tv Mad Money CNBC February 14, 2012 6:00pm-7:00pm EST
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meg whitman. >> i'll let her know. alv. >> i got to agree with anthony. i do like hewlett-packard. >> i bought it this i'm jim cramer. welcome to my world. >> you need to get in the game! >> they're nuts, they're nuts! they know nothing! >> "mad money, you can't afford to miss it." >> i'm cramer. welcome to "mad money." my job is not just to entertain you but too educate you. so call me 1-800-743-cnbc. sometimes investors get trapped on the wrong side of a trade. today the market confounded everyone with the averages getting slammed most of the day before going on to rebound hard
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in the late afternoon. dow closing up 4 points, nasdaq advanci advanci advancing .02%. first let's set the day up. we had a ton of bad news this morning. i mean really bad news. i've been impressed all year with the pace of retail sales as expressed to me by the individual companies i talked to. yet today we got aggregate retail sales from the commerce department and they are plain putrid. it was half of what we were looking for. copper fell again today, dipping below $49, critical level, after being as high as $51.50 last year. it seemed like copper was breaking out. then this morning the red metal was breaking down! third we were looking for any
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resolution on the greek bailout when the european finance minister get together tomorrow and whether they've cut the budget enough to merit more funds. what happened? the meeting got cancelled! they're having a conference call instead. that meant a selloff in the euro, which i said has to stabilize. when the euro is weak, these companies don't do as well because when they repatriate their euro, they can't exchange them for as many dollars they could as if the euro was strong. the fxe, it tracks the euro versus the dollar, dropped 70 cents. it was 132 and change last week. these are big moves. >> all of these negatives ksh. >> the house of pain! >> were enough to send many of a stock down most of the day.
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then word of out of europe that nay sayers were a tad more positive of giving the country more euros. they got hurt but not nearly as bad as those taergting individual stocks that they thought were ripe for beating. allow me to explain. there's been a ton of talk lately that the smart money, typically described as the hedge funds, has started to short stocks aggressively, meaning they're not betting hard against the stock market and individual securities. you make these bets when you think of move up is unsustainable and you think stocks will reverse hard. but which stocks do they go after? what do they target? here's the irony. many managers don't just bet against the s&p 500. i know what kind of stock these guys go for. they look for so-called expensive names that seem to be
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ready for a fall because they've gone up too much too fast and they think the fundamentals don't justify the valuation. today was a real bad day for people who bent against these hyper momentum stocks. going into today's session, one of the most overvalued stocks out there was a brand new issue, michael kors. we would have recommended this a week ago but it violated rules for not recommending sales that sell for over twice their growth rate. already, i missed it. but that's not the judgment you get from an experienced manag managemanager manager . if any stock is ripe for a fall, it's this one. it's going to rip your heart out! nope! not this one. kors supported a gigantic number
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today. it was a colossal gain that included a phenomenal 35% gain in europe. the darn thing surprises to the up side. the next thing you know it leaps -- no, it tears up $9! 27%. you might think that's from aggressive mutual fund buyers but i think it came from fund managers who made a short bet and that short bet had gone awry. korz also shorted against fossil. it looked like the growth rate was slowing and the wonder story, spird on by the once famous sitch from the "jersey
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shore" had finally played out. a whole new level of short stocks. sell, sell, sell. sure enough the company took it upon itself on its conference call to be about as bullish as i've heard them, making clear that earnings are about to accelerate and very guidance issued would be crushed by the next quarter. no possification here for fos ill. it leaped more than 15d! 14%, taking apart anyone who bet against it. i don't know if it's done going higher. what spurred the terrific growth? a gigantic surge in fossil's michael korz business! kors slewed not one but two groups of short sellers.
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they probably feel like sticking their heads into some airtight michael kors handbags and who can blame them! netflix ramping up $4.74. meanwhile apple and chipolte, man, they started rising even before the greek word came out. it was that kind of day. bottom line. when hedge funds go after stocks they think have gone up too much and see overvalued, they better have more to the negative story than too much price appreciation. bet against companies when something's wrong, not when their stocks seem to have run up too much. trying to pick a level where a stock is too expensive is like trying to value a pollack, a van gogh, where the beauty is in the eye of the richest beholder.
