you going to macy's? they don't have any more signs that say 30% off. i used to walk in there and just feel like i should have a big 30% off sign on my head. toll brothers reports a number that's, well, just okay but the mem trick for home builders that i follow is the cancellation rate. who can pay for what they want? how many people walk in can waive the down payment? who can get a mortgage? cancellations are the lowest since 2006. that's when the housing boom was raging. usually bullish takes up the whole group. especially because toll brothers sells $500,000 homes, up.
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they said as the quarter went on, pricing was better. looks like the market's no longer being killed by home buyers aun able to get financing. how can you not conclude you should be buying the mortgage stocks? let's not forget applied materials. biggest semiconductor, monkey -- must be thinking about the monkeys. anyway, lot of stuff going on in my head. you got to just give me a few. it is a company that -- this one starts to move when semiconductor companies are so vechd that they need to build new fabs. that's not fabulous. they call fabs the facilities where they make semis. here hae a company that's run 36% this year. the commentary from the ceo is bullish. he says for the first time in a long time we see positive trends in our business.
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bears say that's why it ran. the bulls say you ain't seen nothing yet. i followed a short sale. it was a dramatic decline in short telling in july. it was in the paper today. usually that's very bearish. we need tons of shorts to buoy the market with it comes down. the s.e.c. just banned naked short selling. perhaps these are positions they never should have bought in the beginning. maybe it is just a rule change, not a sentiment change. where do i stand? obviously i'm torn. i think we can correct because sentiment is too bullish. but i believe it will be a gentle shallow correction, down maybe 1.5% to 3% from here. no more. when i see the action today i think to myself, oh, my, is that incredibly bullish prognostication too bearish? as you saw on the dow 10,000 is
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gone. this market is even stronger than i thought. in the end when i'm puzzled by the data or sentiment, i fall back on what i've learned in 25 years of professional investing. here's what i think happened. big boys stepped away from buying for a couple of days hoping the market would come down so they can catch up in performance. they waited down 1.5%. when it didn't go down again at the opening they collectively pant. damn the torpedos and the data, full-speed ahead. and that's not earning, not fed, not the economy is why we rallied so big today. andy in california.
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i'll take your call. go ahead. >> caller: symbol cbg, cb richard ellis group up 2% today. commercial real estate. is it a buy? >> what a crummy stock! no, actually kind of interesting. i don't want to play with my heart here. c.b. richard ellis had a good interview in the sunday paper business section about three weeks ago talking about the idea that business has really turned. i have to tell you, i am not as bearish on commercial real estate as others. i've been in a cross fire with some of my friends from jpmorgan. with my friend doug cass. i think commercial real estate is not nearly as dangerous as other people think. andy, good luck to your dodgers. market showed mixed signals today but i say full-speed
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ahead. "mad money" will be right back. coming up -- >> the news is the best in months. >> with a brighter outlook on unemployment, which companies stand to benefit the most? cramer's got a pair of big players that can turn your investment into a payday. is it time for a gold rush? cramer goes head-to-head with eldorado ceo paul wright to see if they still have the midas touch on the executive decision. plus, lightning strikes. cramer takes all your calls in a spine-chilling overcharged "lightning round." all coming up on "mad money." get your "mad money" text alert today. text mm to 26221 to get cramer right on your phone. or give us a call at
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nature of this market? how do we deal with the fact that it feels like the fed's got the whole economy in its hands? on the one hand we're getting some pretty clear signals that things are getting better. it's what bernanke told us today. recovery's certainly starting to happen. most important being the july jobs report we got last week that showed the unemployment rate declining from 9.5% in june to 9.4% in july. the first time the unemployment rate's fallen in 15 months. that should make you bullish. right? what about the fed realizes that things are getting too good and decides to raise rates at the next meeting? something we know will eventually happen. we know a lot of people were worried about it given all the chatter about today's fed meeting. if that happens, if the fed raises rates and stops flooding the system with money, that could put the jazz boots back on the economy and stop the recovery in its tracks if it comes too soon.