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take it from this ex-hedge fund manager, who knows better. unless the darn thing is a forge rirk you may just get your head handed to you in a handbag! rachel in florida. >> caller: hey, jim, happy valentine's day. >> say to you, rachel. >> caller: with monthly retail sales missing expectation, should investors worried about the strength of the overall economy? >> i don't trust the commerce numbers which i regard as being -- they seem empirical. i regard the work i do from the bot manies up to be better. i'm not sweating the program. alan in illinois. >> caller: yes, jim. this is alan from chicago. buia. i watch you all the time. i got a feeling, i know it's risky. looks like greece is getting a tad better. i'm interested in buying the
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national bank of greece. what's your opinion on this? >> it's a decent speck. it's a $3 spec. i think all these banks have to be recapitalized, which means they have to issue more stock and be able to make it so that their balance sheets are better. and, by the way, if you they go the euros, that's going to be devalued nine ways from sundays. a wise investor likes to know what he's betting against and that there better be more to the story than just the fact that the stock went up a lot. mad money, we'll be right back. coming up, the big picture. cramer's screening a stock with a new movie franchise that could reach twilight status. could this help you create a blockbuster portfolio? stick around to find out. and later, breaking up is easy to do?
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in relationships calling it quits breaks hard. but in investments, it could have investors falling in love. >> and cramer turns to the technical calls to see if the bears are retreating to their caves or preparing to claw their way back in a new edition of "off the charts," all coming up on "mad money." miss out on "mad money," get your "mad money" alert today, text mm.
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is it big enough to move the needle? how much of an impact account event have on earnings, not just headlines? could it provide a serious boost to the numbers or will it barely make a dent in the estimates? very rarely do you find a true needle mover, a genuine catalyst that could drive the stock much higher. however, that's exactly what we've got this time around with the hung are games, a new movie coming out in march, generating a ton of buzz on the street and in this case i think the buzz is actually justified because this film's a needle mover for the studio that made it, "lion's gate," lgf for all you home gamers. that's why i think you need to get in this stock ahead of the release date, even though they've already had a big run since the beginning of the year, rallying 35%. all on the buzz for "the hunger games."
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i had to go back about 25 years before you say one that worked for me. the "harry potter" films were barely enough to move the needle. why do you think the hunger games will be different? harry potter helped but lion's gate is a small, independent production company. market cap at just $1.5 billion. so it takes a lot less to move the needle here. that may be the secret. but there's more to it than that. for the last decade, lions gate has had a volatile earnings history. over the last couple years the company was embroiled in a deeply entrenched takeover battle, which lions gate finally won last year. meanwhile they've built a
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terrific base from scratch. what makes this movie so big in the hunger games is based on the first boosk a trilogy by suzanne collins, more than 23.5 million copies in print, the thing hollywood loves because there's already a huge fan base with built-in sequel potential. the story is about teen-agers in the future who engage in an annualized televised fight to the death with the winners securing food and other supplies for their home district. believe me, i was skeptical but my 17-year-old told me that "hunger games" was a must read. i sat down to read it on a saturday and finished it sunday. i immediately got the rest of the trilogy, finished all in one week. these are some the most exciting books i've ever read, fabulous dark heros, tremendous tension,
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biblical overtones. there's some pretty serious father/daughter discussions in my house. lions gate plans to turn this into four movies and there's every indication the first one will be a blockbuster. i've seen the trailer for the first one and seen it a hundred times. i'll be there opening night for lions gate and i've only done that 2005 before, "terminator 2" and "titanic." let's say it grossed $200 million, that would be reasonable. doable. the entire franchise could be worth $400 million to the company. that's just here in america. they've already licensed it