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while i've come to trust ben bernanke, the fed chairman, as both the steward and savior of our economy, it is still true the recovery isn't unmiss gated positive for all stocks because it will eventually cause the fed to tighten. so is there a way to let you thread the needle here, some stock that will be helped, not hindered, by higher interest rates that may happen before the end of the year. irv's got two of them tonight. they're both excellent companies. they've been down in the doghouse because offal the weakness in the economy. they are paychecks, payx, and automatic data processing, adp. these two payroll and human resource outsourcing companies do better with a recovery,
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especially nonjobless one, something latest unemployment figures indicate. an increase in jobs means an increase in check volume. your paycheck. transaction volume. for both companies this is a big plus. they also benefit from higher rates. most companies don't. theeps do. because the way paychecks works, they collect money from the company where you have your job to run payroll, then they send out the checks to employees like you. and while they wait for you to cash that check, they make money off the float. they collect interest on the money they collected before it gets to you. so higher interest rates on that float means a lot more money for this company. these two companies. i think both companies work if you're bullish about the economy's prospects. even if you believe that the fed is eager to tighten and maybe do some damage.
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paychecks and abt are sick cal, which is why the last year has been bad for both of them. paychecks fell from a high in august 2007 to a low of 20 on march th but it hasn't recovered as much, only hover is in the mid to high $20s. twoebt $31 in october 2008 and stayed in the mid 30s 2. i think they'll have to change their tune when the recovery sets in and we get back to normal levels of sales and earnings growth. a recovery means a lot of good things for both of them. though paychecks was more bullish on its recent conference call. i always tell you listen to those before you buy a stock, they benefit from new business formation as they handle the payroll and benefits from new
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companies. in fact, this past quarter paychecks and adp were both hurt badly by declining business sales, something responsible for 90% of the sales shortfall in paychecks. an improved economy means fewer bankruptcy for paycheck client losses due to companies going out of business or having no employees rose by 17% last quarter. bankruptcy kills these guys. adp has also been getting killed by auto dealer closings. of course, high unemployment has been killing both of them. but as we start to create more jobs, that will increase transaction buying with both companies, help them return to their normalized pomp. i think the comparisons for both paychecks and adp will get much easier going into the first half in 2010. that by itself should be very helpful especially as we keep moving toward an economic rebound which you know i think we will. so what happens when the big, bad fed ultimately steps in and raises rates?
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could slow the pace of the recovery but accelerate the profits and paychecks and adp, getting slammed right now by the fed funds rate that's practically at zero. as we know, money market funds are yielding almost nothing. stay tuned to this for a second. remember, these companies earn interest in the float as they sit on large sums of money for short periods of time. we've had a prolonged periods where paychecks and adp have suffered from the twin problems of a weak economy and low rates. not many companies are hurt by both. now we're moving to a period where the economy's getting better, the fed will have to raise and these double losers will become double winners. which one? both companies have pristine balance sheets with zero debt, well run. adp is cheaper in a price to earnings multiple. these are big cyclical companies. price earnings multiple higher.
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as earnings increase with recovery and higher rates, multiples will stop looking so big. you'll be kicking yourself for missing a great story because you got confused by valuation. even though paychecks is more expensive nenks, if i were going to buy one it would be paychecks. first of all, it has a superior dividend not to mention a superior attitude and a superior state of mind, a la stephen segal in "hard to kill." paychecks has a 4.4% yield which makes it an accidentally high yielder. adp has a 3.4% yield. that's small. the story that caught my attention, made me think of this was in "usa today." paychecks says sales are going to grow at 12%, adp only 8% to 10%. paychecks has been adding clients faster, so when
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employment picks it may have already handled the number of paychecks handled by paychecks, well, i think explode. you want to play on the end of a recession that isn't in danger of being skwaured by an overzell russ federal reserve that's going to take rates higher? adp and paychecks even benefit from a stronger economy and higher rates. you know me, i love dividends. paychecks has a whopper. it will do well even if gentle ben becomes the ben who palled around with bill lard. and if were you, i'd dump adp right here. >> caller: boo-yah, jim, it is a pleasure. >> what's shaking? >> caller: i love the show. you are the voice of reason and experience. >> well thank you. i come out here every night and think, well i've been around. i ought to have learned something by now, right? go ahead. >> caller: sdx seems to be stuck in neutral, down one day, up the
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next. what role do you see stx and copper playing in the overall economy. >> fcx is the index which measures international shipping. obviously china meedz to be able to buy a lot of copper and you ship it to them. i think that this is temporary. i think copper will reaction sell rate again. i think it goes higher. freeport is the pure play on copper. i like the stock. i screwed up on this one. it got to $17, i still liked it, up and down and up and down but i like frooeft freeport and i think it is a great recovery stock. i like dividends, too. chris in florida. >> caller: hey, jim. that's a big boo-boo-boo-boo-yah for you. >> how can i help? >> caller: i got mosaic. my question is about mosaic. i realize it is a commodity, fertilizer that people need. knowing that the global population is growing and the need for the food will be in
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great demand -- you got that, chris. >> caller: i feel like mosaic. what do you think mosaic will be six months to a year from now? >> first, mosaic is not the horse i want to play. mosaic at $53, probably goes to $60 in the time potash goes from $95 to $120. i think pot has better fundamentals. i urge you to listen to the conference call and you'll agree with me. there is a price negotiation going on between india and china that could short term hurt the stocks. i don't dislike mosaic, i just like potash better. if you're bullish, consider adp and paychecks. those are the great recovery plays. paychecks is better because it's got that hefty yield. after the break i'll try to make you even more money. hoping to give your portfolio the golden touch? cramer goes one on one with eldorado's ceo to find out if his stock can shine on the
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executive position. and later, try to keep up with cramer as he takes your calls rapid fire in an all-new "lightning round." plus, how do your stock stack up in a mystifying market? cramer makes sure your portfolio make the grade on "am i diversified?" all coming up on "mad money." he ran off with his secretary! she's 23 years old!
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gold goes up when everything else is imploding. that makes it a necessity, especially when governments around the world have all rolled out their printing presses to fund huge stimulus programs. something that eventually causes pin action, debases the value of paper currency. you ought to own gold but half. historically as i told you, you'd have been better off with the actual precious metal or an
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etf, like the gld to track the price of cold one for one. stock gold miners can run into all kinds of problems that have nothing to do with gold prices. one of my favorite miners is eldorado gold or ego. it's one of the lowest cost coal producers out there. $442 an ounce for the average gold miner. gold's at $9.50 give or take. you see how much money they make on each one, $950. this stock is up 31% since i recommended it, $7.94 on february 25th. it's up 12% from when i last interviewed the ceo. i don't know. is it done? it's only pennies from its 52-week high? eldorado's already outperformed
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gold. so far you'd be better off owning eldorado than the actual commodity. a 10% change in gold prices should lead to a 25% change in el dor rdorado eldorado's prices. ego keeps doing better than the commodity of gold. its low cost combined with the fact that its mines are primarily located in turkey and china with development in exploration projects in brazil and greece, which while they're not as safe as most developed country they're a heck of a lot safer than vez nezuela. because i'm pro gold i think this one has movement to run but i got to do my homework. i'm thrilled to hear from eldorado's ceo to see if this gold stock still has it. mr. wright, welcome back to "mad money." >> thank you, jim. pleasure to be here.