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overseas. lions gate has 143 million shares outstanding. the first film alone could be worth .87 a share bottom line. just one catalyst, albeit a gigantic one. back in january lions gate concluded a merger with privately owned summit entertainment for $413 million. in exchange to get the right to a bunch of titles, including the twilight films another father/daughter thing i engaged in -- i do that stuff. stop laughing, i do! already the fourth -- sometimes -- franchise in history behind harry potter and james bond. it will help stabilize the company's cash flows, giving them the wherewithal to compete
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with the big studios. the company's already developing more young adult pop culture books to adapt into movies in order to find the next "hunger games," though that might be hard. this is not a company that's been hitting the ball out of the park. it reported a loss of a penny. analysts looking for a 9 cent profit. the stock popped 7.5% the next day! i think it was in anticipation of "the hunger games," as well as other titles in the pipes like charlie sheen's "anger management" and the final "twilight" moving come beiing i november. so do you buy it here despite the recent run? i think lions gate is cheap at this level. this could be a $15 stock
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masquerading as an 11 and change stock. but i wouldn't mind waiting for a market-inspired pullback before trying to build the big position. every time there's a movie big enough to move the needle for the company that made it, with "hunger games" i think it is a giant needle mover. the stock is ready to go every time this takes a dip between now and "hunger games." after the break, i'll try to make you more money. coming up, breaking up is easy to do? in relationships calling it quits breaks hearts. but in the market, it can have you falling in love. and later, dow 17,000 doubters? cramer turns to the technical calls to see if the bears are
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retreating to their caves or preachi preparing to claw their way back. laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] now there's a mileage card that offers special perks on united, like a free checked bag,
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i bet you're getting pretty darn sick of all those commercials showing people getting together. that's why tonight i want to celebrate the notion of breaking up. not because i'm a heartless, jaded cynic, but because this show is about helping to make you money. while romantic breakups will put you in the house of pain, corporate breakups are all about a house of pleasure. when you and your girl friend split up, calls for crying. but when a company in your po portfol portfolio breaks up, you should cheer. just ask the giants of yahoo!. tonight i want to look at post, which is a spun off to emerge as a small cap cereal making. breaking up, we'll let you say it's never been sweeter.
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call it breaking good, not bad. you know post is a house of some of the most recognizable cereal brands in america, honey bunches of oates, total pebbles, shredded wheat, golden crisp, grape nuts, and honey combs. it's an iconic household name. yet despite the power of its brand, post has been one lousy performer ever sense kraft sold to raw corp back in august of '08. turns out the post-raw corp deep has not been made in heaven. post makes higher priced nationally branded serial. while ralcorp liked they had heftier margins, they didn't know how to manage the business. for the three years post was married to ralcorp, there were all kinds of screw ups. ralcorp didn't support post brand, they didn't spend enough
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money on advertising, something that's actually crucial when you're compete being against the likes of kellogg and general mills with gigantic marketing budgets. their stock was punished to the point where a breakup was the only move it made sense. post was spun off on its own separate stock just as january 27th and ralcorp only kept a 20% interest. it's like they didn't even stay friends and now they're talking behind each other's back. now that post is its own company, all the problems that held it back under ralcorp can be corrected and i think the stock has a whole lot more room to run. its stocks surged almost $2. while i'm unhappy the surge occurred before we could bring you the segment, i believe the run is far from over. you have to look at this breakup as being very similar to when
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tina turner left ike. with post standing in for turner, rollin, rollin, rollin up the stock start. the company can spread its wings. we don't need another hero. when you look at post earnings before interest and taxes, now is a 16% margin. the company keeps 16 cents out of their dollar before you factor in interest payments and taxes. that's 8 percentage points from where it was before ralcorp bought the based. i don't see why post can't get that margin back up to 24%, especially when you consider kelloggs and general mills have earnings before margins. post 11.5% market share. now the company plans to stabilize this market share and start taking share again.
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the important point to recognize here is that the expectations for post are extremely low. so any improvement at all will be viewed as a huge positive. why do you believe post can turn itself around? because the new management seems to understand all the problems and what to do to fix them. post has decided to increase its advising budget by 400 basis points. ralcorp dramatically underspent, which is a big reason post lost so much share under their previous administration. plus post has decided to invest heavily in innovation, something they haven't done for over a decade. i've got some ideas for innovation. yum. then there's pricing. historically post's sweet spot has been price points that are
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below kelloggs and general mills but higher than general labels. now post intends to get back to the historical sweet spot and hope think take some share doing it. i also am a huge believer in post's new management. the ceo has a long track record creating value through improving ongoing operations and takes strategic actions. he's a breakup artist supremo. quote, nothing is off the table, he said. obviously they have to wait a little bit, the tax laws. even though post moved up big today, still only 3 points from where it was spun off last month and selling at an 8% growth rate, not too expensive in the consistent world that is cereal. plus right now there's very little -- limited analyst
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coverage and you want to buy post before it starts gaining sponsorship. here's the bottom line, breaking up, it ain't that hard to do and sometimes it's extremely profitable, which is what i think we'll see now that post is independent. it could take time for post to turn things around. i think the stock could drop back a bit because it rallied for no particular reason but you want to be in this before the earnings turn happen or less you'll be burnt to a golden crisp or shredded into chaffe, not wheat. let's go to steve in new york. >> caller: good evening, professor cramer. parent company victoria secret. what a great day to talk about victoria secret and limited brands on valentine's day. >> oh, right, i forgot what they sell there. >> caller: i've owned this stock for 25 years, jim. it's one of the best retail companies in the world. every once in a while i'll take
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profits off the table as you recommend but i always go back in and buy the dips. i've been richly rewarded for that. the company is too darn large. it's owns seven divisions. wouldn't it be better for shareholder value to break the company up into two divisions? >> as you know, les wexler, they named that med school after him in ohio state. if he thinks it should be spun off, it should be spun off. who am i to challenge one of the serial dividend raisers. if he wants to keep it together, i'm not one to challenge him. let's go to glen in north dakota. >> caller: glen, a big booyah to you for the great state of north dakota. i'd like to wish my beautiful wife, joslin, a happy
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valentine's day. i'm rocking out here. i heard of a pos takeover. do we buy or -- >> whoa, whoa, whoa, we do not talk possible takeovers on the show because then we get everybody riled up and if there's no takeover, everybody gets unhappy. i have to come back. i do not know the oasis story as well as you do. we'll do the metric, continental resources verse eog and get back to you. memo from post to ralcorp, forget about it, breaking up isn't so hard to do after all! stay with cramer. >> coming up, are you ready to get charged up? cramer cranks up the voltage and goes electric on an all new hyperactive lightning round. and later, dow 17,000 doubters? cramer turns to the technical calls to see if the bears are
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retreating to their caves or preparing to claw their way back on an all new edition of "off the charts," all coming up on "mad money." medicare. it doesn't cover everything. and what it doesn't cover can cost you some money. that's why you should consider an aarp... medicare supplement insurance plan...
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♪ but i still haven't found what i'm looking for ♪ in your eyes i am complete, see the doorway ♪ of a thousand churches, resolution ♪ >> thank you, ben bernanke for all the great work you've done to sustain this bull market. and now it is time for the lightning round! are you ready? i'm going to start with justin in new york. justin! >> caller: hey, jim! big time valentine's day booyah to you. >> sweet. >> caller: yeah. i love you, your show and your books. >> thank you very much. >> caller: hey, you know. so, we're talking about apple
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play, i'm talking about tango. >> that came public this summer. i have to do more work on it. people say it's the ultimate cloud play. let me do work on tango before i go tangoing with it. jules in louisiana. >> caller: a big booyah to you. >> what's your your mind? >> caller: my sock is sasol. >> i've been a buyer of s soo sol. >> jim? florida. >> caller: booyah, jim. >> booyah. >> caller: my stock is cf industries. >> i'm not a fan but i do like the story, it could roll over a little. robert in connecticut. >> caller: jim, booyah to you.