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>> mr. wright, what i always worry about when i'm buying a growth gold stock that you've completely delivered is production growth. it's been terrific but you've reported some delays recently some of your projects. are we worried that we are behind schedule on any of the large e projects, therefore raise the cost of your finding gold? >> we announced in our last quarterly results that we were matter of months behind on our third gold mine. that's a project in turkey. i think again, jim, it is not a big surprise that you do occasionally have delays in construction. sometimes delays are under your control. in our case it was largely weather related. but i think we're still on track to complete construction in 2010. for us that's acceptable. >> so in other words, i should not be looking for dramatically higher cash cost for gold for you guys at all. >> not at all. the integ grit of the project
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we're billing remains intact. it is being enhanced monthly through drilling as we identify more mineralization. the project that we're building will actually produce at a level of approximately $260 an ounce and will actually contribute towards our growth being lower cost than it is at present. >> how did you find one at -- how did you get that mine? >> well, we discovered this project a number of years ago through grassroots exploration. i think it is an important aspect of the company that the majority of the ounces that we have in production now and plan for production are actually ounces that we discovered from grassroots. so our cost of discovery is less than $10 an ounce and that in itself is exceptional. >> that's amazing. really is. to our viewers, that's exceptional. now the other criteria i use about whether i want to own a gold stock versus the gld or bullion, are we make to make a conclusion that we have multiple years ahead where there can be
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more gold dug out of the ground? how does eldorado fare on that criteria? >> that's a bulk you can definitely take. all of the projects we have in the existing mines are relatively new mines that have anywhere, frankly, from 10 to 20 years ahead of them. you're dealing with a new generation of long-lived, low-cost mines. these aren't mines going through mid life crisis or towards the end of their lives. >> i never thought about a mine as an existential situation. >> i think in a way, we have a natural hedge because of our low cost of production. at this point we're quite happy going along with the spot price. we frankly have a view that the gold price will continue to grind its way to higher levels and we i think want to respond
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to our shareholders. >> everybody is fascinated by china on this show. we're big believers in china. you have a stake in a chinese gold company. what makes china attractive? they are in the end communists. >> we enerrtered china in 2005 after acquisition to a project. it was our first gold mine developed by a north american company in china. to be honest, we've been very pleased with our sushgs in china. frankly, it's delivered on all aspects you would expect from an investment and we're frankly quite thrilled with the ability to enhance our investment in china through this acquisition. >> i know that what i'm about to talk about is a high-quality problem but you're $3.8 billion company. why shouldn't one of the multiple larger gold companies that do not have long lived reserves lower their finding costs? >> that's probably a question
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you should pose them, jim. our simple model is to continue to do the best job we can, make sure that value gets expressed in our share price, and then, frankly, others will decide, our shareholders will decide eventually what comes of that investment. but certainly it is a challenge for the larger companies. they're challenged in terms of how they are going to preserve their existing production and reserves and given the size they've grown to. sflits's literally why i'm only recommend you you and agnico. they can only buy new. there's something else that i know i happen to be a big believer in iron ore. you, too, have iron ore projects. but they're not -- you're not doing anything. >> we have a modest project in brazil which we recently completed construction on,
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commissioned and was ready to start operations. then we ran into the recent downturn in iron ore prices. what we've seen in the last month or so is a fairly dramatic return to levels which has frankly prompted us to reassess what we should be doing with this project. i think for us as a gold mining company, there's two options. one is divesting the asset. the other is operating at a profit. suffice it to say, there's renewed interest in this project from potential buyers about the product and the project. i think it is safe to say by the end of the year you'll see us go in one direction or another. >> i didn't mean to cut you off, but you've got one exciting story. i am so glad that you have appeared on the "mad money" radar screen. i get a lot of positive e-mail for what you've done for our viewers. thank you so much for coming on the show. >> very much appreciate the opportunity, jim. >> paul wright, eldorado. if you believe that there's chaos, and a lot of you do, if you are worried about the future, this company's got big
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growth, lowest finding costs. you just heard the sticker. i didn't know about, how they can sell that iron ore mine. this is a $3 billion company, that frashgly it could double. stay with cramer. coming up, the madness goes nationwide. as jim takes calls from all across cramerica. >> big 110-degree boo-yah from phoenix, arizona. and an all-new quick fire "light nipping round." and later, whether the dow soars or hits the floor, jim helps you try to stay on steady ground with "am i diversified?" all coming up on "mad money."
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i want to talk about some mobile tech action we saw today. we got perhaps the most feedback from anything we've done in ages. enormous amount of feedback from my mobile internet index which i introduced last night. that's why today's movement adc telecom, adct, is so important to highlight. they announced sharply better than expected earnings. i've got to tell you something, this is all about china. their chinese infrastructure play. cree also blew away competitors.
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technology tsunami. that's right. i'm talking mobile internet. and now, now it is time for the "lightning round." where i take your calls rapid fire, you say the name of a stock, i tell you whether to sell or buy. i don't know the stock prices ahead of time. my staff prepares a graph that's on the fly. be prepared to hear this sound, then the lightning round is over. are you ready? it is time for the lightning round. start with chris in virginia. chris? >> caller: hello, jim! big boo-yah! b-b-b-b-boo-yah. >> that is a spirited stuttering boo-yah. welcome to the show. >> caller: a question for you, ticker symbol alu. >> no, no, no, no.