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>> what's on your mind? >> caller: i would like your opinion on activision. i'm not a buyer, i'm a seller. i like simple. >> caller: booyah, jim. hal. everybody is dumping this stock. >> halliburton, they were the guys that were not all that bullish about near term earnings. i've got to stay on hold. let's go to dan in colorado. >> caller: professor cramer, booyah from colorado high plains country. >> how's it going, man? >> caller: doing pretty good. i like cyber security. i granted it speck stock status. what do you think of web sense?
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>> web sense is good but i'm going to raise you. let's go to david in california. david. >> caller: booyah from southern california. how's it going today? >> real good, thank you. how about you? >> caller: can't complain. last year you got my interest in these mezzanine investment companies and ended up selecting prospect capital corporation. i like their monthly dividend and a real good year. >> you're move on the case and more up on it than i am. i can't plus prospect. i got prospect and tango now i got to do work on. better to own it that you don't know it than cuff it. joe in new york. >> caller: jim, a great big west
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ba babbylon booyah! >> what's on your mind? >> caller: wanted your prognosis on health south. >> talk about a stock that i got wrong. i thought they were going to really just roll the money. i like the rehab care business. however, they didn't. i'm on hold until they give me better numbers. let's go to josh in arizona. josh. >> caller: yeah, booyah, jim. >> booyah, josh. >> caller: i wanted to ask you about the stock called egp. >> we recommend it when it's much higher yield. it has a small are yield now. how did that happen? because the price appreciation. let's go to david in new york. david! >> caller: good afternoon, jim. this is dave from new york. booyah from new york. you're my teacher. first time i'm raising my hand. i like the stock tivo. what do you think? >> it's a pretty good move. i got to pull back before i can
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get all excited about it. that is the conclusion of the lightning round! >> let's go to kentucky! >> a hill billy booyah! >> here's a big las vegas bing bing bing, ching ching, ching booyah! >> long island new york, forget about it, booyah! booyahs come from all across america. let cramer help you channel yours. in what passes for common sense. used to be we socked money away and expected it to grow. then the world changed... and the common sense of retirement planning became anything but common. fortunately, td ameritrade's investment consultants can help you build a plan that fits your life. take control by opening a new account
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or rolling over an old 401(k) today, and we'll throw in up to $600. how's that for common sense? sadly, no. oh. but i did pick up your dry cleaning and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can't hear you because i'm also making you a smoothie. [ male announcer ] marriott hotels & resorts knows it's better for xerox to automate their global invoice process so they can focus on serving their customers. with xerox, you're ready for real business.
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or 2% cash back on every purchase, every day. what's in your wallet? this guy's amazing. yesterday everybody was talking about the big cover story from barons this weekend, enter the bull. predicts the dow jones industrial average heading to 15,000 or even 17,000 over the next couple years, a lot of people scoffed, that the 15,000 target was like dow 36,000, the outrageous book written at the height of the dot-com bubble that forecasted massive gains
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for years to come was right before the market imploded. but i think the time we're paid to always be more cynical, i think it's passed. t it's only after the last dozen or so years where every bull market has been viciously torn to pieces, every shred of optimism has been beaten out of investors that we're instinctively suspicious of anybody that says stocks are headed higher over the long term. for the dow to get to 15,000, it's a little over a 7% increase where we are now and the prediction is it would happen over the next two years. we're only talking of annual gains of 8%. if some guy says the market will give you 8% return over the next 12 months and that's considered a super controversial statement? dangerous? it seems like we've been scarred by the market's hideous performance. we're so traumatized, we can't
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recognize a potential bull market when it's staring us in the fairs or goring us with its horns. being a permanent bear, it has paid off big time. what if i told you our dozen years in the stock -- we could be returning to a general bull market like the 80s and 9 0z. i know it's tough for many of you to swallow. for those of you in the young are demo, you only not the bear market. for those of you trading in the 90s, it's so long ago that many of you don't remember. that's why tonight we're going off the charts to show you why the bearish patterns of the last 12 years could be coming to an end. and we're doing it with the help of scott redler, an excellent technician and chief strategic officer at t3 trading in addition to being my colleague
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at realmoney.com. going back to 1998, you can see how we've been trading side ways. if you bought the s&p in 2000, you're back to where you started. no wonder people are so skeptical stocks can make you money over the long term. however, when redler looks that the chart, he doesn't just see that lost generation of stock investors. he's looking with the eye of a technician and those eyes see a pattern that indicate the side ways action of the last dozen years could soon be over, giving way to a much more bull ush uptrend that could actually be stand. the era of stocks is an asset class b and dead, no money being made? he thinks it might be over. what makes redler think this. if you look at the peak in the year 2000 ond the peak in the year 2007 right before the
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financial crisis, sure enough there's that dreaded down top. we're still away from the high of 1576, but if we can break through the level of the double top, then redler believes the sky is the limit. the next could be 1,700. he thinks that's doable. the reason? the uptrend that began at the bot many in 2009. let's look at the uptrend at looking back at the s&p 500 going back six years. the long-term move higher that began in march of 2009, believe it or not, it's still very much in tact. when you take this big picture monthly view, the action of the s&p 500 looks fantastic to a charter like redler. ever since the generational bottom, we've been making higher highs and lower lows, classic signs of a healthy up trend. the s&p has to break out of its
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high to continue the pattern of ever higher highs. once that happens, he thinks there's nothing standing between the s&p 500 and its all time high of 1576. keep in mind, this is vae long-term oriented chart. many times on twitter people ask me what is the time frame you like to look at? i like to look at the long-term off the charts. i look to look at two years but i'm willing to go back further. if it can break out about 1576, which is the level of double top from the previous chart, no ceiling of resistance left for the s&p. i course there will be pullbacks along the way, but his chart work suggests the stagnant market of years past could be coming to an end. the bottom line, i'm not saying that this market will definitely go much higher but after looking
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at redler's chart work, you got to be a little less skeptical about the power of this bull. or to put it another way, since the turn of the millennium, the s&p 500 has been owe bag some kind of law where what goes up must come down. but now it seems very likely that gravity has been suspended and the s&p can have big multi-year moves higher. darn tooting. time to take a disto isaac newton. they say money never sleeps. neither does jim cramer. this new at&t 4g lte is fast.
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i never like having to tell you some stocks my go down. you my own them. you might therefore think it's my fault they go lower. believe me, i'm not that powerful. amazon and google disappointed badly in my opinion. they didn't deliver what we thought they would. i thought they should both go down and stay down. yet with the exception of today's minor dips, they've been headed right back up. i struggle over these moves. if anything, things have gotten worse for these guys. google is about to change the motorola deal for $12.5 billion. the problem is right now apple's pulling away and i don't think this deal will let android catch up. or do i like the google tv
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story. i want to see advertisers get higher rates on line. i don't think these opportunities are as great as we once thought. amazon, i don't know. you got to believe they were wild live under promising in that last quarter but that's not their style. i think amazon like google is trying to take on apple, this time on the hardware side with kindle fire and i think it going to cost a lot more money to do so. amazon got knocked down today midday because bloomberg came out with what i thought was a blockbuster story saying the company has far fewer prime subscribers than anyone think, maybe half. then the thing bounced back! finished down only 29 cents. that's nuts. that story was powerful. what's going on here? why have google and amazon been stronger than i think they should be? first, maybe they shouldn't have dropped as much as they did in the first place. these are still excellent companies with fabulous growth
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prospects. second, lots of hedge funds were short amazon and google and pressed their bets when the companies fail to deliver. like korz and fossil, they're competing with each other to buy stocks. it's been a long time since we had investors say i don't care about amazon now, 2015 rules. thaund ru under that rubric, maybe it's cheap. i don't like that kind of bay. 2012 as been a year where all is forgiven and forgotten very soon. why believe in that. stick with cramer.
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