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we are in a situation that that one is not part of our internet mobile tsunami. i can give you sienna, adt telecom and cisco. all of those are superior to your house of pain. that's been a multiple year house of pain. remember, franco american spaghetti, throw it away. randy in arizona. randy. >> caller: hey, cramer, how you doing? boo-yah today. >> you came to play. obviously randy came to play. he's not watching the diamondbacks. what's up? >> caller: hey, cramer, i'm working on that mobile internet theme. >> yes. >> i peeled the back off, i'm working with my kid the other day, we're driving down the road. they're both on the internet. i peel the back off this thing, i'm paying $30 a month for, it says novatel. it hooks up to my kid's commuter. they can work on it well while we're driving. he says he gets a good signal. wonder if this is a good entry
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point? >> right here is a good entry point. make it very clear to everybody, it is not a great company but this tidal wave of technology is so great, it will whip everything in its path, including novatel. i think you've got a good one. danny in texas. >> caller: jim! danny b. from dallas with a big texas boo-yah. >> johnson boo-yah. everything's forgiven because you got rid of t.o. because i burned his jersey when he left philadelphia. by the way, i burned pink girl's jersey, too. because i mean business. right not parking lot. go ahead. >> caller: it is hot here in texas like it is in the markets. i am interested in isrg. >> isrg, i've gotten off of it lower after a big gain. let me tell you something, you got a hotster. i think that one can work. i'm always surprised, there's more and more people adopting it
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even though we know hospitals are painfully in trouble. i can not go against it but i regard it as speculative. buy ten shares, that thing's a monster. $220 stock. mary. we got a lot of diamondbacks. or some wildcats? or some sun devils. mary in arizona. mary. >> caller: well hello, jim. this is mary and i know nothing, nothing. but while watching your program months ago, i was introduced to tsm. after following it for a while, i subsequently bought it at $6, sold half of the shares at $11.50. should i sell the other half while it is hovering around a little more than $10, or hold? >> we're taking the show away from that first guy we gave it to, the guy that bought the stock at a couple pennies and went out and bought the rental car company? we're getting the show to mary.
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mary's "mad money." she's done precisely what i want. i think, mary, you have the house's money in your hands. i think you should take off a quarter of it right now -- and then let the rest run. you are a winner, mary. you are how we win in the stock market. two callers who have so much horse sense, rob and mary, that i got to tell you, i'm done with the "lightning round."y wond been doing the right thing. is the advice you've been getting helping or hurting? are the fees you're paying really worth it? td ameritrade's fees are fair and straight-forward. their research is independent and unbiased. their investment consultants are knowledgeable and there when you need them. so why not talk to one? announcer: call today to schedule a free investment check-up, or visit a td ameritrade branch.
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a manufacturer for tech. we have a big big machinery company and oil company. that is absolute perfection. >> charles is cheating, they k. i think charles is cheating. he tapped into my staff ahead of time. not true. let's go to steve in nevada. steve. >> how are you? >> not bad, steve, how are you? >> yes. >> top five holdings. >> caller: hello. >> yes. steve, how you doing? >> caller: i'm doing pretty good. i have first solar. >> d.o. >> sure. >> caller: and nordic. >> nordic american tanker. >> caller: then i own yahoo.
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>> yahoo. >> caller: and dc. >> a strange metal that works. let's go over this again. i think these portfolios are a little difficult so i will fill everybody in. we have first solar. everybody knows that's the solar play i like other thannien lee. north american tankers have a hefty dividend and herb jansen a believer because he has no debt and yahoo, i'm troubled with them because the deal they made with microsoft wasn't advantageous and this is typically shallow, i like deep, and thompson is a mining company starting to go up in price according to freeport. we have solar tech a shipping company. let's call that a solar company. doesn't compute with yahoo. oil drilling and mining. heavy on the resources. you know what -- it's still a great portfolio. "mad money" is back after the break. i'm racing cross country in this small sidecar,
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i can't believe i was too bearish coming in today. there's always a bull market somewhere and i promise to find it for you. i'm jim cramer, see you tomorrow. next up on kudlow, i think the fed is promoting inflation. the bull market recovery snapped back anyway, builder bob toll sees better times. i like swiss banking secrecy and hate irs fishes expeditions.
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